By Scott Moritz

With clouds of economic gloom darkening the tech horizon, mobile phone sales – a former bright spot in the gadget world – look to be slowing.

Tech buyers went away early this fall, and as recession fears intensified, orders have continued to dry up.

There have been a number of ominous signs. First Cisco (CSCO) slashed its outlook and froze hiring. Then Wall Street analysts slashed Google’s (GOOG) search ad sales estimates, predicting the first ever drop off in the company’s growth rate.

Now, market analysts at Gartner have peered ahead into future and declared cell phone sales will likely slow from 2008 levels by 1% to 4%. This would be the first year-over-year slowdown since 2001.

“It is too early to say how long the economic climate will impact the devices market, but we expect market conditions to remain challenging through at least the first half of 2009,” Gartner analyst Carolina Milanesi said in a statement Tuesday.

A low single digit drop in sales certainly isn’t a steep fall and hardly a surprise in light of recent downward adjustments from wireless phone giants Nokia (NOK) and Samsung. But no growth in 2009 would be a major milepost given how newer markets like Brazil, Russia and Asia have been providing plenty of worldwide demand. And in mature markets like Europe and the U.S., smartphone sales are surging, fueled by touchscreens like Apple’s iPhone and Research in Motion’s new BlackBerry Storm.

Gartner now predicts mobile phone sales will hit a growth rate of 8% this year, down from the 15% level in 2007.

By Scott Moritz

Qualcomm (QCOM) joined tech’s growing crowd of downward revisionists as the slumping global economy forced the company to slash its financial targets.

While the San Diego wireless chipmaker turned in a strong fiscal fourth quarter Thursday, Qualcomm like several tech giants – including Cisco (CSCO), Intel (INTC) and Apple (AAPL) – have lowered financial projections as business took a nose dive this fall.

Qualcomm posted adjusted earnings of $1.06 billion or 63 cents a share, a 17% increase over the 54 cent pro forma profit in the year ago period and 3 cents above analysts estimates, according to Thomson First Call.

Sales for the company’s fourth quarter ended in September were $3.3 billion, up $1 billion or 45 % over the same period a year ago. Analysts had anticipated revenue of $2.86 billion.

Similar to Cisco, which saw strong pre-October results yet dire post-October conditions, Qualcomm pulled down its forecast for the current quarter.

“As a result of the credit crisis and the economic uncertainty, our guidance reflects slower end-market device growth for 2009 than previously anticipated,” said CEO Paul Jacobs in a statement.

Looking ahead, Qualcomm cut its December quarter adjusted earnings forecast to a range around 48 cents or 8% below year-ago levels. Sales are now expected to drop 4% on a year-over-year basis to $2.4 billion roughly flat sequentially. Analysts had been looking for earnings of 61 cents on revenue of $2.9 billion.

Qualcomm shares dropped 3% in after-hours trading after closing at $33.05 Thursday.

Qualcomm, which makes components for cell phones and licenses wireless technology, says December-quarter chip shipments will drop to 62.5 million from the 79 million level a year ago. And the company predicts the average selling price for mobile phones will fall to $205 from $211 last year.

By Yi-Wyn Yen

SAN FRANCISCO – Intel CEO Paul Otellini, who runs the world’s largest semiconductor business, gave a sobering view of the economy to the Web 2.0 Summit crowd Thursday.

If you think the recession is bad now, says the Intel (INTC) chief, a year from now will be worse.  “This is the deepest one I’ve seen in my lifetime. All the smart people that I talk to tell us the U.S. is in for a two-to-three quarter recession,” Otellini said. “Unemployment peaks lag GDP. We’ll see much larger unemployment a year from now.”

In its weekly report, the Labor Department said new claims for unemployment dropped slightly to a seasonally adjusted 481,000 for the week ending Nov. 1. But every day more job cuts are announced. In the past week alone, big tech companies like Cisco (CSCO), Electronic Arts (ERTS), Motorola (MOT), and Xerox (XRX) have announced layoffs or hiring freezes.

Otellini said he was grateful to take a break from the doom and gloom to attend the Web 2.0 conference. The Intel exec provided a 20-minute demo of forthcoming Intel products and answered questions from Web 2.0 host John Battelle.

“I like coming here,” Otellini said. “It’s a respite from watching the stock market crash every day.

Otellini stressed that tech companies need to stay focused on a post-recession strategy. “We have to not think about today’s market turbulence but what can happen as we get through this and what kind of products we can develop around the web as we break out of this cycle,” he said.

Intel is betting on high-powered mobile chips. An Intel employee showed a person taking a picture of a Chinese restaurant with a mobile gadget and then using the web to translate the Chinese characters into English. He also demonstrated how Web 2.0 applications can be used on the go. He scanned a Lego-like toy called K’nex and on the screen, a YouTube video popped up of a person constructing a K’nex model.

Those powerful mobile chips are coming in the next couple years. Next year Otellini says Intel will introduce a new smartphone processor that has the capacity of the original Centrino laptop chip. And by 2011, Intel will offer mobile power that runs as fast as desktop PCs. Otellini acknowledged that to unlock the value of these faster mobile devices requires “a first-class broadband infrastructure around the world.”

The Intel chief says he’s encouraged by growth in China. During a recent trip, Otellini said he met with government officials who told him that China’s GDP would grow 8% to 9% in 2009. “They’re putting in programs that will shift savings and encourage domestic consumption,” he said. “They”ll start buying a lot of tech stuff and putting cash back into the system.”

By Scott Moritz

Free. That’s Vodafone’s (VOD) recently-unveiled price for the hotly-anticipated touchscreen BlackBerry Storm from Research in Motion (RIM) in the United Kingdom.

In a sign of just how desperate phone companies are to lock customers in to lengthy contracts, Verizon’s (VZ) wireless partner is willing to subsidize the Storm – which sells for about $500 without a calling plan – in order to lure subscribers in England.

Though a final decision has yet to be made, Verizon is considering the same strategy for the Storm’s U.S. debut next month, according to an industry source familiar with the discussions. Another person close to the company says it’s unlikely the Storm will be free.

Verizon declined to comment on its pricing plan for the Storm.

The fact that Verizon is even considering a free phone highlights the competitive pressure created when AT&T (T) started selling a heavily-subsidized Apple (AAPL) iPhone for $199.

Most industry analysts expect the Storm, which has received favorable reviews, to be priced at or below the iPhone.

While Verizon would like to use its exclusive Storm deal to gain an edge in the smartphone market, selling it for free “would be breaking new ground for Verizon,” said Roger Entner, an analyst with Nielsen IAG’s . “It’s likely that they will put it at $150 and maybe $99 if they want to ship massive volumes during the holiday.” At either price, the Storm would be heavily discounted.

Verizon has come up short on blockbuster phones over the past year and a half as the iPhone has become the icon of the smartphone market. AT&T has been a driving force in the U.S. wireless market thanks to the iPhone, which pulls in an average $95 per month. But that drive has also come at a steep price to Ma Bell, which forks over $375 upfront for every iPhone sold. That cost the company $900 million in the third quarter.

For RIM, the Storm represents its biggest step yet into the consumer market as it tries to derail the success of the iPhone. One major challenge is to get devotees of BlackBerry’s physical keyboard to embrace the clickable touchscreen keypad on the Storm. The iPhone’s onscreen keyboard has presented some difficulties for many typists.

So far, Verizon hasn’t had much success with its touchscreen devices. But the Storm, if it’s a hit, could finally establish Verizon as a player in the red-hot touchscreen market. What’s more, it could not only entice new customers, but also convert old lower-paying customers to more expensive contracts. Each Storm subscriber will have to sign up for a BlackBerry e-mail and calling plan, which currently starts at $80 a month.

By Scott Moritz

Motorola on Thursday said its plan to break up into two companies is on hold, leading the head of its mobile phone business to outline a new plan for reviving the company’s ailing handset business.

Part of the restructuring plan includes the loss of 3,000 jobs, most from the mobile phone division, a company representative confirmed.

Motorola (MOT), which reported third quarter earnings that beat profit estimates but missed sales targets, said the split up called for by activist investor Carl Icahn will not happen in the third quarter next year as planned. Icahn wasn’t immediately available for comment.

Motorola was down 5% Thursday and has seen its stock fall 72% in the past year as the lack of a successor to its once-hot Razr phone wiped out its sales volume and profits amid a declining economy.

Sanjay Jha, who took over as head of the handset business in August, blamed the economy, the credit freeze and “changes underway” in the mobile phone unit for the breakup delay. Analysts have been critical of the costly breakup plan, seeing it as a distraction that failed to address the underlying problems at the world’s third-largest phone maker.

On a conference call with analysts after earnings were announced, Jha said the company would cut the total number of phones models it produces next year and focus less on its own mobile operating system in favor of systems developed by other companies, including Google’s (GOOG) Android and Microsoft’s (MSFT) Windows Mobile.

Some analysts who have been critical of the company welcomed the new plan.

“Sanjay nailed it,” said Ed Snyder, an analyst with Charter Equity Research. “It was a perfect description of the big problems facing the handset business and an intelligent plan for fixing them. Unfortunately it will be painful.”

By Scott Moritz

With touchscreen phones all the rage, and U.S. telcos following AT&T’s (T) lead of cutting the price of Apple’s (AAPL) iPhone, it would seem Nokia (NOK) will be left out of the smartphone party this year.

The Finnish phone giant won’t have its closely-watched 5800 phone – Nokia’s music-loaded take on the iPhone – available here until sometime in the first half of next year, according to people familiar with the phone. Nokia wasn’t immediately available for comment.

And even when it arrives, Nokia has lacked a big U.S. phone partner that would provide the subsidy necessary to put it under the $200 range. At full price, it will have a hard time making a big splash.

“You could look at it as having a 100% upside,” says Nielson IAG analyst Roger Entner, referring to Nokia’s measly share of the U.S. market. Make that a potential upside of 95.5% since Nokia’s slice of the U.S. market has now fallen a percentage point from year-ago levels to 4.5%.

These numbers were part of Nokia’s overall solid third-quarter performance reported Thursday. Nokia posted an adjusted profit of 44 cents a share, down from the 55 cents it netted last year, but in line with analysts estimates. Sales fell 5% to $16.4 billion from $17.3 billion in the year-ago quarter and below the $17.2 billion street estimate.

After hitting a new four-year low, Nokia shares rebounded a bit Thursday up 4% as investors took some confidence from the fact that it met estimates.

As Nokia predicted, its worldwide market share fell to 38% in the third quarter from 40% in the prior period. The decline, according to Nokia, reflects the company’s unwillingness to cut phone prices amid a heated price war in some regions.

Nokia has managed to grab and hold onto the No.1 phone supplier position by honing its skills at making low- and medium-priced phones for a global audience. This focus on the mainstream has caused Nokia to be consistently late to fashion trends like flip phones, ultrathin designs and now touchscreens.

After a strong start in the smartphone wars with over half the global market in 2007, Nokia has dropped to a 35% slice in the third quarter from 48% of the market in the second quarter, according to Morgan Stanley analyst Jim Dawson. The alarming sequential drop is a reflection of how strong rivals like Apple and Research in Motion (RIMM) have grown. The smartphone market will get a new challenger later this month with the arrival of Google’s (GOOG) Android-powered G1 phone at T-Mobile.

But while 2008 is not going to be a big year here for Nokia, the trends – aside from the slumping global economy – are promising overall.

Each player comes from with a different specialty to the smartphone market, says Entner. Apple and Google aim for a strong Internet experience and RIM’s BlackBerry Storm hopes to capitalizes on its successful e-mail background with a touchscreen design. “Nokia comes from a mobile phone approach,” says Entner.

“Nokia sees the phone as an integrated device.” says Entner. In the past three years, Nokia has acquired mobile e-mail shop Intellisync, GPS mapper Navteq and digital media delivery system Loudeye in an effort to control the delivery of services like e-mail, navigation, photography, music, videos, games and the Internet. 

Of course, all this will matter more in the U.S. when Nokia can deliver the device.

By Scott Moritz

Three of tech investors’ favorite horses - Google (GOOG), Research in Motion (RIMM) and Apple (AAPL) - which led the stampede out of the Nasdaq Monday, came rushing back a bit Tuesday.

Panic sellers who sent the Nasdaq down 9%, its steepest one-day drop since the Internet bubble burst in 2000, were replaced by bargain hunters Tuesday. In mid-day trading Google shares were up 8% and RIM’s stock bounced 10%. Apple was up 5%, while the Nasdaq as a whole rose 3%.

Apple was one of the biggest losers Monday, falling18% after two analysts downgraded the stock on fears that Mac sales were going the way of the rest of the PC market. FORTUNE’s Philip Elmer-Dewitt, however, pointed out that some of the gloomy predictions were based on a survey of business IT buyers, not quite Apple’s core market.

Other analysts came to Apple’s defense Tuesday. Goldman Sachs’ David Bailey reiterated his buy rating  saying the stock was oversold.

“We think yesterday’s 18% decline more than captures the concerns over Mac growth in a weakening spending environment, making Apple shares attractive at current levels,” Bailey wrote.

Monday’s broad selloff, and in particular the Nasdaq’s plunge, kicked into high gear after lawmakers failed to pass a Wall Street bailout bill. Amid fears that the current credit crunch could push the economy into a deep recession, not even the tech sector’s lack of debt and strong cash position were enough to keep panicky investors from bailing.

Tuesday’s rebound offered some solace, but as Monday’s collapse showed, tech is along for Wall Street’s ride, like it or not.

By Scott Moritz

Apple (AAPL) got hit with a pair of downgrades Monday as analysts see a weaker consumer taking a big bite out of the computer-maker’s growth rate.

RBC and Morgan Stanley analysts slapped Apple with neutral ratings, down from buy, on concerns that the slumping economy will put a chill on sales of Mac notebooks and desktop computers.

Citing a IQ/Changewave survey, RBC noted that 40% of consumers questioned said they “plan on spending less on electronics in the next 90 days,” RBC analyst Mike Abramsky wrote in the note. This is the weakest outlook ever measured in these surveys, Abramsky wrote.

Apple shares fell 16% in morning trading Monday in the wake of the reports, as investors get a sobering view of how popular consumer devices can lose momentum in a faltering economy.

The growing credit crisis has helped deflate consumer confidence and force delays in purchases of items like new computers and flat-screen TVs. The problem for Apple, writes Kathryn Huberty in a downgrade of Apple to neutral Monday, is that not only is PC sales growth slowing but the one area shrinking less is the under-$1,000 price range where Apple is absent.

Add the slowdown in PC sales to the higher costs of iPhone production, and Huberty says there will be a dramatic drop in Apple’s profit growth. Huberty cut her Apple earnings growth projection for the year to 6%, well below the 9% analysts’ consensus average.

Apple is not recession proof, RBC’s Abramsky writes.

Not surprisingly, investors have taken flight from stocks in some of the stronger players as the market jitters spread across nearly all sectors. Apple shares are down 35% and smartphone rival Research in Motion (RIMM) is down 47% in the past month.

RIM’s disappointing outlook Thursday confirmed that the once hot smartphone segment is cooling just as the larger mobile phone market grinds into slow gear, not just in the U.S., but globally as Nokia (NOK) recently pointed out.

By Scott Moritz

NEW YORK – A brief hands-on experience with the Google (GOOG) G1 phone gives the impression that after a slew of touchscreen duds from other telcos, Apple’s (AAPL) iPhone finally has a worthy rival.

The highly-anticipated HTC phone for T-Mobile (DT) was unveiled in New York Tuesday, and kiosks with technical experts were set up so media people could run the first Android-powered phone through some tricks. T-Mobile will start selling the phone Oct. 22 for $179 with a two-year contract.

The G1 has a large touchscreen, nearly the same size as the iPhone. But unlike the iPhone, there is a physical keyboard under the slide-open screen. People familiar with the iPhone will find the G1 a little lighter and thicker. The G1, for you ultra-thin fans, is about 3/4 of an inch thick, downright portly compared to the svelte half-inch iPhone.

Navigating the screen is fairly easy and there are several ways to move around. The touchscreen has a swipe capability that allows you to flick up and down or side to side. There is also a small trackball-type button at the bottom of the phone for scrolling.

The 3G network coverage at the show – only 16 cities currently have T-Mobile’s 3G networks – was fast. Google’s homepage loaded in five seconds and Google search results also popped up in five seconds. Sites like CNNMoney and Fortune took about 17 seconds to load. That is a fairly standard 3G speed.

Calls worked, and the sound was clear, for those considering the device as a phone primarily.

It is clear, however, that with Google’s support, Android and HTC have made a solid Internet device that combines web access with technology like GPS and software like Google Maps. Applications like Compass Mode, as Fortune’s Philip Elmer-Dewitt explains, gives you a 360-degree street view, a trick that has been limited to PCs until now.

The phone has so-called push e-mail through its Gmail service. As Fortune reported Monday, T-Mobile was considering a low-tier price plan that would give G1 users free e-mail without a data plan. T-Mobile technology chief Cole Brodman says the company looked at a few different pricing plans, but decided that the e-mail only data plan “doesn’t do the device justice.”

The G1 will have two monthly price options, $25 for data plan limited to 400 text messages or $35 for unlimited data. That’s compares with AT&T’s $30 and $45 data plans for the iPhone.

HTC’s touchscreen has some familiar features, like a shifting orientation if the user tips the phone on its side. It also has a zoom-in function that is done with plus and minus buttons on the screen rather than the two finger pinch or separate approach on the iPhone.

The G1 allows dragging and dropping of pictures and text, a feature the iPhone still lacks. The music player was easy to use and there is a direct link to Amazon’s music store.

Overall, and first impressions being what they are,  the G1 stands well above disappointing touchscreens like Verizon’s (VZ) LG Voyager or Sprint’s (S) Samsung Instinct. And until Research in Motion (RIMM) delivers its touchscreen Storm BlackBerry, T-Mobile’s G1 is the toughest competition yet to the iconic iPhone.

By Scott Moritz

Android lands at T-Mobile Tuesday, and as part of the effort to deliver the Google phone to the mobile market, T-Mobile is considering including free e-mail access.

The new Android-powered phone will have Google’s (GOOG) Gmail service built in, and T-Mobile executives are considering offering access to Gmail free, without the need for a data plan, says one person close to the discussions.

The HTC-manufactured T-Mobile phone will be the first of the hotly-anticipated Android-operated handsets, and one of several new challengers to Apple’s (AAPL) iPhone. The Android project was created by Google to cultivate an open application platform to operate next-generation mobile phones.  T-Mobile  – a unit of Deutshe Telekom (DT) - is expected to unveil the phone during a press conference at 10:30 ET Tuesday, and offer it for sale later this fall.

Analysts see the Google phone as the beginning of an important lead in mobile Internet advertising through ads appearing on Android powered phones. Sandeep Aggarwal, an analyst with Collins Stewart, estimates that the phone will generate $5 billion in incremental revenue for Google by 2011.

Should T-Mobile decide to offer free Gmail access, it would be seen as a big counter move to Research in Motion’s (RIMM) BlackBerry e-mail service, which costs $15 a month extra. And if telcos embrace Google’s ad-supported free e-mail, it could help drive Google’s ultimate aim to spread its successful desktop advertising business to mobile phones.

The move to provide free Gmail has risks, however.

T-Mobile could undercut its own data revenue stream from BlackBerry subscribers if users trade in their Curves and Pearls for the Android phone. But T-Mobile, the No.4 wireless shop, needs an attention-getting strategy like free e-mail to help set itself apart from bigger players like AT&T (T), Verizon (VZ) and Sprint (S).  

Google referred calls for comment to T-Mobile and a T-Mobile representative could not provide an immediate comment.

As for the HTC Android phone itself, one user who got an early trial described the slide out keyboard as a little awkward for some typing tasks. The browsing quality however was “better than BlackBerry and close to the iPhone.”