A recovery in cell phone demand will not happen until well into 2010, researcher Gartner said on Wednesday, while Reuters data showed the industry could suffer its worst quarter ever in April-June.

The handset market fell 8.6 percent in the first quarter of 2009, Gartner said, adding it saw demand stabilizing but it would not be until next year before demand would grow again.

We do not expect demand to get better before second half of 2010, said Gartner analyst Carolina Milanesi.

A Reuters poll of 34 analysts forecast handset vendor phone sales in the April-June quarter to slump 14.5 percent, with 2009 sales forecast to slide 10.3 percent.

Several companies and analysts have said the worst could well be over for the industry after the first quarter drop, as the fall was partly caused by retailers selling stockpiles of older phones.

In the first quarter, handset vendors sold 14.3 percent fewer phones than a year ago, according to research firm CCS Insight, with the world's top cell phone maker Nokia reporting its first-ever quarterly pretax loss.

Gartner, which tracks changes in inventory and actual sales to consumers, said retailers sold some 25 million phones from inventories in the first quarter.

It said it expects inventory reduction to continue in the second quarter, but at a pace of some of 10-12 million phones.

Although inventory has diminished there are still no clear signs of an improvement in consumer demand, said CCS Insight analyst Geoff Blaber.

Global Crown analyst Tero Kuittinen said he expects phone sales in the second quarter to rise 5 percent from the first, but mostly due to the inventory change.

Trends in the key UK and Spanish markets remain worrisome; and consumer behavior across Europe continues shifting. People exiting 18- or 24-month plans drift toward prepaid phones or cheap monthly plans, Kuittinen said.

SMARTPHONE BOOM TO EASE PAIN

Gartner said 36.4 million smartphones were sold in the first quarter, up 12.7 percent from a year ago, and said it expects faster growth later in the year boosted by new and attractive models from many of the top vendors.

Gartner's 27 percent growth forecast for the 2009 smartphone market is far ahead of many industry players, who forecast market to grow 10 to 20 percent this year.

Aymar de Lencquesaing, the chief of Acer's phone unit, told Reuters Global Technology Summit he expected market growth in coming years to beat analysts' average expectations of around 15 percent as smartphone prices dropped.

I would argue it could be a lot faster. It's a question of price point ... I would bet, if I were to bet, that we will see an acceleration of the conversion to smartphones rather than slowdown, even in a recession, he said.

Lee Williams, chief of the Symbian Foundation, the consortium of companies around the world's most popular smartphone operating system, said at the summit he expected the market to grow 12-15 percent this year.

Nokia has been losing market share in high-end and high-margin smartphones for many quarters to Apple, Research in Motion and HTC, but Gartner said the firm was able to stop the trend in the first quarter, helped by success of its first touch-screen phone, Nokia 5800.

Nokia's market share in smartphones rose to 41.2 percent from 40.8 percent from the previous quarter. Closest follower, BlackBerry-maker RIM, controlled 20 percent of the market.

(Reporting by Tarmo Virki; Editing by Erica Billingham)

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