Wall Street Beat: Earnings highlight smartphones as key to growth

Amazon, Apple, Samsung, Alcatel-Lucent are among tech bellwethers reporting results

By , IDG News Service |  Software

With Apple reporting a decline in profit margins and Samsung consolidating its leadership in the mobile device market, earnings results and market research reports this week point to the ever-increasing importance of smartphones as key to growth in tech.

The tech sector could use some good news. With the U.S. government cutting US$65 billion in federal spending over the next six months as part of the so-called sequestration budget compromise, IT spending will take a hit, according to a report from market research company Forrester Friday.

Even though consumer and business spending will offset some of the sequestration, most economists forecast that it will shave a half point off of U.S. GDP growth, now expected to be 2 percent or less this year, Forrester pointed out.

"This slightly worse economic outlook has caused us to reduce our forecast for US business and government spending on information technology (IT) goods and services in 2013 to 6.2%, from our January 2013 projection of 7.5%," according to Forrester chief economist Andrew Bartels, in the report. Forrester is also lowering its forecast for 2014 IT spending growth to 6.8 percent from 7.2 percent.

"Outside of software, mobile devices are a bright spot in the hardware sector," Bartels wrote.

Within the mobile sector, smartphones are where the growth is. In the first quarter this year, for the first time ever, smartphones comprised more than half (51.6 percent) of all mobile phones shipped, according to a report from market research firm IDC Thursday.

The worldwide mobile phone market grew 4 percent year over year in the first quarter, to 418.6 million phones, IDC said. In particular, the smartphone market grew 41.6 percent year over year to 216.2 million units.

"Phone users want computers in their pockets. The days where phones are used primarily to make phone calls and send text messages are quickly fading away," said Kevin Restivo, senior research analyst with IDC, in the report.

The first quarter shipments declined from the fourth quarter of 2012, but the beginning of the year is typically a slow season for mobile phone shipments, IDC added. In any case, smartphones fared better than other mobile phones: The seasonal, sequential decline for all phones was 13.4 percent, but for smartphones the drop was only 5.1 percent, IDC said.

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