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The big five handset makers are taking contrasting approaches to preparing for the likely downturn of 2009. While Nokia is keen to preserve margins at all costs and boost services, and Sony Ericsson is narrowing its range to tap into media and internet apps, Samsung is planning to go the opposite route - and one that helped cripple Motorola - by relying on increased sales of very low end phones in developing markets.

On Friday, Samsung Electronics reported a steep 44% drop in third quarter profit to 1.22 trillion won ($871.1m) - just missing analyst forecasts - and offered a bleak outlook for the fourth quarter, despite the holiday buying season in the west. Not that handsets were mainly to blame for the shortfall - weak demand and price pressure in chips and LCD products were the main culprits, but there was also softness across its telecoms activities. Third quarter sales were 19.3 trillion won ($13.8bn), beating analyst estimates of 18.8 trillion won ($13.4bn), but profit margins were already dropping because of pressures in the handset and consumer electronics sectors, and Samsung's shift to low cost models. Samsung's semiconductor business suffered the most, with profit margin plunging 74%, while margins on phones were down by 15%. Flat panel TVs were fastest growing in terms of sales and margin.

Positives for Samsung are its cash mountain - the company said it would be looking for bargain acquisitions during the downturn - and it claims its margins are still better than most competitors', though the reliance on resilient margins makes the low cost cellphone strategy even more risky.

The company expects a smaller than usual sales boost from the holiday season. "It is becomingly increasingly difficult to expect high seasonality in Q4, given general weakness in the global economy," executive VP Woosik Chu said. Telecom VP Youngcho Chi confirmed his division would be focusing on mass market handsets for emerging economies, and investing more heavily in marketing those models.

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