Cell Phone Manufacturers Cutting Prices

Weak demand and an overstock of inventory has led to price cuts by many popular cell phone makers.

Sales of consumers electronics were down sharply over the holiday season leading to grim sales figures and an overstock of product. In an attempt to cut inventories and boost sales numbers in the first quarter of '09 several manufactures including Nokia, Sony Ericsson and Motorola have cut prices by as much as 10%.

Reports in Reuters suggest that while vendors often cut prices in January, some actions this year have been more aggressive than usual.

"Our researchers have seen significant price cuts in Europe by the major handset vendors as 2009 begins," said Tom Byrd, who leads device-pricing research at CCS Insight. "This reflects the highly competitive pricing environment we have been predicting for this year."

Insight and other analysts have predicted slow cell phone sales in 2009. Suggesting the economic downturn will affect the entire cell phone market, from handset manufacturers and network operators to component suppliers, developers, distributors and retailers.

According to new data from the government's Bureau of Labor Statistics, cell phone spending has increased steadily, out pacing residential spending in both 2006 and 2007. Expenditures increased rapidly, from $210 "per consumer unit" to $608 in 2007, an increase of almost 200 percent. It is expected that the 2008/2009 numbers will show an even greater increase as the number of U.S. households move away from residential service and towards cell phones.