So I guess it wasn't a fluke, and maybe it wasn't Nokia (NYSE: NOK) to blame after all.
When Texas Instruments (NYSE: TXN) warned on Q1 earnings last week, market watchers recalled Nokia, and the cell-phone-making joint venture between Sony (NYSE: SNE) and Ericsson's (Nasdaq: ERIC) (appropriately named "Sony Ericsson"). Last year, both companies announced that they planned to diversify their supply lines and buy more cell-phone chips from ABTI ("anybody but TI").
Some pundits concluded that TI was looking at a soft quarter, solely because a couple of its larger customers had shifted market share to a TI competitor -- Qualcomm (Nasdaq: QCOM) or Broadcom, perhaps. Other analysts argued that the sudden change in TI's position meant that something unexpected was afoot: an honest-to-goodness slowdown in cell-phone sales somewhere downstream from TI, and not just a shift in share.
Turns out, this latter group was right.
Sony Ericsson warned yesterday that it was indeed experiencing a slowdown in sales of its high-end cell phones -- one big enough to cut its Q1 profits in half. Whereas Sony Ericsson had earned about $571 million pre-tax in last year's Q1, this time around, the company expects to earn no more than $276 million -- a good 12% shy of analyst projections.
The news sliced about 10% off Ericsson's market cap yesterday. The much more diversified Sony lost just 2%. Nokia and Motorola rang in with 10% and 4% losses, respectively.
Equally interesting, companies that make the chips for these high-end gadgets also suffered. Qualcomm and Broadcom, for example -- both of which could have been expected to benefit, if each were merely capturing TI's lost market share -- both shed about 6% of their value.
Foolish takeaway
But the most interesting thing of all? To this Fool's mind, it's the fact that the companies with the highest-end cell phones of all -- Apple (Nasdaq: AAPL) and Research In Motion (Nasdaq: RIMM) -- got hurt least of all among the cell-phone hawkers. Apple shed just over 2%; RIM just under 4%.
I wonder how long that will last?
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