U.S. cell phone sales take a dip

Sales of cell phones in the U.S. declined during the first quarter of 2008, as the maturing market was hit by a slowing U.S. economy.

Nearly 31 million handsets were sold in the U.S. during the first quarter of this year, down 22 percent from the same period a year ago, according to the NPD Group. Sales of mobile handsets generated $2.7 billion, down from $2.9 billion for the same period a year ago.

This is the first time since the NPD Group started tracking mobile handset sales in 2005 that it a saw a decline in the first quarter after the holidays. And the market research firm believes the decline could be tied to economic troubles.

"Cellular phone service has become a practical necessity in modern life," said Ross Rubin, director of industry analysis for NPD. "However, with looming economic concerns on the horizon, many consumers may be holding back on new handset purchases, especially those tied to new pre-paid plans."

The maturing market may also be playing a role in the slowdown. Roughly 84 percent of the U.S. population already subscribes to cell phone service, according to the trade group CTIA.

But feature-rich phones like smartphones still seem to be selling well. In fact, smartphones, which offer e-mail, Web surfing, music, and other Internet services, accounted for about 17 percent of all mobile phone sales during the first quarter, the NPD Group reported. This was an increase of 10 percent over the previous year. The study also found that 60 percent of phones purchased in the first quarter were music-enabled. This is compared with 41 percent of phones the prior year.

News of slowing sales is bad for Motorola, whose handset business is currently up for sale. Despite its mountain of woes, Motorola maintained its lead in the U.S. market during the first quarter. But its overall share of the market declined from 35 percent in the first quarter of 2007 to 27 percent this year. Samsung and LG reported strong market share with 18 percent and 17 percent respectively, according NPD.

Research in Motion, the maker of the BlackBerry, edged out Sanyo as the fifth largest mobile phone maker in the first quarter of 2008.

But Nokia, the worldwide leader in handset sales, is still struggling in the U.S. market. The company came in fourth place with 8 percent market share according to NPD. Nokia has struggled to get a foothold in the U.S. market where most devices are sold through carriers. One of the main problems is that the company's hottest phones aren't sold in the U.S. market or come to the market months after they've been offered in Europe or Asia.

But Nokia executives say they are committed to increasing market share in North America. On Monday, Nokia's Chief Financial Officer Rick Simonson told Reuters that it plans to have strong double-digit market growth in North America within a year. The company has opened a research and development facility in Southern California, which it hopes will help it develop products specifically for the U.S. market. Still, Nokia believes that its massive scale will help it in North America.