Despite a mood indicating the opposite, mobile phone sales actually fell in 2012 across the globe. According to a Garner report, the international mobile phone market contracted by 1.7% in 2012, with Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) being the biggest loser. The firm’s 2012 sales dropped by 4.7% from 2011.

Nokia Logo on Glass

The winners in 2012 were Samsung, which increased sales 28 percent year on year, and Apple Inc. (NASDAQ:AAPL) which increased sales 22.6% year on year. Samsung Electronics Co., Ltd. (LON:BC94) actually outsold Apple with its smart phones in 2012. The company sold a total of 384.6 million phones in 2012, and more than half that number qualified as smart phones. Apple, in comparison, sold 130 million phones in 2012.

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) probably forms the most important part of this report. The company is certainly the one that felt most of the brunt of the changes in the market in 2012. Feature phone sales, which Nokia still relies on for a substantial part of its revenue, fell by more than 19% in 2012, as smart phones began to take over the international market.

That trend shows no signs of stopping. According to the report, smart phone sales will overtake sales of feature phones for the first time in 2013. Sales of smart phones are expected to reach close to a billion units in the year to come. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is suffering as it continues to transition from a budget phone company to a premium company.

Lumia sales have not been too inspiring and new competition is sitting on the horizon in the form of the Blackberry Z10. The narrowing of the company’s traditional revenue streams from feature phones will decimate its bottom line, and reduce its ability to market and research new products. 2013 is certainly going to be a difficult year for the company.

Gartner suggested that the reason for the contraction of the worldwide mobile phone market was a tough economic climate coupled with changes in preferences and increased competition. These reasons seem to fall short of a reasonable explanation, competition should strengthen a market as prices fall, and the economic climate was not worse in 2012 than it was in 2011.

Perhaps then, it is possible to explain the drop in total market by a change in consumer preferences. Smart phones may have a longer upgrade cycle than feature phones, in a global context, because of higher prices. The trend is worrying, but it is not expected to continue through 2013. With the fall in feature phone sales expected in the coming months, that will mean little to Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V).