Smartphones Bloodbath after Q1: Full Review of each brand and player

I suggested 2010 would be a big year for smartphones. I suggested the market would be volatile. I suggested we'd see new players enter the already-heated race. And I suggested it would turn into a bloodbath.

Well, the blood is already being spilled. Palm is the first to be killed. I did forecast they would not survive this year, yet that they were bought in April shows how intense its been getting. So, I gave the preview to this year. Now we have heard from the major manufacturers and can report on the first quarter point of year in smartphones. I used the average of the big industry analyst reports on the total quarterly sales of smartphones to arrive at the quarterly total sales number of 54.5 million units.

Note that all four major analysts (Gartner, IDC, Canalys and Strategy Analytics) all were within 1.3 percent of that total, so there is wide agreement that is pretty solidly the real number. And very interestingly, where usually the first quarter of the year has seen a decline in smartphone sales after the Christmas period, each of the four analyst houses agreed the overall smarpthone market grew - roughly one percent. So that is our standard. Remember we are not comparing performance of Q1 in 2009 the economic recession quarter, we are looking at the cumulative quarters in this analysis, so we are comparing Q1 of 2010 to Q4 of 2009. And the total market grew by 1%. That is the benchmark, if your company grew 1% in this year, you were only keeping up with market growth. The real winners grew faster than that. Here is the ranking of the Top 5 and their performance:

Maker.....Q1 units.........(Q4 units)..(growth)..Q1 market share...(Q4 mkt sh)..(growth)

Nokia......21.5 Million......(20.8 M).......(3%)..........40%...............(39%)..........(1 pct)
RIM........10.6 Million......(10.1 M)........(4%)..........20%..............(19%)...........(1 pct)
Apple.......8.75 Million.....( 8.5 M)........(1%)..........16%...............(16%)...........( flat )
HTC.........3.5 Million.......( 3.3 M)..... ..(6%)........... 6%...............( 5%)...........(1 pct)
Motorola...2.3 Million.......( 2.0 M)......(15%)........... 4%...............( 4%)...........( flat )

Others.....7.8 Million........( 9.1 M)......(-14%).........14%...............(17%)..........(-3 pct)

TOTAL....54.5 Million.......(54.0 M........(1%)

Now lets go through the various brands in order of their size.

SMARTPHONE MAKERS - THE BIG 5

NOKIA (AND SYMBIAN AND MEEGO) - A lot happening with Finnish Nokia. They had a good quarter for overall phone sales where many rivals were making losses or on razor-thin profits. Nokia was pretty healthy. But its smartphone business is buzzing. I had predicted that Nokia would face a decline in market share during 2010 due to the heavy competition, but they started this year with vigor, and grew smartphone sales 3% from the excellent Christmas quarter and sold 21.5 million smartphones. Where iPhone unit sales and market share was flat, Nokia grew both unit sales and market share. 21.5 million smartphones sold gives Nokia 40% in Q1 of 2010, up from 39% in Q4. As always, Nokia's market share in smartphones is well above its market share in dumbphones, signalling that Nokia is very effectively implementing its migration of its global lead in dumbphone market share for the past decade, into a dominant market share lead now in smartphones for this new decade.

Nokia reported that 10 million of those had a QWERTY or touch screen interface (or both). This time Nokia did not report N-Series and E-Series sales, but All About Symbian estimated those at about 4.3 million N-Series and 5.7 Million E-Series. That means half of Nokia's smartphones were of the low-cost type. This is in line with my bloodbath forecast and most analysts say the battle for the platforms and brands will be in the mid and low end of the market. Nokia is driving that shift and playing to its own strenghts in low cost manufacturing, giant scale, sourcing, and especially its distribution chain advantage (carrier relationships and independent phone resellers).

Nokia received some welcome news in the UK customer survey where Nokia regained top slot from SonyEricsson (RIM was third). Nokia is one of only a few brands where current owners intend their next phone also to be that brand (Apple, RIM and Samsung the other three where most current owners also want their next phone to be of that same brand). So where Nokia had been stumbling last year with customer satisfaction and loyalty, it seems to be getting that part of the ship back into shape.

There is of course a lot more moves and news from the smartphone market share leader. Nokia is pushing its rivals many of whom suffer of tight profits or make losses, by announcing a global price drop a few weeks ago. Nokia is pushing QWERTY phones into lower cost smartphones and even dumbphones.

The first clear iPhone clone by Nokia is 'finally' released, as the N8, which seems to be superficially by size, weight, screen size, form factor and main features to be very much a Nokia branded iPhone wannabe. Its no doubt the best form of flattery, when the market leader copies your design, you must be doing something right haha. Apple however is not exactly smiling as Nokia can bring its N8 to far more countries and carriers, and offers it at a lower price point than the iPhone. We'll have to see whether the N8 performs in the market this year more like the N95 vs iPhone or perhaps more fail like the N97 vs iPhone.

In the operating system side, Symbian is getting another update. The Linux based Nokia Maemo operating system was merged with another Linux smartphone OS from Intel to create MeeGo. Nokia says this will be the future OS for premium smartphones. We don't have any phones yet out on MeeGo (Nokia's flagship N900 is powered by Maemo).

The Ovi store, for all the initial bad reviews, is being updated, and is gaining performance. Apps and content from the Ovi store is now being downloaded at the rate of half a billion downloads per year (vs Apple iPhone App Store which is the market leader having about 2 billion downloads per year). Ovi is still being fine-tuned and at less than a year old, it can be considered to be in its ramp-up stage. Expect Ovi to grow strongly still. 

Nokia's investment in navigation specialist Navteq was turned into free maps and navigation bundled with Nokia phones. That hurt GPS based navigation specialists like TomTom and Nokia hopes it can give Nokia an advantage. But all these steps are not enough for Nokia investors. There was a near investor panic with some suggesting CEO Olli-Pekka Kallasvuo should step aside. Nokia's respose was a reorganization which put Anssi Vanjoki in charge of handsets. In my book, out of the classic Big 5 legacy handset makers (Nokia, Samsung, Motorola, SonyEricsson and LG) - Nokia is not just the most profitable, but has executed its smartphone strategy by far the best. In my book one should not compare Nokia's performance against small smartphone specialist companies like RIM or HTC, or Apple which only sells super-premium class smartphones.

But Nokia has failed quite spectacularly in the US market, and most of Nokia's owners come from the USA so they see Nokia failing in their home market, where RIM and Apple have their best market, and its thus easy for investors to think that Nokia is doomed, and what happened in the US market will now face Nokia in the rest of the world. Its a 'reasonable' conclusion but one which is not based on how the mobile phone market operates. As I have explained, the market is not open, and that there are enormous market distortions, and that the US market is totally not reflective of - and does not give predictive insights - into the far larger rest of the world market for phones (or smartphones). But the fact is that the management of a corporation serves its owners, and Nokia share holders are angry at the management, and much of that anger is based on comparisons to how RIM and Apple are perceived to dominate the market or perceived to grow strongly.

RIM (BLACKBERRY) - Congratulations to Canadian RIM for becoming the largest mobile phone handset maker of North America. With 10.6 million unit sales in Q1, ahead of Apple at 8.75 million and the crash of Motorola's handset sales (smartphones and dumbphones combined) of only 8.5 million - Q1 is the moment when RIM shot past Motorola and even SonyEricsson and became the 5th largest handset maker in the world. And relegated Motorola all the way down to 8th place (as Apple also passed Moto). (haha and where was the place where you first heard a prediction that in 2010 RIM will pass Motorola in total phone sales volume? Probably was the Communities Dominate blog?)

RIM grew unit sales 4% from the fourth quarter of 2009, but RIM's numbers are always a bit tricky this time of year, because their quarters end on February, May, August and November. So where most had Christmas in the 4th Quarter, RIM had Christmas in the 1st Quarter. But the numbers now being reported by the major analyst houses tell us that RIM sold 10.6 million Blackberry handsets in Q1, a growth of 5% from Q4. RIM's market share grew to 20% from Q4 when it had 19%.

RIM news when reported by US press and analysts seem to suggest time and again, that RIM has an outdated OS, its customer base is too strongly enterprise customers and its email client does not well migrate to consumers. All of that his utter baloney. RIM's migration to consumer markets is well under way, it it is the world's most preferred QWERTY keyboard phone maker for all those millions of youth who are addicted to SMS text messaging. Pew reported that 30% of US youth send more than 100 SMS per day. Nielsen reported that 42% of US youth are able to send SMS blindly. Both of these guarantee that an iPhone will not even be considered by that portion of the youth market who are so addicted to SMS. And accordingly, in the US market NPD measured that 46% of all phones sold (including dumbphones) had QWERTY keyboards vs 31% that had a touch screen. RIM is leading in the hottest market segment while Apple gets all the glory in the press for leading a far smaller market segment. Remember, RIM grew market share from Q4 of last year, Apple was flat. Who is gaining and who is not? Whose market strategy is executing better?

RIM success stories keep coming from strange markets. Last year we reported on Blackberry being the most popular smartphone in Indonesia and the bestselling phone of any kind in Venezuela. Now we hear more such success from Botswana in Africa to Thailand in Asia to Brazil in Latin America. RIM has set up a Blackberry factory in Brazil to cater to Latin American demand. It is also gaining a lot of fans in India. Meanwhile back in Indonesia, pirated Blackberry clones of mostly Chinese origin sell 2 million units, twice the sales of the real Blackberry. The market in India expects to sell a total of 7 million QWERTY phones this year alone, obviously far more Blackberry-clones than real Blackberries. And in South Africa just on the Vodacom network, there are 1 million Blackberry phones - where Blackberry alone outsells all other smartphone brands combined - a nasty hit at Nokia who dominates the dumbphone market in South Africa.

The iconic texting phone is also gaining in advanced markets, in particular in Europe - in Britain's customer survey RIM finished third most popular phone brand behind Nokia and SonyEricsson - and obviously ahead of the iPhone. The customer segment that really goes for the Blackberry is the youth and young adults, and a Blackberry is often seen as a sign of 'being cool' and or being connected. A big key to it is the Blackberry instant messenger.

But RIM needs to make hey when the sun is shining. There are big thunderclouds forming on the horizon. The biggest single threat is Microsoft's Kin/Pink QWERTY phones but many more QWERTY models are coming from almost every major rival, starting with 3 new QWERTY models from Nokia. And the Blackberry form factor is popular with low cost smartphones like the youth phones from INQ that have launched in India for example at prices of exactly half that of the Blackberry, and many more pure dumbphones offering SMS texting and instant messaging with QWERTY keypads like Boost Mobile's simple featurephones at 99 dollars without contact and prepaid price plans.

The performance and news directly from RIM is solid for this quarter and heading into Q2. But the competition for the youth QWERTY phone opportunity is getting far more tough than I expected at the start of the year. Even of Android devices, more than half of all traffic generated by Android devices according to Admob stats, was generated by Android phones with both touch and QWERTY inputs. The keyboard 'secret' is getting out, ever more handset makers target this segment and as the operators know their profits come disproportionately from SMS, they also tend to prefer QWERTY phones to boost their own profitability and bottom lines. RIM is seeing more competition into 2010 than I initially expected. But also, RIM starts the year fulfilling my promise that they will grow market share this year.

APPLE (AND OS/X AND iPOD TOUCH AND iPAD) - I had predicted that US based Apple would see a major decline in unit sales from the Christmas quarter to Q1. And I said that would also include a big quarterly drop in market share. I was not alone in that prediction, in fact every one of Apple analysts who predicted unit sales for Q1 had predicted a decline, most of them predicted far bigger declines than I did. But that decline didn't happen, globally. The drop in sales did happen in most of Apple's traditional iPhone markets - the US market saw a drop of iPhone sales of 14% from Q4 according to AT&T, so the assumption was fair that we all made. As I've said, no forecaster had expected Apple to grow sales by 1% or even to have sales flat from the Christmas quarter of 2009. As regular readers of this blog now know, the surprising 'missing million' unit sales of iPhones was due to the Lunar New Year gift-giving in China.

So we all got it wrong. iPhone sales did not decline something like 15% from Q4, they actually grew slightly, 1% and reached an all-time high of 8.75 million units. A great quarter for Apple. But remember, this is not a financial analysis blog or series of blog articles (Apple's financial performance was excellent). We are monitoring the bloodbath in the smartphone market for 2010. And the news in smartphones is not that great for Apple, after all.

For even with that record-breaking quarter, Apple did not gain market share, holding market share flat at 16% from Q4. Apple grew unit sales yes, but in market share, Apple only managed to keep up with the market, without any gain. Both of its bigger rivals, Nokia and RIM grew not just unit sales, but also grew market share. Apple's current quarterly market share is down from its peak best quarter in 2009 of 17% (in Q3 of 2009). While its too soon yet to know whether Apple's annual sales has peaked - remember my prediction was not just of a quarterly peak, it was of an annual peak - the numbers are increasingly starting to stack up that way, that I may indeed be correct.

NPD reported just a few days ago that Android smartphones already outsell the iPhone in the USA, Apple's best market. And thats when most Android US phones had not even been launched yet, and more importantly it is before most major Android manufacturers who are not strong in the USA but have strong regional presence - like SonyEricsson for Europe and Japan, and ZTE and Lenovo for China etc - had not yet launched their Android phones. Apple freaked out so badly about the press about Android overtaking iPhone in the USA, that it sent its spokesperson, Natalie Harrison to come and spin the story.

This first quarter for Apple was mostly about the iPad, but also the iPhone OS update, the iAd platform and other Apple stories were well in the news. In the smartphones bloodbath, Apple's China Surprise was welcome news, now creating that bonus sales peak in Q1 after the Christmas sales. We can expect such a China Surge every year. I expect we will no more see the catastrophic sales declines in Q1, thanks to Chinese New Year celebrations and gifts. This is something that comes as a fantastic bonus surprise to Cupertino this year, the Year of the Tiger.  

Meanwhile more 'mundane' normal stuff at Apple - there were consumer surveys in America that found Apple was the smartphone with best customer loyalty (Blackberry was second). The App Store reported its 4 billlionth download cumulatively since 2008. Apple passsed the 80 million unit level cumulative sales of iPhone compatible devices (iPhone, iPod Touch and iPad). And while it wasn't launched in Q1, the iPad recorded a million sales in its first month in the USA alone. Bodes very well for the iPhone compatible Apple exclusive platform.

Apple's global market share in phones (all phones, not just smartphones) has passed the 2% level for the full year 2009 and is now nearing 3% for Q1. That is solid growth. Apple also passed Motorola total handset sales in Q1, displacing Motorola as the biggest mobile phone manufacturer based in the USA. That means Apple is the 7th biggest handset maker in the world, very impressive performance for a company that entered the phone business only 3 years ago and makes only one phone model and sells at the super-premium high cost price bracket. If we want to compare it to the car industry, Apple's global performance is very similar to BMW in cars, a premium-only car brand which usually sells between about 2% and 3% of total world car production (and almost any year, is the most profitable of all major car brands).

Of Apple's dependence on the US market, that I have been critical of in the past, Apple has moved very well into a global footprint. In Q1 of 2010 Apple has its best 'internationalization' quarter to date for the iPhone, as only 31% of all iPhones were sold in the USA - 69% sold abroad. Very good development for iPhone's aspirations. The growth prospects for Apple iPhone platform are very good. But, in examining the smartphone market (where we have to exclude non-phone devices such as iPod Touch and iPad), Apple started the year with no gains in market share. I forecasted that for the full year Apple's market share will decline. Now we hear NPD telling us the US market has turned against Apple growth, and this is before the rest of the world has seen similar Android invasions. And most Android makers have not yet released their full range of Android products (only 34 have been released so far, the year will end with more than twice that number). The prospects for Apple market share in smartphones does look not so good, even as unit sales (and obviously Apple profitability) look strong. Apple will be luckly to hold onto market share.

HTC - Taiwan-based HTC numbers can be seen two ways. There is total HTC production which was about 3.5 million units for Q1 (giving HTC a market share of 6%) or it can be measured as as 2.6 million HTC branded units (5% market share). What we also get out of that, is the total sales of HTC manufactured, but not HTC branded smartphones, which is 0.9 million units. We do not know the exact number, but its safe to guess that the biggest part of that remainder was Google Nexus One sales, which I have modelled at 600,000 units for Q1. I do count the manufacturers' market shares based on their total production, however they decide to sell them, so I use the 3.5 million number in my model. And that means HTC grew 6% from last quarter, and their market share grew from 5% in Q4 to 6% now.

When you're small you want to make a lot of noise. HTC may sound like a Chihuahua dog but their recent yapping has been very potent about their market performance. After switching from Windows Mobile to Android, HTC has seen its unit sales grow dramatically and their market share climb from 4% to 5% to 6%. Now while we await for Q2 results, HTC has been bullish enough to declare their Q2 sales will be up by almost a third - this over one quarter from Q1 to Q2. HTC says they will sell 4.5 million smartphones in Q2. So HTC is seeing huge growth right now. But their growth rate comes from a small base.

HTC is the biggest smartphone maker who does not make its own OS. HTC was in the running to buy Palm, and there are lots of noises from HTC that they may want to develop their own OS. Clearly they felt that on the Windows Mobile platform they often missed market opportunities due to Microsoft choices in the development (and often because of OS update delays). But OS development is a costly business, so we have to see how this goes. Nonetheless, HTC is the hottest smartphone maker right now.
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MOTOROLA - Motorola the US based giant phone maker is no longer a giant. Twelve years ago it was the world's largest phone maker. Four years ago Motorola was in solid second place with 21% market share. Then it died. Today Motorola is no longer a Top 5 major phone maker. It is not the biggest phone maker of North America (RIM is bigger) and it is even not the biggest phone maker of the USA (Apple sells more iPhones in only selected countries and often exclusive carrier deals, than Motorola sells far cheaper dumbphones and cheaper smartphones in almost all countries with carrier relationships that span several decades. And all this where its handset division continues to make losses. Today the Motorola management is in the process of splitting the company in two. I wrote my autopsy of Motorola's Harakiri here in this article.

So this is not a phone sales bloodbath review, its a smartphone bloodbath review. And Motorola was very late in deciding on a smartphone strategy and last year decided to rush into Android phones. Its first major Android handset is the Droid (sold as the Milestone in many countries). Motorola has indeed grown market share in smartphones - quite strongly actually, reaching 2.3 million units of smartphone sales, which gives it 4% market share. Motorola's growth was by far the strongest of the big smartphone makers at 15% from Q4 of last year. That does seem to make Motorola 'strong' and powerful in smartphones. It is an illusion.

Motorola is cannibalizing its dumbphone sales in a crash-dive of market suicide. Note, that Nokia has consistently achieved greater smartphone market share than dumbphone market share. And Nokia has been consistently profitable in its handsets business. So Nokia has managed to gain market share as it transitioned from dumbphones to smartphones. So Nokia picked up more Nokia brand users, as it migrated from dumbphones to smartphones. Motorola did the exact opposite. It has been bleeding market share, abandoning customers, in its shift to smartphones. Motorola is cannibalizing its own sales and doing a horridly bad job at it.

Look at the past quarter. In Q4 of 2009 Motorola total phones unit sales was 12 million units. Smartphones were 2.0 million units. Then this Q1 quarter, Motorola total phone sales was down catastrophically to 8.5 million units, and smartphone unit sales was up to 2.3 million units. Thus Motorola dumbphones declined 3.8 million unit sales in three months. That gave Motorola a gain of 0.3 million smartphones. Motorola has lost more than 12 dumbphone customers to gain one smartphone customer. That is disasterous brand performance. Imagine, 11 existing Motorola customers out of 12 who were given the chance to pick a Motorola Droid this past quarter, went to another smartphone brand. Its market suicide by Motorola, I have no better term for it. And how 'prepared' is the new Motorola now for the smartphone battles? Its employee force is slashed and cut and gutted. Motorola does not make its own operating system so it is at the whim of Google Android and will see countless of Android clones that are very similar to the smartphones from Motorola. Remember that tiny (when counted among global handset makers) HTC outsold Motorola in smartphones by 1.5 HTC-manufactured smartphones to every 1 Motorola-branded smartphone sold.

So we have the top 5. All grew unit sales over the first quarter. Where the industry grew 1% in total smartphone sales, Apple matched that growth, growing also 1%. Nokia grew 3%, RIM grew 4%, HTC grew 6% and Motorola grew 15%. Apple and Motorola held market share even, while Nokia, RIM and HTC all grew market share. Now how about the pretenders.. 

OTHER SMARTPHONE MANUFACTURERS - THE HUNGRY PACK

So behind the Top 5 in smartphones, we have 'the rest'. And where a few years ago there were barely any recognizable brands offering smartphones, that changed in the past few years. I counted that in 2006, out of the world's largest corporations, ie the Global Fortune 500, there were only 7 that offered a smartphone. Today 23 of the Global Fortune 500 corporations have joined the smartphone races as manufacturers under their brands, including the world's largest PC maker HP, the world's largest mobile operator group Vodafone, the world's largest software maker Microsoft, world's largest internet company Google, etc. The smartphone 'bloodbath' has truly been joined. Even the ghost of IBM - its PC unit (sold to Chinese Lenovo) is a smartphone maker now. Lets see whats bubbling here to trouble the big 5 in this year of the bloodbath.

SAMSUNG (AND BADA) - If HTC has been bullish, South Korean Samsung has been something even more, what would that be, water buffalo'ish? At the start of the year Samsung promised us they'd sell 18 million smartphones - up from 7 million in 2009. Now only a quarter into the year, they have already upped that goal to 24 million smartphones. This is at the level of total iPhone sales last year. So Samsung management has been very aggressive in their statements about smartphones early in this year.

But then, where is the roar, we now hear more of a whimper from Samsung as Q1 numbers are reported. What is Samsung's total sales for Q1? Nobody at Samsung willing to give us the number. That to me says its not as good (yet) as they want. I was expecting Samsung to come in at about 2.4 million range - reflecting a growth rate similar to that of Nokia and RIM - especially remembering that Samsung is one of the big brands of China, so they should have seen a solid China Syndrome bonus sales out of China. But nobody at Samsung is saying anything. I am interpreting that as disappointing performance. Samsung reported almost immediately after Motorola, and they probably were a bit spooked by Motorola's strong smartphone number. That suggests to me, that Samsung actual Q1 smartphone sales were under Motorola's - and based on this, and until we learn otherwise, I am modelling them at 2.2 million unit sales for Q1, which means a sequential decline of 6% from Q4, and a 4% market share currently. If Samsung management is serious about strong growth this year, they better get their act together soon.

Samsung has given us guidance on the split of how its various operating systems will do this year. Remember Samsung makers smartphones on four OS platforms, Symbian, Windows Mobile, Android and Bada. Samsung has said that half of its smartphones will be on Android and a third on Bada this year. But I promised Samsung would grow strongly in smartphones this year. One quarter is done, and Samsung is not in the Top 5 yet. They better get going..

SONY-ERICSSON - The management of the partnership of Japan based Sony and Sweden based Ericsson to sell mobile phones, SonyEricsson would not confirm the exact number of sales of its smartphones, and the general opinion is that SE sold something well below 2 million units. I am modelling them at 1.5 million for Q1. That gives SonyEricsson 3%. These are still mostly Windows Mobile smartphones as SonyEricsson is transitioning to Android based smartphones. But the rumor mill is getting stronger that we may get a PlayStation Portable based smartphone coming towards the end of the year. As I've been saying, it could be the next 'must-have' phone.

GOOGLE (AND ANDROID) - USA based Google was supposed to have a great year with Nexus One boldly marketed not as another smartphone, but as a superphone. Since then Google has been making a lot of enemies in the mobile industry and feeling the backlash. Its big US launches on Verizon and Sprint have both been cancelled, both Verizon and Sprint later changed their minds, and replaced the Nexus One with some other HTC Android smartphone. That must sting over at Google. Similarly in Europe Vodafone has scaled back its retail availability of Nexus One. Thats most of the smartphone global market just there, Europe plus the USA, and Google now is strugging to find any meaningful sales in the rest of the world, and selling directly. And to make matters even worse, Google has announced it will discontinue its online store for the Nexus One.

How did Google do? We know for a fact that HTC manufactured 3.5 million units of smartphones in Q1, and its own HTC brand sold 2.6 milllion units. So the absolute maximum Google Nexus One sales for Q1 is 900,000 units, but HTC also makes phones for other brands, so I am modelling Nexus One at 600,000 units. That gives Google a market share as a smartphone brand of 1.2%. Obviously Google's entry into smarpthones was nothing near as spectacular as that of Apple iPhone in 2007 (exactly as I predicted haha)

HEWLETT-PACKARD (EX-PALM) - Yes, the world's biggest PC maker HP out of the US, is now the newest smartphone maker, the smartphone previously known as Palm. Actually that is a bit misleading, HP has been occasionally offering updates to its modest market performing PDA-style smartphone that ran on Windows Mobile. Its been a very borderline player in the past. Now HP gains Palm. Palm was once the world's second bestselling smartphone but in recent years was out of the top 5. We do not have actual unit sales of Palm but judging by the analyst reports (ie the 'other' category of smartphone operating systems), we can be sure its less than half a million. I have modelled Palm at 400,000 units of sales for Q1, which gives it 0.8% market share. Under one percent. But that was Palm under old ownership and management, chronically making losses quarter after quarter and year after year. Now we should see a revival of the Smartphone Known Previously As Palm, as HP can use its scale, its global reach, its dealerships and retail, its brand, and its strong enterprise solutions to support the smartphone. HP can also provide the cash needed to refresh the product line and also fight in the bloodbath in terms of price wars, something that the perennially loss-making Palm was unable to do against the deep pockets of the likes of Nokia, Apple and Samsung. Expect ex-Palm to revive and grow, but also this will take time, so probably we won't see big gains in Q2 yet, more towards the end of the year. At least the bleeding should stop now.

LG - We have seen a slew of South Korea's second largest handset maker LG launches into smartphones but they are only ramping up, so there aren't significant numbers to report yet but we'll have to see how LG fares later in the year.

ZTE - out of China is the world's fourth biggest phone maker but most of those are very low cost dumbphones, so ZTE is only very modest in smartphones. A powerful domestic brand in the world's largest mobile market, China, which only last year got into 3G, ZTE is now gaining strong new sales of low-cost 3G smartphones for the Chinese consumers hungry to get mobile broadband into their pockets. The total numbers for ZTE smartphones are not reported and I expect them to be well below the million unit level (but see Lenovo here next) but that can change in a hurry, due to China's huge size and massive growth rates. And now that China has launched 3G last year, their appetite for smartphones has appeared.

SHARP - Japan based Sharp manufactures Microsoft's Kin phones, and on its own brand is Japan's biggest dumbphone maker and Japan's second biggest smartphone maker. They seem to be making a move to expand abroad, and in possibly related news, Sharp is releasing 3D displays for phones, and dual stereoscopic 3D cameras also designed for phones. We may see the 'next generation' of the smartphone races emerge in the video/3D area, with Sharp a strong contender there. But that is announcements now only, no phones yet even announced, far less released.

TOSHIBA - Toshiba is Japan's biggest smartphone maker and it was suggesting it wanted to gain world market share, but its been very quiet during Q1.

OTHER JAPANESE - and then there are the other Japanese like Panasonic, Kyocera, NEC, Fujitsu etc. They make some smartphones but none in the one half of one percent scale in global market share.

INQ - The UK based 'house brand' for the Three/Hutchison pure 3G operators/carriers has been making a modest amount of smartphones for its group. Now INQ is expanding its market entering India with low cost QWERTY smartphones.

NEWCOMERS WHO ENTERING SMARTPHONE BLOODBATH

LENOVO - Chinese Lenovo has become very bullish with its smartphone strategy. It came out with a goal of selling one million smarthones in China alone, with an Android phone launched for Q2 which is clearly designed to be feature-for-feature a clone of the iPhone 3G, and priced at only half the iPhone in China. Lenovo brings to the table a very trusted domestic Chinese computer maker brand and the Lenovo smartphone has WiFi which on the Chinese iPhone is blocked. Also where China Unicom is the only dealer for the iPhone, the Lenovo rival model will be sold by China Unicom and China Mobile (which is 3 times larger than China Unicom) as well as the third carrier, China Telecom. The Lenovo Chinese market gives Lenovo good scale to then ramp up and challenge the iPhone and other Android phones in many other Asian markets from India and Indonesia on.

MICROSOFT (AND WINDOWS MOBILE, PHONE 7) - Microsoft out of the USA had entered the smartphone race early in the past decade with its operating system, but like in the personal computer space, Microsoft said for many years it was not interested in making the hardware, only the software. That changed this year, when Microsoft suddenly threw its hat in the ring and entered the smartphone races with a big splash, with its youth-oriented QWERTY smarpthones under the working name of 'Pink' and released as the 'Kin' phones. The immediate launch featured two phone models. They are now going on sale in Q2, so we didn't see Microsoft numbers in Q1 yet, but this is a very powerful rival who has a long history in smartphones.

The bizarre news is on the pricing plans for the Kin phones in the USA, which were revealed at a 70 dollar monthly fee for Kin price plans. That is remarkably costly for a youth-oriented phone. This will weigh in quite badly in the fight, where far cheaper QWERTY (dumb)phones also exist in the US market. We have to see how it performs in the US market but Microsoft has also lined up a solid family of carriers/opeators internationally to resell the Kin phones. It could be the sleeper hit of the year, but the pricing needs to be competitive.

DELL AND ACER - other PC makers are entering the smartphones market. Acer, the world's second biggest PC maker out of Taiwan and Dell the third biggest PC maker out of the USA have promised Android phones for this year. But Dell's top management statements have been bizarrely contradictory (similar confusion to what we saw from Microsoft for years) such as the statement that PCs will not face a challenge from smartphones (where most rivals accept that the majority of computer use will shift from PCs to smartphones over this decade). I think in this hotly contested year of smartphones, if your management is not focused, you lose.

VODAFONE - The world's biggest mobile operator group Vodafone based in the UK had earlier announced ultra low cost dumbphones, and now recently also its first branded smartphones, running Android and aiming for the Emerging World markets like India.

NTT DOCOMO (and its alliance) - And if Symbian, Android, RIM Blackberry, Apple OS/X, Bada, Palm, MeeGo, Linux Mobile etc are not enough for you, Japan's largest mobile operator/carrier NTT DoCoMo collected an alliance of Japanese telecoms companies to announce its own future OS platform. The OS should apparently be the Japanese migration path for Japanese Symbian and Linux Mobile smartphones. These will not impact this year's sales, but they give more of a future for both Symbian and all Linux based OS's such as Android and MeeGo.

SMARTPHONE OS SOFTWARE

Lets also take quick look at the smartphone operating systems. This is just a quick summary of what was covered in the above.

SYMBIAN AND MEEGO - Symbian global market share keeps shrinking gradually but its still 44%, almost as big as numbers 2, 3 and 4 combined. There are modest smartphone sales by Samsung, SonyEricsson etc, but most Symbian sales are now Nokia (now Nokia accounts for 90% of all Symbian handsets shipped). The Symbian OS is increasingly powering mid and low cost Nokia handsets that were previously featurephones. Meanwhile Nokia and Intel joined forces to develop MeeGo and have a series of telecoms companies already committed to the MeeGo platform. There are no MeeGo phones out yet.

RIM BLACKBERRY - is the world's second most popular smartphone OS for four years already and grew market share to 20% in Q1. There are upgrades coming to the Blackberry OS but this OS is only powering the RIM smartphones.

APPLE OS/X - saw a quarter of flat sales and has 16% market share when measured in smartphone sales of the iPhone. As a software development platform, Apple OS/X also powers the iPod Touch so its reach is significantly bigger than what the unit sales of 8.75 million would suggest (iPod Touch sales tend to be about two thirds the level of the iPhone). Now Apple is adding to that reach with the iPad.

GOOGLE ANDROID - has passed Windows Mobile and is now the fourth biggest smartphone OS with 10% market share. Over 60% of all Android devices currently are made by HTC, with Motorola the second biggest Android maker. There are over 34 models of smartphones already released by over a dozen Android manufacturers with many more coming this year. NPD reported that total Android based smarpthone sales had passed Apple iPhone in the USA in the first quarter but globally still Apple leads Android. Android is gaining more reach for its platform (similar to Apple's OS/X and iPad) as Sony announced plans to roll out Android powered TV sets with internet access. Obviously just like iPads are not smartphones, neither will any Sony TV's count as Android smartphone sales, but this is potentially a far larger reach for Android developers, and once again renews the rivalry between Sony and Apple, that we've seen before with Walkman vs iPod and Walkman vs iPhone and now PSP vs iPhone gaming)

MICROSOFT WINDOWS MOBILE AND PHONE 7 - Microsoft's OS is continuing to bleed market share. Its total smartphone sales by makers such as Samsung, Motorola, HTC etc reached under 4 million units and gave MS a market share of 7%. Windows Mobile was the world's second best-selling smartphone operating system just over two years ago. Now its fallen to 5th place. Microsoft looks very much like Palm in smartphone handsets and Motorola in dumbphones, another US based player who didn't understand the market and failed in it. Now as we await the Phone 7 new OS - which is incompatible with Windows Mobile which screws up many of the existing developers and their investment in the platform - we have to see is Microsoft's entry too little and too late. Android is the hot flavor right now in operating systems. Microsoft's Kin phones illustrate that MS is serious about this space, but we may see that the Windows/Phone based OS will migrate from a family of manufacturers to a single manufacturer system - on Kin phones - similar to how Symbian has changed from being supported by most big brands to becoming a Nokia exclusive platform.

LINUX MOBILE - has been small and mostly Japan-based. It continues in that way with 4% market share.

PALM (HP) - was the dying swan. Now resurrected by HP.

SAMSUNG BADA - was not yet out in Q1, we now see first Bada phones so we'll start to track their numbers from Q2.

Thats it, the bloodbath update for Q1 of 2010. The summary? I expected Palm and Microsoft to really suffer - and they did. I expected RIM, HTC and the Android platform to grow as they did. But I also got it wrong. I expected Nokia and Symbian to decline - Symbian did but Nokia surprised me. I expected Apple to decline, it held steady. I expected Samsung to make a big splash which so far is not visible. And Motorola is doing its best to try to turn from a cheap dumbpone maker to a premium luxury smarptone maker - and losing tons of customers in that process.

We will continue to monitor the bloodbath whenever there are major news. and roughly every month on a review of the monthly news but not covering every brand. The next full all-brands review will be after we get the Q2 numbers, so expect it near end of July or early August on the Communities Dominate blog.

Comments

[Alex Birkhead]

Hi Tomi,

Hugely disappointed -- very little to quibble with! ;-) Superb round-up as usual.

One general biggie -- isn't it time to redefine the market definition? Smartphones of old (Symbian, BlackBerry, etc.) are the new featurephone, while iPhone, WebOS, high-end Android are the new smartphones (i.e. mobile computers). Current definitions remind me of the days when BlackBerries were astonishingly excluded from some smartphones stats, making a joke of the numbers. Usage habits seem to support this, especially for devices from the old guard, which are used more as multimedia devices than internet terminals (messaging possibly excepted).

Nokia is clearly god of the mid-market, but not obviously troubling iPhone or Android at the top. Using your auto-analogy, Nokia is the Toyota or Volkswagen of the game (but currently lacking a serious Audi/Lexus brand extension to tackle iPhone/Android), facing mainstream competition from the Hyundais (Samsung/LG) and still-developing Chinese players (ZTE, Huawei, etc.).

In retrospect, seems quite a dull quarter for the major volume players, but I agree this could be the lull before the storm, and more interesting lower down with HTC, Moto, Samsung, LG, SE, ZTE manoeuvring and not necessarily performing short-term as might be expected. I know you think they should be put out of their misery, but perhaps a hint of life at Moto as a smartphone specialist? Android remains the wildcard, and gets rather obscured when focusing on vendors.

[boris]

"Current definitions remind me of the days when BlackBerries were astonishingly excluded from some smartphones stats, making a joke of the numbers."

Exactly, we need financials on this, not unit numbers based on an arbitrary taxonomy. Who is selling the most 500 Euro phones is a better question.

[Anders S. Løvlie]

Tomi,
very interesting as always! What's your take on yesterday's android announcement, that they are now selling 100k phones a day? That corresponds roughly to the number of iphones sold per day the last quarter. So are we already seeing android catch up with the iphone also globally? unless iphone sales are increasing even more this quarter, of course - but with your theory about chinese holiday sales in the previous q, and the wait for a new iphone, that may seem unlikely, no?

[Carlos]

Tomi, thanks for the chart.

boris, that is a valid information. But lots of people want a mobile solution, not a shiny toy.

I see in our customers that they want our programs, but the cheaper the better.

Also, if I have to prioritize the development, for me is important to know the size of the market. And yes, I know that potential customers not translates directly to real customers.

[Alex Birkhead]

100k/day (36.5 million annualised) could put Android close to BlackBerry (37m shipped in most recently reported 12 months, or 42m annualised based on last qtr), especially if apparent momentum is maintained -- i.e. vying for number-two spot globally for higher-end mobile devices.

Apple (iPhone only) would already have dropped to #4, at 30m-35m, and unlikely to see its numbers leap (if at all) until iPhone HD (v4) released in second half of the year, i.e. probably too little, too late. Kind of humiliating even for Apple, if overtaken from null by a Google initiative in 18 months. Will certainly have surprised me if Android makes #2 this year, especially when still relatively immature (could be a true monster next year).

Being ungentlemanly, both iPhone and Android could be argued already to be ahead of RIM, as Google is talking about 'activations' and RIM 'only' added 5m new 'accounts' last quarter (20m annualised; it claimed a total BlackBerry account base of 41m -- suggesting pretty high attrition and/or upgrade rates, and, who knows, maybe fat inventory in sales channels). However, presumably some BBs are used without an account, odd as that might be, so real user base could be #2.

OT: I think Tomi may previously have argued that BlackBerry doesn't see much competition/attrition from iPhone, or anyone else. I don't believe this, just as I strongly disagree that RIM is safe in an enterprise stronghold, though I do agree that Apple is moronic not to offer a keyboard BB-killer, and this would definitely be the time to unveil one if Android truly on the rampage...

[Alex Birkhead]

Anyone taking bets 'against' Apple slashing iPhone average selling prices within six months, perhaps by 30% or more, even 50%, for base models, to make price-competitive?

Apple has the cash, possibly the ambition, and I think there have been hints it is prepared to take a serious margin-hit. This would take on Nokia, RIM, Samsung, etc. in the midmarket, as well as move to rebalance against Android, and so offer potential big volume payback.

This is possibly the one big, fast move it could make to significantly raise its game against Android, short of new form factors or breathtaking innovation in v4. Not sure HD video would be enough in itself.

Currently, Android vendors can happily launch top-end models as high as parity-pricing with iPhone (i.e. very high), then modulate pricing in line with demand. Apple, meanwhile, has set a high price bar and and can't be seen to budge except once a year; not so clever when past sell-by date (like about now).

Without something radical from Apple, I might even have to eat humble pie and start buying into Tomi's iPhone-has-already-peaked theory. Yikes...

[Tomi T Ahonen]

Hi Alex, boris, Anders, Carlos and Alex again..

Thank you for the comments. Will respond to each individually

Alex (first) - me too, so disappointed you don't have more to argue haha.. Seriously thank you very much.

I totally understand the point about re-defining and partly agree with that too, but the point is, there is no metric for anything else, better than 'smartphone'. There are some analysts who now report on touch screen devices, but those are far more than all smartphones combined, as many dumbphones are touch screen (Samsung sold 40 million touch screen phones last year, most were dumbphones). And as the world sees about 2,000 new phone models released per year, its pretty much impossible to have any one entity do a fair evaluation of them to determine on a subjective level, what is a 'legitimate' premium phone and what is only a 'glorified featurephone' haha. I do appreciate what you say and we have this discussion here on this blog hundreds of times and on Forum Oxford etc, and there is near universal need for more refinement in splitting the smartphone space into more meaningful categories, but for me, as an analyst, I can't use anything that can't be measured. And today the only way we measure is by OS.

But obviously to use the car analogy, what we now need is to have some measurements of sedans vs convertibles vs SUV's vs vans vs pickup trucks vs citycars etc etc etc. Not just dumbphones and smartphones haha. I do agree with you on the need. But I can't provide more for you (and readers) here on this blog until the big analyst houses start to measure something more meaningful.

Also remember only a little over two years ago, smartphones were less than 10% of new phones sold, so this is a new market segment, typically measurements always lag new developments. I'm sure they will come soon. The user interface seems to be a natural way to split them - touch screens, QWERTY phones, basic T9 smartphones, and of course the hybrids of both touch and QWERTY.

About Moto vs other Android 'big brands' ie LG, Samsung, SonyEricsson and ZTE - consider how dramatically Moto crashed onto the US market in the past 2 quarters. This is Motorola's home market where they used to be biggest dumbphone brand so they had excellent market presence and brand preference. And they were able to convert a decent amount of that into Droid sales (as the Droid/Milestone was not available around the world for full Q1). The world loves the iPhone, its not on all networks - Androids will be on all networks and all technologies - and even who could select the iPhone, Android devices give plenty of choices, adding the QWERTY and giving various features like a better camera etc. So, in the USA, Motorola was able to sell in heavy numbers vs iPhone (not matching iPhone US obviously).

Now consider rest of world. SonyEricsson is small potatos in the USA but is big in Europe and Japan (as Sony). Their Androids can do as well in Europe and Japan, as Moto did in the USA. Then Samsung. They are very strong in the USA, Europe and Asia including China - could 'do a Droid' with Samsung Android phones in Q2 and Q3 in the USA - Samsung dumbphones already outsell Moto dumbphones in the USA - and Europe give Nokia a run for its money, sell well in home market South Korea and China, and many parts of Asia. LG similar to Samsung and only now rolling out their full Android portfolio. And then there is ZTE, who is big in their home China, in India and in parts of Africa etc. While they sell cheap phones mostly (and 3G data dongles), they are launching ultra-low-cost smartphones on Android targeting the China/India/Africa markets.

Almost everywhere except perhaps Latin America (a continent split by Nokia and Blackberry) these brands could do similar 'damage' in rapid Android success as we saw with both HTC and Moto in the USA. And remembering each of these brands has its own 'footprint' for where they are strong, we can see very dramatic Android pick-up during Q2 and Q3.

boris - I hear you, yes, adding the financial data adds a lot of insight to who is doing how well. But as you can see, this blog is not a financial analysis/stock advice blog, this is a tech blog about social networking, digital communities, user-generated content, and the related digital convergence including mobile phones. This is not even a smartphone blog haha. So you cannot expect me to go through that hassle to try to get you that info. I think that is up to those who do financial analysis as their day job haha. And I will very happily link to those blogs and let my readers find that info when somebody bothers to do that.

But also remember boris, many of my readers don't care one iota which corporation makes money or not, they are developers who care about the installed base of the platforms - our primary interest and focus here. So to them it does not matter at all, whether the iPhone costs 600 dollars or 50 dollar, whether Apple makes a profit or loss on it, they want to know that iPhone is now selling 3% of all mobile phones, 16% of all smartphones, and the installed base of iPhones is nearing 1% of all mobile phones used on the planet. That is their interest, and my primary focus on the blogs here.

I do accept we could add more info out of the financials - which would turn this monster-long blog into a nightmare-long blog by the way, haha - but something that I can't hope to provide for you. As you can see, we have no advertising on this blog, I have no way to monetize this blog, this is purely a hobby and passion for me to connect with my readers. I have a day job and this blog plus my Twitter feed plus moderating Forum Oxford is taking way too much of my time as it is haha.. (especially as we answer every comment left on this blog too)

And boris - please see Carlos's reply to you. That explains it well.

Anders - very interesting yes, the 100K per day is the rate of 36M per year, which is up from the rate of 24M per year just two months ago - illustrating enormous ramp-up. Last I read an official quote from someone at Google, there were 34 Android based handsets already shipping. Today on Twitter I read someone say (but there was no link, so am not taking it as 'confirmeed') that there are already 60 Android handsets released. That also would correspond with the ramp-up. Remember HTC the best-selling Android maker reported their Q1 to Q2 growth is 30% in just 3 months. That is very similar to the rate of 24M to 36M so all signs suggest that is happening. And it means that globally in Q2, Android is passing Apple iPhone sales level (following inevitably that which already happened in the USA).

On iPhone this quarter. Well, there was supposed to be a decline after Christmas haha, and it wasn't becasue of China. But removing China, there actually was a decline in rest of world iPhone sales (remember AT&T iPhone sales fell 14%). That fits perfectgly Apple's iPhone annual sales pattern, peaks in Christmas, then Jan-May sales decline sequentially, until in June we get new iPhone.

Even though we had China Syndrome, the rest of iPhone sales have definitely fallen from Christmas peak - and they are now falling further in April and May and up till about mid-June (till new iPhone). And the Chinese Lunar New Year peak gives similar 'crash' in China now, for April and May. I bet you the sales of old iPhone 3G and 3GS models April-May-June will be trivial, in the 5M range or so. BUT we will get the big surge at the end of June of the next gen iPhone sales.

So my gut says iPhone total sales Q2 will be relatively flat, maybe slight uptick from Q1. But not as dramatic uptick as we saw in previous years - because the downturn did not occur due to China Syndrome. What is further changing the picture is the dramatic sales of iPads - which I am guessing is diminishing demand for next iPhone, as the Apple fans have recently 'splurged' on an expensive Apple gadget that is still shiny and new when the next iPhone arrives. So Apple's new sales peak for iPhone will definitely be muted to some degree due to recent major purchases of iPads. And in the rest-of-world market, the iPad launch is very close in time to iPhone launch, further diminishing the end-of-June sales of iPhone.

But yeah, most of all its the competition from the Androids which will hurt Apple. I can't see Apple doing a total surprising game-changing new phone this June which would have things that some Android devices have not already introduced. So Apple's offering will seem far less radical now. But we'll have to see, Apple also has the knack to surprise and truly innovate. This would be the time they should do that haha..

Carlos - thanks, yes, that was exactly what I was trying to explain to boris too. Thank you for vindicating my view haha, I really appreciate it that you wrote that.

Alex (second comment) - very good point and I said earlier in my bloodbath preview that RIM was safe from Android this year, but this ramp-up is something severe indeed. They (Androids) are clearly targeting number 2 position already as a platform. Now, we have not heard from RIM for a long while. They had their two worst months also, and they did not gain a China Surprise because the Chinese carriers haven't been supporting Blackberry strongly up to now. But we hear of enormous gains of Blackberry in bizarre emerging world markets like India, Botswana and South Africa - that part that half of all smartphones on South Africa's Vodacom network are Blackberries - that should by all reason be half Nokia - all of the Continent of Africa is something like 70% Nokia if we add the second hand phones too. So Blackberry can well be continuing its unlikely growth rates haha..

One thing to watch on Android - remember Samsung Bada, so expect Samsung to shift focus away from Android quite aggressively as soon as Bada is up and running and the more the rivals get traction on Android, the more its in Samsung's interest to bail out of that bandwagon haha and differentiate on Bada.

On the enterprise, Alex, trust me on this, please haha. I really know this stuff. Just recently Apple got the world TV media all to carry the news that a UK bank had swapped out Blackberry for iPhone (CNN, CNBC and BBC 24 hour news all carried the story). The real story was that Standard Chartered, a mid-tier UK bank, had allowed iPhone to run parallel with Blackberry in their Asia branches, they were not swapping out Blackberry. And this is one bank. Ranked number 389 on the Fortune Global 500. But there were something like 53 banks in that 500 list, so Apple has taken at best half of one bank, with 52 banks still solidly in RIM's iron grip. No, there is no mass exodus of enterprises abandoning their Blackberries. Its as near a stranglehold as is physically possible in high tech today. Don't delude yourself into thinking RIM is losing the enterprise stronghold.

Incidentially HP would be foolish to try to break into that just as Microsoft figured out its not worth doing their smartphone for enterprise, they went for consumers, far easier target, more open competition, can be done with 'normal marketing', not against 'impossible odds' haha.

Thank you all for writing

Tomi Ahonen :-)

[Tomi T Ahonen]

Hi Alex (third comment)

Love the yikes. And you know by now, that I am of course holding against hope, that Apple has its slider QWERTY model coming and we get the 'ultimate' iPhone which can recapture the market haha...

Or of some less-obvious super move this June, to wow us and amaze us and make everybody else's phones seem obsolete (Apple will do that, many times over, in this decade no doubt. But nobody can do that every year, not even Apple, so is it time to happen now in 2010, who knows)

So yeah, I will be the first to be happy to find I was wrong but I really appreciate it that you see there is a chance my brave forecast earlier this year has some potential to actually turn out to be true.

And also - I do think Apple needs 'a jolt' to get into gear again - so that is what would definitely happen if their market share won't recover and Androids rush past them. If so, Apple will react far faster than say Nokia does haha..

Thanks Alex, I really appreciate it that you wrote that Yikes comment haha. Loved it.

Will be exciting times this year of the bloodbath - and yes, Apple has the deepest war-chest to make rivals bleed haha.. so its not over by any means

Tomi :-)

[karl]

Great article Tomi, as usual.
Question java on mobiles - any data on where JME fits in as an aplication platform and where it's headed?

[New reader Chris]

Thanks Tomi for the great insights on the market.

I really wish nokia would release meego quicker.. Because nokias QT on smartphones seems like its going to be huge. Being able to develop software that runs on symbian, meego and any other regular operatingsystem (windows, linux, mac..) is a really cool idea.

I'm a developer so this blog is a definite bookmark. :)

[Matthew Artero]

Tomi,
You are my smartphone analyst God. I just love these surman suuhun reports. Check out my comments below about the bloodbath within a bloodbath.

Alex,
I don’t think Motorola or anyone else has a future as a smartphone specialist. That’s like saying a PC company has a future as a gaming computer, or video computer specialist. The only thing those specialist PC companies do is assemble parts with screwdrivers. One can’t run a smartphone company based on one’s ability to use a screwdriver.

Apple is simply doing the same thing they did in their early PC days when IBM and Apple software were incompatible. The incompatibility will come to an end for smartphones just as it did for PCs, just as games migrate from consoles to internet and PCs. When the incompatibility ends, the ability to be a specialist ends.

Everyone,
People are wrong when they talk about the greedy telecoms becoming dumb pipes after all, because they abused consumers in the past. They were simply reacting to the terrain of the battlefield at the time. Just like Apple is not being greedy about establishing its own standards and its own App store. That’s just today’s terrain.

Apple knows incompatibility will come to an end and that’s why the real focus is on advertising. Nokia, Apple, and Google have all relatively recently bought mobile ad companies. Google has always been in this to increase mobile search and sell more ads. They just want to ensure their place in the mobile ad eco-system. Android and apps only matter to them to the extent it helps them to sell ads.

Interoperability and standards have always been at the core of phone companies, first with voice, and now with the web. App developers need improvements in the networks so they can develop more apps. Networks need money to improve. The more fragmented app standards are the more fragmented the money for the improvement of various networks. Fragmented improvement means fragmented app development means slower app development. So standardization is very important to developers.

The Wholesale Applications Community says they will have a device portfolio by November. Service providers don’t want to be told which phone to sell or subsidize or have limited profit margin on because it comes with the apps consumers want that only run on the phone’s proprietary OS. Phone manufacturers don’t like this added cost of competing, of having to also have apps and an app store. Consumers like the fact that their phone numbers are portable between service providers and they want their apps to be portable as well. They don’t want their apps to lock them into a specific brand.

So everyone wants standardization, consumers, developers, manufacturers, and service providers. It’s coming, and when a consumer has his standardized app collection, does he buy an iPhone that doesn’t support it? So even the iPhone will be forced to get on board and lose its app store as a competitive advantage.

So if Tomi is right and 2010 remains a flat year for iPhone market share, 2011 with standardized apps will be interesting indeed. I think the people who say standardized apps are only for feature phones are nuts. Even if standardized apps get their start on feature phones, smartphones are going to want to cater to that market as well. As they try and get consumers to upgrade, allowing them to take their apps with them will be a key selling point. So the new smartphones are going to comply with standardization as well. They already do it for voice, email, and web browsing.

Tech Crunch’s claim that the Wholesale Applications Community is a disaster in the making is utter nonsense. They interviewed Andy Rubin, Google VP of Engineering, in charge of the Android. All of Rubin’s complaints against standardization are things that are already resolved in PCs, netbooks, and the internet. So of course those same issues will be resolved on phones as well.

All of Rubin’s comments are specific to OS software, but WAC is also addressing standards in the hardware and in the networks as well. Rubin’s comments show us what Google is really afraid of. Ads for mobile search have lagged behind all other forms of mobile advertising. So Google is still trying to figure out its role in and still trying to establish itself in the mobile ad eco-system. In a growing market like mobile ads, it is still anyone’s game. It is a bloodbath within a bloodbath; just less visible than the hardware bloodbath.

With ads for mobile search lagging, Google wants to be the one selling the ads in your apps. Of course the ads on iPhone apps are likely to go through Apple’s ad company. Ads on standardized apps that don’t rely on a proprietary OS can end up being controlled by the service provider or other ad company, leaving only mobile-web ads as an open market for Google. And people think standardized apps are going to cause service providers to become dumb pipes, think again. Ad companies are going to have to pay a fee to send their ads to those apps.

So it seems Rubin’s negative comments have more to do with the importance of his role to Google. How important is Android going to be to Google at the end of 2011? How many ads will be directly attributed to Android at the end of 2011?

Some app stores give developers a cut of the ads. Different networks pay developers differently. WAC is addressing standardizing developer pay as well.

Decades ago when I was a highschool student I worked as a channel switcher at a television station. I blacked out commercials that came with shows but did not pay the local fee, and ran a local commercial or public service announcment instead. As technology advances we will see this same business model adopted by internet service providers. If you want those ads to show up, you don't just pay the website, you also pay the service provider. The bottom line is the ads haven't paid for the right and nobody is going to fight to give them a continued free ride. Since TV and radio broadcasters get a cut, why not phone companies? So if you want your ad to show up on a network then you pay the ad company of that network.

Tomi,
You gave some break down of the HTC smartphones but not Nokia. It sure would be interesting to see how many sells a model has to have in order to stay alive.

Especially for someone like me who is pushing what I call the iPhone Killer but in reality it is a QWERTY Killer and a Killer of two handed smartphones, I sure would like to know the unit sells of each model. Not that I expect you to look it up for me. That info would tell me how many units I need to sell in order to get which companies to license my tech.

I saw the video of you talking about the young people who have grown up never knowing a world without Google, and so on. That inspired me to change my fast pitch for the venture I am trying to start. I’ll include it below. I sure would like to have a role in this blood bath.

I read that you are based in Honk Kong. I am in Guam which is not terribly far away. Any chance you could help me hook up with 10 to 20 people who could invest $50k each? Here is my fast pitch partially inspired by your lecture:

iPhone Killer will create over 20 million people a year who will never learn to type on a QWERTY keyboard, or require a table or chair in order to type.

Like a TV remote control iPhone Killer is operated with only one hand, without looking at it, and unlike the iPhone it types just as fast as two hands on a full size keyboard and mouse. It takes only one day to learn instead of the months people spend developing their typing speed on a full size keyboard.

These more than 20 million people a year will demand smartphones and laptops equipped with iPhone Killer; rejecting QWERTY keyboards, thumb-pads, and touch-screens. Many smartphones do not sell that many units in an entire year. This large market will cause smartphone and laptop manufactures to license iPhone Killer and take it to scale for us.

It will eventually grow to over a billion units per year including calculators, remote controls, cash registers, laptops, and smartphones.

[Manu]

Don't think my reply a while ago could go live due to some connection error at my end. Never mind, I would like to extend much deserved appreciation for writing a comprehensive essay on smartphone's market in today's context.

[Tim]

I am struggling to square your bullish approach to Nokia with the Gartner stats in this O'reilly post looking at the trend from 2006 to 2009:
http://radar.oreilly.com/2010/05/mobile-operating-systems-and-b.html

This would indicate that Symbian is losing market share quickly and combined with the May 2010 Gartner results that have Symbian Q1 2010 dropping to 44.3% from 48.8% in Q1 2009. This would indicate a total 2010 share of something around 40-42% down from 47% in 2009. I would further argue the only thing keeping Nokia from falling faster is sales of handsets like the E-63 which really are only mid-range at best. Frankly it looks to me like Symbian is collapsing. And Meego is simply a confusing mess.

And I also think RIM has peaked. The Gartner May 2010 figures have it at 19.4% in Q1 2010 vs. 20.6% in Q1 2009. This fits with what I saw working in a Telco over last 4 years in New Zealand. The iPhone has been absolutely killing BlackBerry in the Small Business market (BIS) as well as making more modest inroads into larger Corporate. In Consumer BB doesn't stand a chance, we couldn't make any business case stack-up to justify BlackBerry for PrePay, and the BlackBerry 'tax' will continue to restrict any Consumer customer friendly pricing. Along with this RIM showed no willingness to invest in raising their brand profile. If the best they could pull-out at their flagship conference (Wireless Enterprise Symposium - note the 'Enterprise') was a PR video of OS6 and not a single new phone then they are in trouble.

In summary - iPhone and Android strongly in the ascendancy, RIM just peaked and beginning downward slide, Nokia declining fast, Microsoft needs to make a big play now.

[HCE]

@Tim

> In summary - iPhone and Android strongly in the ascendancy, RIM just
> peaked and beginning downward slide, Nokia declining fast, Microsoft
> needs to make a big play now.

No doubt iPhone and Android are in the ascendancy. Android has some growth left in it but I think the iPhone's market share will peak in a year or two unless Apple changes its policies. One model, replaced once a year plus no discounts is not going to work that well in a brutally competitive market. I'm don't think their market share has peaked yet but their growth is going to be a lot slower.

Regarding RIM, I think it is too early to tell if they have begun a downward slide. They will be releasing Blackberry OS 6.0 in fall (plus some interesting new models) and that could give them some momentum.

Disagree somewhat regarding Nokia. Some of the market share loss for Symbian has been due to vendors (other than Nokia) abandoning the platform and the sheer proliferation of smartphones of late. As figures posted on this website will show, Nokia lost some market share but have since stabilized. Their problem is that they have been retaining their market share by dropping their average selling price. They'll have to introduce premium models that will let them generate higher revenues and profits per phone. They are hoping that Symbian^4 and MeeGo (both of which will be out either end of this year or early next year) will allow them to compete at the high end with the Androids and iPhones of the world.

I think Windows is in a world of trouble. Already their market share is down to 6.8 percent or so. Windows Phone 7 is not out till the end of this year. At the rate they are losing market share, they could be below 5 percent by the time it comes out. Unless Windows Phone 7 hits the ball out of the park, I think they are going to forever remain a minor player in the smartphone space.

- HCE

[Tomi T Ahonen]

Hi karl, Chris, Matthew, Manu, Tim and HCE

Good comments, thanks. Will respond to each individually

karl - on Java, its the biggest 'app' opportunity out there, over half of the installed base of all mobile phones, essentially all smartphones and featurephones support Java (or Brew) in some way but there is a big amount of fragmentation in the Java world. So its not 'easy' to deploy to it, but you can reach a far bigger audience than on any smartphone platform.

Chris - thanks. And happy you are enjoying the blog. Please note (I'm sure you were aware of this, but just in case) that MeeGo will not be compatible with Symbian so you'd need to re-code your apps if you port them from one to the other. With MeeGo it will be a considerable amount of time before that platform will be 'significant'. Remember that all N-Series only sold a little over 4 million smartphones the past quarter - only half that of iPhone - and not all N-Series would initially go to MeeGo, just the high end of the price range, so we may be looking at a very small niche platform for a couple of years while Symbian continues to be the majority of Nokia smartphones.

Matthew - thank you so much. About Motorola being viable as a pure smartphone play. You make good points but I think there's more to it. I think first of all, that in theory of course that can be done (ie RIM proving that a pure smartphone maker space is economically viable) but Motorola's whole organization is totally unfit for this purpose. Motorola traditionally was the most resistant to the fast pace of handset changes - witness how long they tried to milk the Razr past its due date. Nokia, Samsung, LG have been most adaptive to the rapid cycles in mobile and have the corporate DNA to handle rapid changes.

The premium phones space needs a brand that works with luxury and desire, SonyEricsson is doing a good job at it with the Cybershot and was doing a great job of it with the Walkman until the iPhone arrived (and Walkman phones crashed). Motorola is for the most of the world seen as a discount brand. That makes it almost impossible for Motorola to fight fairly for the top end of the market, without huge price discounts etc (which further do not support a premium luxury brand). The one exception is China where Moto does hold a luxury image. But even in its home market of the USA, Motorola is not seen as a luxury phone - Apple does, but Moto is a safe mid-range phone.

Then the distribution system, warehousing, air cargo contracts (the weekly shipments of new phones to typical large European countries are in the range of 20,000 to 100,000 handsets per week - these tend to be air-cargoed from factories often in China), carrier-specific sales support channels - that is all what Motorola built for being a mass market phone retailer. The premium luxury smartphone sales will also need distribution, will also need sales support, carrier relationships, etc but different competences, needs etc. So Moto would simultaneously need to fire some people and hire other people - very disruptive and demoralizing. And for practical purposes, Motorola should then also rebrand itself - the ultimate irony considering the company is best known for inventing the hand-held mobile (cellular) phone.

So my point is, that Moto could possibly achieve this, but at enormous costs, destroying what little fragments of profits still exist in some pockets of the company, destroying its R&D competence, its sales organization, its distribution system, etc. And for it to have a reasonable chance to succeed, they'd also need to rebrand. Ouch I say haha..

On the advetising part - yes, its part of the hot story right now (I'm headed to New York City to speak at the MMA Global event (Mobile Marketing Assoc) to deliver a keynote, and yes, mobile advertising and marketing is very hot in the news. But the economic opportunity for mobile ad is modest. First of all, the total global advertising spending is under half of what mobile telecoms earns per year. So for the total industry, even if every penny of advertising spending globally shifted totally to mobile, from TV, radio, internet, billboards, magazines, newspapers etc - that would not be enough to sustain the mobile industry. We'd go broke haha. So the mobile industry is that big, it has to rely on real paying customers for the vast majority of its income. That doesn't mean that there isn't a great chance in mobile marketing - its the fastest-growing revenue sector in the mobile industry right now - but TV is not going to die, newspapers will cut their ad prices, radio will too, as will cinema, magazines, billboards and of course the internet. So mobile ads may perhaps account for 10% of all ad spending somewhere near the middle of this decade (today it accounts for about 1%). Its very likely that even then the internet side of digital advertising (Google Ad Words and all that) will still be bigger than mobile (today web advertising is 10x bigger than mobile advertising). So the hype about Apple iAd and Google + Admob plus all the other mobile ad initiatives, is a bit premature. The real economic opportunity will not be visible for years to come haha..

Good points about Wholesale Applications Community - totally agree - and I like the idea in the iPhone Killer - I hope your venture gets good backing and you can make a big business out of the idea (the name is a bit provocative for my tastes haha, but thats ok). Do let us know how it gets along. I think I've seen you also write to me about it in my email (sorry have been very busy past few weeks so am behind in my emails)

Manu - sorry that your original reply did not display. Happy you wrote you second comment, and please Manu, if you had any questions or comments, please do repost them. But of your general sentiment, thank you so much, I really appreciate it that there are readers who find value in this blog.

Tim - thanks, very good comments and I totally hear you, I understand that you've been reading other highly respected opinions with differing views. So, first on Symbian, as HCE already responded to you, Symbian market share has declined quite a lot yes since 2006, but that is not Nokia smartphone sales decline. Since the iPhone and the Androids came along - and the number of Global Fortune 500 rival giant corporations involved in smartphones more than trippled from 7 to 23 - of course those who existed prior to 2007 will have to see some decline in their market share - as new companies come into the space. That is natural. But Windows Mobile lost more than a third of its market share, Motorola lost a third of its smartphone market share. Palm lost four fifths of its market share, yet Nokia smartphones lost only one fifth of its market share. Recently Windows Mobile and Palm have seen catastrophic further declines in their market shares, while both Nokia smartphones and Motorola smartphones have seen their losses bottom out, and both brands have started to gain. So while yes, some legacy smartphone brands have been losing market share to the newcomes - recently (past 6 months or so) - that very explicitly has NOT been Nokia (nor Motorola). It has been Windows Mobile and Palm.

And the winners, yes, if we measure from 2006 to today, obviously Apple and all Androids have gained. But recently Apple has not been gaining. Its peak market share in Q3 of 2009 was 17%. Today Apple's market share is 16%, so Apple has experienced at least 'a' peak (as all analysts now admit), perhaps Apple has actually experienced 'the' peak (as I argued and the data is starting to support). Note that for Q1, Apple lost out to Androids in Apple's best market, the USA, and now as Android handsets sell at the rate of 100,000 units per day, ie 36 million units per year - Androids have passed Apple which was selling at the rate of 35 million units per year. And Apple has already testified in court documents (in the Gizmodo stolen iPhone 4G model case) that the publicity of the iPhone 4G is damaging current quarter iPhone model sales - what was already flat sales from Q4 to Q1, and was expected to be at best flat sales from Q1 to Q2 - why at best flat sales - because iPhone was 9 months old, while all major rivals had released newer models, meaning iPhone's relative competitiveness has diminished in Q2 when compared to Q1. So now Apple says the publicity around the stolen iPhone 4G has damaged its market share - testified so to California courts. They wouldn't be saying this in public court documents if there wasn't evidence to support that argument - due to the US courts system, by which any evidence may be 'discovered' by the other side's lawyers. So Apple would look really foolish if they argue something in front of a judge, that their own documents cannot prove. That tells me that 'old' iPhone model sales are severely down for Q2.

Of course the final sales of iPhones in Q2 will be old model 3GS and 3G model sales from April 1 to June 30 and added to that the new rush of eagerly awaited new model iPhone sales from about mid June on. So those numbers should be very strong if previous patterns hold, and therefore Q2 is likely to end up being another 'flat' quarter for Apple, definitely no better than flat in terms of market share. This while for the last quarter when Apple market share was flat, its two larger rivals, Nokia and RIM - both - grew market share - and Apple's nearest smaller rivals, HTC and Motorola - both - grew market share. Apple is very seriously standing still when all rivals rush forwards to capture the emerging smartphone space.

That is what the current facts tell us. If you want to take any 'expert' view on the near future, and take their 'forecast' haha, feel free. I urge you to read my 'bloodbath preview' and see how accurately I have forecasted the start of this year in it, including that Palm will be sold, that Google Nexus One will not sell that well, including that RIM and HTC will continue to grow early in the year, etc. I trust my forecasts haha, and make no comment on my colleagues who also make a living out of their forecasts.

Then you say you are seeing that Nokia is failing. Your particular experience seems to be in the business-oriented smartphone space mentioning the E-63. But Tim, the total employee phones opportunity in smartphones is only about a third of the global market - the consumer market is liteally twice as big. And Nokia is massive in that market, at the low end of the market, from phones like 5800 Comes With Music. Outside of the US market, Nokia sells half of the world's smartphones. So Nokia's 'problem' is essentially 'only' a US market problem, by no means a global market problem. Nokia is clearly the most desirable smartphone globally, has massive customer satisfaction and in many markets has as high as 70% market share (in dumbphones) and Nokia is the only dumbphone maker whose smartphone market share is better than its dumbphone market share, which suggests Nokia is by far the most successful dumbphone maker to migrate its customers from dumbphones to smartphones.

Now, I am not about to suggest that people don't 'prefer an iPhone'. That is fine, people prefer Aston Martin cars too. But most people can't afford an Aston Martin. And most people cannot see spending 600 dollars on a phone (iPhone real price without handset subsidy like on AT&T). Once when we go past the subsidised phones and look at the real price in unsubsidised markets, Nokia brand wins with its price-features-quality-brand ratio. Yes, many would prefer an iPhone, but only a couple of percent on the planet can afford such a luxury price product (especially when it also has so many 'flaws' like its camera is of such modest resolution, its camera has no flash, the Apple OS doesn't support Flash animations like most videos on YouTube, etc). And like I've argued, for those users who send 100 SMS per day - a third of American youth for example - there is no chance of swapping out their current QWERTY based phone for any pure touch screen phone, they will want a QWERTY keypad on their smartphone.

So like we've said here with many, many times, if Apple is BMW, sitting at the luxury end of phones, making tons of profits on a highly desirable high quality technology - Nokia is more like Ford or Toyota, making a broad range of products for normal people, including some premium luxury products to the high end of the product range, but that Nokia is the most profitable of the classic big 5 handset makers.

On your point 'RIM has peaked' - that is absolutely not true. I hear you that you have that feeling that RIM is not growing - and it may well be true, that in the country or countries you know (and market sub-segments that you know) it may well be happening. But the global numbers do not lie. Blackberry grew unit sales and grew market share again the past 3 months, where Apple was flat. And Blackberry is brilliantly executing a transition from business phones to consumer phones, riding on its QWERTY form factor and taking advantage of the Blackberry Instant Messegner, which for teens and the youth, seems like they get free SMS. For example in Indonesia, Blackberries outnumber iPhones 25 to 1. In South Africa - Africa being the biggest Nokia stronghold - on the Vodacom network, half of all smartphones are Blackberries. In Venezuela the bestselling phone - not bestselling smartphone - is Blackberry. These are not done by business/enterprise phones. I was just in Indonesia a couple of months ago, and saw the advertising and all Blackberry ads are aimed at youth, not the business users. Same last year when I visited Venezuela. So please Tim take a look at the numbers and give some scope for the possibility that there is actually a silent RIM revolution going on. In India the cellular telecoms industry association says this year they'll sell 7 million QWERTY phones and while most of those are Blackberry clones, the Blackberry is the most desirable phone there, not the iPhone. Same for the consumer survey out of Britain, Blackberry ahead of the iPhone. So just trust me enough, to monitor this space and see. If these trends hold, RIM is likely to give several quarters of 'amazing' growth numbers - which are not a surprise to regular readers of this blog haha.

And your summary 'iPhone and Android strongly in the ascendancy, RIM just peaked and beginning downward slide, Nokia declining fast, Microsoft needs to make a big play now' is not supported by the latest facts. Yes, Android is growing and yes, Microsoft is declining. But the evidence is clear, that RIM and Nokia are growing, not declining, and Apple is definitely NOT 'in ascendancy'. The last time Apple managed ANY growth in its market share was from Q2 to Q3 of last year. So Apple's growth has stopped in September. Thats 8 months of straight stagnation already, while Nokia, RIM and yes Android have all grown in the same period.

I do appreciate it, Tim, that you have this perception that Apple and Android are stealing the market and RIM and Nokia (and WinMo) are in decline. There is a lot of mis-informed and un-informed reporting that supports that view. I totally appreciate it that you've come to believe that. Please just examine the facts, the numbers, and ask yourself, where is the truth? Clearly it cannot be true that Apple is stealing market from Nokia, if Apple has lost market share from Nokia since September of last year, and Nokia smartphones have grown market share in the same period?

I'd greatly love to hear more from you.

HCE - thank you for responding to Tim. Obviously we are very much in agreement, thank you.

Thank you all for writing, please come back for more comments.

Tomi Ahonen :-)

[HCE]

@Tomi

> Obviously we are very much in agreement,

I don't think so. You seem to think that Apple's market share has peaked. I think they have potentially a year or two of growth left - albeit at a slower pace. You seem to think that everything is hunky dory with Nokia - I'm not so sure. I wouldn't use words like "decline" or "dying" but they are in some measure of trouble. It is not a good sign that they have had to keep lowering average selling price and profit per phone in order to retain share. It isn't good if they sell almost three times as many smartphones as Apple and still make less profit. They need their upcoming high end phones to succeed. If they don't then words like "decline" *will* be warranted.

- HCE

[em]

Apple has no way to grow market share unless the iPhone strategy is completely reworked. There are too many competitors, form-factors and price points coming in at the moment. Globally.

In some countries a touchscreen smartphone with unlimited data (24 month contract) costs around $10 per month. The phone is free on contract. The rules of economy still exists and price is a significant factor, a part of famous "User Experience". $600 iPhone can't increase market share.

Apparently Apple does at least some minor strategy rework after the release of a new iPhone. We will know next year, how it works.

[HCE]

@em

Apple has several potential ways to grow market share - though not at the same rate as before.

The first is opening up to more carriers. In the US (Apple's best market), they are limited to one carrier. If the iPhone was on Verizon that would increase sales quite a bit. If they were on Sprint and T-Mobile as well, it would increase sales even more. There are pretty strong rumors saying that the iPhone is coming to Verizon this fall - so if that happens, US market share could jump.

The second way of increasing market share is adding lower cost models. They have been selling the iPhone 3G alongside the 3GS at a price of $100. That could continue or get expanded a bit.

The third thing they could do is to fix their pricing structure a bit in some countries. In India, for example, an iPhone 3GS 16 GB model costs close to the equivalent of $800. You are not going to sell many iPhones at that price.

None of these are drastic changes and all of these will help boost share. In addition to the above changes, there is probably room for growth in countries like China where the iPhone is just taking off. We are also just before the launch of a new iPhone model - the next two quarters will be good - regardless. Also, I feel that Android apart, none of the other smartphone makers has a platform with the same combination of usability, polish and power that the iPhone has.

These are some of the reasons why I think Apple's market share will grow somewhat for another year or two. In another year or so, everyone else will be out with their next-gen OS and Apple will have a smaller technical advantage than they now do. For more growth beyond the next couple of years, they will need to discount more heavily, introduce more lower end models, introduce different form factors and introduce new devices every 6 months instead of the current once a year pace.

- HCE

[Tomi T Ahonen]

Hi HCE (twice) and em

HCE - I'm sorry, I didn't mean to be flippant and certainly didn't mean to put words into your mouth. I was trying to finish a long reply here and on quick read through your latest comment, felt we were in considerable - but not total - agreement. But yes, you are very right, my main thesis on Apple is that its market share has peaked and yes you clearly think there is still room for growth. I did mean that I see that view as very plausible too, and time will tell. I am not seeing anything nearing the catastrophic market share disaster that we saw with Motorola in dumbhones or Windows Mobile in smartphone operating systems, to happen to Apple, I see their peak as turning into gentle decline in the worst case haha. And similarly I interpreted your view to be that Apple would still have room for modest growth in market share, not dramatic gains similar to say Android right now. I meant we were close in that view, not in total agreement. But sorry for being unclear about it.

And on Nokia, I try to be a realist as best I can. My writing is in stark contrast with very many reputable IT experts and financial journalists who write about mobile without understanding it, ie writing of mobile from the view points of say the computer industry, internet or home electronics. These are far more open industries where 'normal' open market rules apply. The mobile industry is not such an upen industry. It is totally ruled by the operators/carriers as I have many times written on this blog.

But my writing on this blog is based on a deep understanding of the mobile industry, and I call it as I see it, Nokia does not compete against the specialist smartphone makers like RIM and HTC, nor against a multi-digital device maker like Apple whose only phone interest is smartphones. None of these makers control even 5% of the total global phone market. Nokia controls 35% of the global phone market, it is Nokia's main business. Nokia's rivals are Samsung, LG, SonyEricsson and ZTE (and until recently Motorola). So if my view is too 'rosy' - if you ignore Apple and RIM, honestly, HCE, compared to Samsung, LG, SonyEricsson and Motorola (and ZTE) - hasn't Nokia executed its total dumbphone strategy far better, and executed its transition to smartphones so far better that Nokia is its own league, the only one of the big 6 dumbphone makers who bests Apple, RIM and HTC in smartphones alone.

I do not mean to say Nokia is doing everything right, and that Nokia doesn't make mistakes and hasnt' stumbled many times along the way. Apple brought - as I warmly welcomed them - to this industry very much highly-needed innovation and fresh thought. The whole handset business was forever transformed by the launch of the original iPhone in 2007 - and not by any Nokia phone before or any Motorola or SonyEricsson or other phone before. So back to our 'disagreement' haha, I hope to be realist on this blog, I do do not claim Nokia is doing it all right. They have their work cut out for them and they are painstakingly slow often in implementing their changes to that giant ship. But even then, if we compare to other giants of similar size - take Microsoft, a company like Nokia where smartphones are not their main business - see how clumsily Microsoft has messed up year and again in trying to get a major stake in smartphones - vs Nokia who rules this market while its not even its main focus.

So yes, we agree, the price declines are a concern of course as are shrinking margins. But Nokia does have strong profits - not as strong as Apple obviously, but far stronger than any of the true big 5 rivals of dumbphone makers - and Nokia can afford to drive the price down, to squeeze its main rivals and hold onto market share. The world is in a price war in phones and all analysts say the prices will continue to decline in all classes of phones - Nokia did not invent this trend, Nokia is fighting within that trend and doing very well. But also we agree, Nokia is bound to lose market share in this year of bloodbath - again something I wrote many times - and I am surprised how strongly Nokia is faring considering the huge Android onslaught - Nokia doing better than Apple in fact over the past 6 months.

So, sorry HCE, I didn't mean to put words in your mouth. But I did think we are of similar views, not dramatically different views. We both see it possible that Apple may grow mildly, I do think Apple will lose market share mildly, but have said before, that the next iPhone model out this June will determine very much exactly how Apple does perform. And Nokia, no it is not performing as well in the market today as its strongest rivals, but Nokia is selling smartphones at a stronger growth rate than the global smartphone industry itself grows, and while it is cutting prices - that is what every maker has to do - just yesterday brought news that US resellers are slashing the retail subsidised price of the iPhone 3GS model to 97 dollars if I saw the TV news item correctly (I was rushing in an airport so I didn't have time to watch the actual news item, only read the ticker feed, it may have been on CNBC or CNN)

em - totally agree with you, yes, Apple cannot grow market share in any meaningful way anymore, unless it totally revises its strategy. Apple has to introduce more models per year, offer more variety within its model range and introduce some iPhone models into significantly lower price points. Again to be clear the real price of the 3GS is about 650 dollars and the real price of the iPhone 3G is about 550 dollars (their actual price is not disclosed by Apple but Apple does say the average of the two models is about 600 dollars and these prices can be determined in a rough level from the unsubsidised prices in markets where there are no handset subsidies like Belgium, Italy, Israel etc).

So the current recent pricing gimmick of selling the older 3G model for 99 dollars in America on AT&T was not a real price cut, its just the same subsidised handset on a long term contract. What Apple needs to do is to do is to create a true 300 dollar smartphone - mid-range price rival to say the Blackberries or about where N-Series phones from Nokia tend to cost on average. It is not possible in this highly competitive market place this year for Apple to gain meaningful market share unless they change their strategy like you say, and I agree, Apple has to make a big change in it.

I think we see even HCE partially agrees with us on this view, haha, when HCE writes that within a few years Apple has to join the choir and offer lower priced smartphones, release new models every 6 months rather than once per year, and introduce more form factors.. I think the main difference between the view that you em and I hold, compared to the view HCE holds, is that we see the need being now in 2010, and HCE believes Apple still has a year or two of a grace period before the real market forces collide to force them to change.

Who knows who is right, haha, we have to wait and see. I do think that the current quarter and the new iPhone model out June will tell us a lot. It is possible that most major analysts are bowled over by the new model, that almost everybody says its the ultimate phone and its far better than all rivals, and we have to all have it - that has happened before with Apple and even with the original iPhone 2G, so Apple is capable of this. But my gut says Apple's recent focus has been on the iPad and we'll only see incremental improvements to the iPhone model, and then it will be just one in the comparison versus many Androids and other smartphones, and that won't be enough to give Apple this year.. But we'll see, I will be blogging about these things of course all year so please come back and we'll see how it goes.

Thank you both for writing, and I'm sorry HCE for not being so clear about what I meant..

Tomi Ahonen :-)

[Matthew Artero]

Tomi,
Thanks for the revenue numbers on mobile ads. I can always count on you to improve my thinking.