Cellphone vendors could exit business if economy remains bleak

Nokia issued its second warning in three weeks that sales of mobile phones are slowing faster than expected due to slack demand from consumers. The company said its fourth quarter earnings will be hurt because it has been unable to cut costs quickly enough to account for the "rapid deterioration of the handset market in the last few weeks."

Fifth place phone maker LG and sixth place RIM also issued warnings on sales and profit growth. The bad news for big phone makers comes on top of the troubles experienced by Motorola and Sony Ericsson, which have both been struggling in the phone market even as the market was blooming.

With hard times ahead, the weaker companies might not even survive as phone makers. Michael Schroder, the head of research at FIM in Helsinki, was cited by Reuters as saying, "If the weakness continues past summer, it is probable that some would get out of the business."

Nokia hopes to win back market share in the smartphone market, the one bright spot in the mobile arena and one where Nokia has lost ground to BlackBerry devices from RIM and Apple's iPhone. However, that outlook also bodes well for Apple, which doesn't have any mobile products outside of its iconic smartphone.

Unlike the other phone makers, Apple sells one highly visible iPhone 3G model rather than the 'hundreds of devices' that chief executive Steve Jobs alluded to as the failed strategy of Apple's competitors in the company's recent earnings conference call.

Apple's simpler strategy of selling one full featured smartphone model has positioned the company as the number three phone maker in terms of revenue and created a strong platform for third party development, recently passing the 300 million downloads milestone with 10,000 apps available.

The iPhone has also soaked up market share in units sold and in terms of operating system use at the expense of rival hardware makers and software vendors, growing 327% over the last year according to figures recently released by Gartner. Despite general concerns about the economy, there is currently no evidence to suggest that Mac or iPhone sales are actually slowing.