Raymond James‘s Tavis McCourt this afternoon reflects on Q1 data for mobile phones and concludes the pressure is increasing on companies who are neither Apple (AAPL) nor Samsung Electronics (005930KS).
Handset sales fell in Q1 for the first time ever, he thinks, even as the global economy is expanding. There seems to be increasingly little left for other mobile phone vendors, he observes, raising the question of how they will maintain the war chests they need to remain competitive:
Overall, 1Q12 financial results were mixed for the handset/mobile computing industry, but essentially all the benefits accrued to Apple, with a little left over for Samsung. The industry overall grew revenues by roughly 27% y/y in revenues, within a broad range of 20-50% witnessed since early 2010. However, unit growth declined y/y for the first time since the global recession. In fact, we believe this is the first time in the history of the wireless industry that handset unit volume declined y/y when the world was not in recession (2001/2002 and 2009). Industry EBIT margins were 23.0%, the highest on record based on our data, but ex-Apple, margins were 9.1%, and if one backs out Apple and Samsung, the industry was just about breakeven in the March quarter. When one looks at 1Q12 industry results, it is hard not to come to the conclusion that Apple and Samsung are near a “check mate” of the rest of the industry as profits appear to be shrinking everywhere else, and the rising tide of smartphones no longer appears to be lifting all boats. It is getting increasingly hard to understand where the rest of the device vendors will get the R&D dollars to compete longer term given their shrinking profitability. Perhaps Microsoft and Google have the answer.
Note that McCourt appears to be referring to unit decline excluding the iPhone and Samsung’s sales, which does today’s Q1 report by Strategy Analytics shows mobile phone unit sales for all players rose, year over year, to 368 million units in the quarter from 356 million a year earlier. However, the growth was at Samsung and Apple, while Nokia (NOK) saw a decrease from 108.5 million units to just 82.7 million, and the category of “other” saw unit sales fall from 160.4 million to 156.7 million units.