December 3, 2008 / 2:05 PM / 11 years ago

Cell phone market gloom spreads to LG, RIM

BARCELONA/SEOUL (Reuters) - Cell phone makers LG Electronics and Research in Motion warned on sales and profit growth on Wednesday, the latest sign a consumer spending spree on expensive gadgets has dried up amid economic gloom.

The world’s fifth-largest handset maker LG said its sales growth would slow sharply next year, while Blackberry-maker RIM, No. 6, cuts its third-quarter sales and profit forecasts well below Wall Street consensus.

“The latest flurry of warnings shows the economic turmoil is impacting everyone in the mobile value chain — from component suppliers to manufacturers, distributors and retailers right down to the consumer on the high street,” said CCS Insight analyst Geoff Blaber.

“Demand is being impacted across the entire market,” he said.

The world’s two largest cell phone makers, Nokia and Samsung Electronics, have already warned the handset market could contract next year.

Nokia is expected to shed more light on the demand situation and industry outlook at an investor meeting on Thursday in New York.

Shares in RIM were indicated to fall sharply on Wednesday after its surprise announcement on Tuesday night.

RIM said it expected fiscal third-quarter revenue of $2.75-$2.78 billion — 9 percent below the midpoint of analysts’ forecasts, while adjusted earnings are now expected to be 81-83 cents per share, compared with 89-97 cents per share the company had initially forecast for its third quarter.

The expected number of net new BlackBerry subscriber accounts added in the quarter would be about 2.6 million, RIM said, roughly 10 percent below its previous forecast for 2.9 million.

RIM’s warning shows that even the most lucrative segment of the phone industry, smartphones, faces difficulties next year.

“Whilst smartphones will be a growing segment in a shrinking market next year, this is further evidence that growth looks set to slow considerably compared with 2008,” Blaber said.

LG Electronics said on Wednesday it expects to achieve slender growth in handset sales in 2009 but aims to raise its global market share amid the ongoing economic downturn.

“The pace of growth is set to slow noticeably,” said Skott Ahn, president and chief executive of LG’s mobile communications unit, adding LG’s average handset growth rate of around 30 percent in previous years would slow to only a “slight” growth in 2009.

Also on Wednesday, German chipmaker Infineon said it sees a significant fall in revenue and an operating loss in its 2009 fiscal year, but mainly due to declining demand from automakers.

Last week STMicroelectronics, Europe’s biggest semiconductor maker, cut its fourth-quarter earnings and sales outlook, blaming the recent slowdown in the wireless, automotive and computer peripheral sectors.

Additional reporting by Rhee So-eui in Seoul, Paul Sandle in London and Sakthi Prasad in Bangalore; Editing by Jon Loades-Carter

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