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Cellphone leaders face the heat

india Updated: Mar 20, 2008 22:33 IST
Ruchi Hajela
Ruchi Hajela
Hindustan Times
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Your cellphones may be cool, but the heat is on for those who make them. Competition has bruised some and battered others, and more signals are out with ringtones of warning showing a shakeout in the industry.

Motorola has now been in trouble for a while now. According to reports from the UK this week, the company plans to halve the number of its designers from 121 at its centre in Birmingham.

The company might even shut down the design centre completely, say reports in the British media – raising questions on the company that jumped to challenge industry leader Nokia with its glitzy Razr range.

While Motorola licks its wounds, Sony Ericsson, which brought together Japanese consumer electronics titan Sony with Swedish technology leader Ericsson, issued a profit warning on Wednesday, showing all is not well in the increasingly crowded handset business.

Motorola’s handset sales declined by about 38 per cent at the end of fourth quarter of 2007 from what it was in the same period in 2006. Recently, company’s CEO Ed Zander quit, followed by Chief Technology Officer Padmasree Warrior.

Taiwan-based BenQ and HTC, which have in-house design capabilities, are among aggressive entrants in a business in which manufacturing efficiencies lie in Asian economies like China and Taiwan, from where nearly all leading brands source manufacturing. The playing field is thus getting leveled.

Sony Ericsson cited a drop in the sales of its mid and high-end handsets as a reason. “The market is proving to be challenging. This has been more pronounced in the mid- to high-end replacement sector of the market in Europe, where Sony Ericsson has stronger than average market share,” Hideki Komiyama, President, Sony Ericsson said in a statement.

Globally, Motorola and Sony Ericsson are the number three and number four cellphone makers respectively. Nokia leads the market with an estimated market share of about 40 per cent. However, it is also struggling to keep its market lead and maintain profit margins as it faces competition from other players like Apple that became hugely popular with its iPhone in the US where Nokia happens to have the smallest market.