With all of the success of the Apple (NASDAQ: AAPL) iPhone and the RIM (NASDAQ: RIMM) BlackBerry, investors would think cellphone sales in the U.S. are booming. That assumption is wrong.
In the second quarter, handset sales in the U.S. fell 13% according to NPD Group, dropping to 28 million units. According to The Wall Street Journal, "That is the lowest number of phones sold in a quarter since NPD began tracking the category in 2005."
Motorola's (NYSE: MOT) market share fell from 32% last year to 21% in the second quarter this year.
The news shows the extent to which handset companies will have to rely on sales in emerging markets like China if they are going to continue to growing. Although recent figures for Europe are hard to come by, it is likely that sales growth there has slowed or has gone negative. In both the U.S. and EU there are almost as many cellphones as there are people and the economy is making it harder to sell replacement handsets.
While the new numbers say more a great deal about the near-term future of the major handset companies and the challenges they face for earnings, the data speaks volumes about Motorola. The company has modest market share outside the U.S. and its domestic market has been its salvation. That is clearly no longer the case.
Motorola plans to spin-off its handset unit next year. But its revenue is falling at the rate of about a third compared to last year and it loses several hundred million dollars a quarter. If the U.S. market turns against the company, shareholders have to ask if the unit has any value at all.
Douglas A. McIntyre is an editor at 247wallst.com.