Bloodbath update for December, as we await EOY data for 2010

The year 2010 turned out to be a massive bloodbath in smartphones, even more so than what I had expected. I have been doing periodic 'bloodbath updates' on this blog during 2010, and also giving quarterly final numbers as the final official numbers have come out. As we now await the quarterly results for the Christmas-period quarter for the major brands, lets catch up with many Bloodbath-related stories that you may have missed. I will go through them in order of the market share sizes.

NOKIA

So lets start with Nokia. The N8 has been receiving generally positive reviews in markets where it sells and there is gossip coming out of Finland, that some analyst has estimated Q4 sales for N8 to be between 3.5 and 4 million units. That would be 'nice' for Nokia but hardly setting the world on fire at those levels. Samsung sells more Galaxy S smartphones (4.2 million in Q4) and Apple sold 14.1 million iPhones (most of which would be iPhone 4's) in the previous quarter and definitely it will sell better than that for Christmas. Now, I am not saying N8 sold 4 million, it is pure gossip at this stage but it will be in the millions simply because of Nokia's reach (compare for example with Microsoft Phone 7 below)

There was quite strong speculation towards the end of the year, that Nokia might do smartphones with Microsoft and/or with Android. I blogged my strong protest about this, saying it is time to sell your Nokia shares if they do that, it would be an ultimately stupid move for Nokia in its current position and its current OS strategy with Symbian, MeeGo and Qt (and Ovi). Of course I don't know what happens inside the big brains of Nokia HQ but I honestly would be enormously stunned if they were to offer any smartphones on other OS's than their own.

On the Ovi store front, Nokia said they now are shipping 3.5 million items of content per day which is about 1.3 Billion downloads per year, putting Nokia solidly in the third-best performing app store behind the iPhone and Getjar. Near future there is a lot of anticipation for the E7 which is the 'non-Communicator' and has an expected ship date for early Q1.

APPLE

The race is real close for 2010 to see which is the second-biggest smartphone manufacturer in the world, RIM or Apple. In terms of current sales in the Christmas quarter, there is little doubt that currently Apple sells more, but the race for the full year will come down to a couple of hundred thousand handsets in the final analysis. I Tweeted that the 'magic number' for Apple was 17.2 million - a considerable ask, after Apple's dramatic Q3 where they jumped to 14.1 million, but they may do it. The current analysts are expecting iPhone to sell in the 15 million to 16 million range and my gut says their Christmas was better than those numbers and it will be down to a few hundred thousand, not a million units.

The victory would taste somewhat hollow, as Android will end up selling far more smartphones, so in terms of OS, the iOS which was 3rd biggest in 2009, will finish 2010 no better than 3rd biggest anyway. IDC gave numbers for Q3 European market share and the iPhone is becoming the darling smartphone of Europeans, with one in four smartphones sold on the continent now carrying the Apple logo, chasing Nokia now for the market lead on that continent.

And for those who 'are counting' - the math is still valid for Tomi's forecast about the iPhone peak, but we will not know final numbers until first the formal Q4 numbers come in from Apple, and then the Q4 total smartphone shipment numbers come from the four big smartphone makers. So we won't know if my peak forecast was right, until in early February or so. But that is coming soon..

RIM

The Blackberry managed a clever little PR spin with their Q4 numbers (RIM Q4 ended in November so we got their data already) and after Apple reported 14.1 million iPhones in Q3, and claimed the mantle of biggest smartphone maker of North America, taking the title from RIM, two months later RIM came back and reported 14.2 million sales of Blackberries and are once again the biggest smartphone maker of North America. And its all but certain that Apple will re-take that position after they report in a few weeks from now. And yes, my forecast for RIM was massively off for the year of the Bloodbath. For what its worth, if the smartphone market had grown as much as was the consensus by major analysts at the start of the year, my forecast would have been pretty much on the money. RIM did grow - strongly - in 2010, but the industry grew far faster than that, and because RIM didn't keep up with the industry, they lost market share. I wrote my apology on this blog already..

SAMSUNG

HTC used to be the fourth-biggest smartphone maker but now that is Samsung's place. Samsung has been generating tons of news and just about all of it most positive. They said they sold 10 million units of their premium Galaxy class smartphone, the Galaxy S. That was in about 7 months. They say they are selling 1.4 million Galaxy S devices per month so they will have sold 4.2 million in Q4. Thats good, but bear in mind, even if we add all Nokia N8 (assuming the 4M is correct) and all Galaxy S - Apple's iPhone will send just about exactly twice that level. Yes, good news over at Samsung but they are not yet in iPhone territory.

But the growth is strong. They are now the biggest Android device provider, taking over from HTC. Their Android based tablet PC has sold 1M units. And Bada? They reached 5 million sales of Bada OS, which makes Bada the fastest-selling new OS launch in smartphones ever. Yes, better than Android and better in the first 6 months than iPhone even. Samsung has announced their 1H target for 2011 is 10 million Bada phones and they have expanded the Wave series of phones to 3 models. Yes, Bada will be huge. (and who told you so haha). And meanwhile on a personal note, I love that Samsung Galaxy Beam smartphone (the one with the built-in pico projector) so much, I stuck it on the cover of my 10th book! And I mean 'love it' from a personal experience, I have the phone and the pico projector is the must-have feature for 2011, this is the future of top-line phones!

HTC

HTC is also having a great year but they are falling into the shadow of Samsung. They are growing consistently faster than the industry and threatening to crash into the Top 10 of the world's biggest mobile phone manufacturers. We have to see what the final numbers look like but they are knocking on that door which would be big celebrations over there in Taipei.

MOTOROLA

Motorola was just split into two parts, so the corporation is in that kind of organizational turmoil. The analysts expect a bad quarter for Moto, we'll see what comes. Samsung obviously this year has pushed Moto out of the Top 5 biggest smartphone makers for the first time. So much for the world-domination plans by what only four years ago was the world's second biggest handset maker.

SONY ERICSSON

We still are hearing gossip about an upcoming Playstation phone and SE has a hard time getting any press attention in smartphones as that story is on the horizon. I am modelling SE to hit about 2M smartphones sold, and expect that if they do, they will be celebrating that level (previously SE has said they specifically have not managed to sell 2 million in a quarter)

FUJITSU

The bigger Japanese smartphone maker has confirmed their year ended with 6.2 million smartphones sold which pretty much secures for them the 8th position. Sharp might challenge. Meanwhile looking into 2011, Fujitsu said they want to expand abroad and specifically enter China's smartphone market (who told you?).

SHARP

Sharp's big 2010 strategy failed when Microsoft suddenly killed the Kin phone project (Sharp was the manufacturer) so now most Sharp sales are from their domestic market in Japan. But out of Japan came the big 2011 strategy gadget for Sharp - the 3D display smartphone running on Android. Expect Sharp to bring it to many markets in 2011.

LG 

The tenth biggest smartphone maker in the world is LG which struggled severely in 2010 and fired its CEO.

GOOGLE

Oh, we thought Nexus was a dead series? Google revised the Nexus and now the new model is made by Samsung. It is getting good press, lets see what kind of sales levels of the smartphone formerly known as a superphone. Good to see you back in phones, Google! (when do we see sanity at Microsoft with Kin re-launch?)

HP (ie ex PALM)

Yeah, where is the news? There is none. HP has managed to take one of the hottest smartphones, in the biggest growth year of smartphones ever, and hidden it from any chance of the slightest market success. Very bizarre strategy by HP. Remember, its not like Palm was their first smartphone - HP had been selling small numbers of smartphones for most of the decade. Thinking of their smartphone strategy and management running it, what rhymes with 'blueless'..

SYMBIAN

Symbian is not only Nokia. Even as Samsung and SonyEricsson are deserting the platform, it is the OS of choice in Japan on the NTT DoCoMo network so domestic smartphones made by Fujitsu, Sharp etc run on Symbian. Symbian will easily end the year once again as the biggest smartphone OS platform. Nokia has been juggling a complex PR nightmare of explaining how Symbian will kind of migrate to MeeGo, with developers using one set of tools called Qt, and the store for both to be Ovi. Yeah, I know, it needs a powerpoint presentation just to understand haha..

ANDROID

Then on the other smartphone OS's which are not mentioned in the above, Android is reporting ever stronger sales and like I said, it will end up the year as the clear second biggest smartphone OS. The growth numbers have been dramatic for the year, and the long-shot possibility is there, that for Q4 Android might even pass Symbian (but not for the full year sales). I doubt it, I think Android will catch up to Symbian during next year, but the gap is closing month by month.. The folks over at Nokia must be praying that Microsoft's Phone 7 is strong, to take some of the growth away from Android (as most Phone 7 manufacturers also make Android devices). But that is not looking likely

PHONE 7

So we come to the newest OS, Microsoft launched Phone 7 in a stumbling transition where Windows Mobile was not going to be compatible, and was to be killed, then WinMo suddenly got more attention from MS and now there are plans to extend its life into 2012, to really confuse any remaining MS partners. And how amazingly did Phone 7 do in its first quarter? Phone 7 most underwhelmingly did not set the smartphones market on fire, and sold only 1.5 million smartphones in its first quarter. Well, its early going. Microsoft is good at playing the long game. Still, this is not looking good for Steve 'I will take personal control of smartphones' Ballmer.

MEEGO

Nokia's and Intel's collaboration is to release first smartphones in the first half of 2011. We'll see. There was some gossip Intel might release a smartphone under its own brand. The MeeGo family has a couple of dozen brands signed up to it, but no major handset makers other than Nokia obviously.

FINAL NUMBER

I am modelling the year now to end at 295 million smartphones. To reach that, the Q4 numbers need to hit pretty close to 100 million (up from record-setting Q3 when they sold 80 million). We'll know in February whether this number was reached, breached or not.

Thats the updates to the Bloodbath.

For all interested in smartphones and their operating systems, remember I have just released the TomiAhonen Phone Book 2010 with up-to-date stats on all the major phone handsets related data, including regional market shares, major manufacturer market focus areas, average sales prices by region, even national handset market sizes for the 60 biggest countries, the installed bases of features, touch screens, QWERTYs, etc etc etc. 90 tables and charts in a 171 page eBook released last week! And costs only 9.99 Euros, for immediate download, and formated to small screens of smartphones so you can carry all smartphone stats and facts in your pocket. This is the only web page where you can buy the eBook - TomiAhonen Phone Book 2010.

Comments

[Hillshire]

"sold only 1.5 million smartphones in its first quarter"

Actually, that was 1.5 mil shipped, not sold. They haven't released the sales number. I would speculate that it was less than a mil since that would have been a decent sound bite for press releases.

Nice summary. Having a former Microsoft exec at Nokia worries me though. Reading posts by current and past Microsoft employees have given me the impression that corporate politics are job 1 there. Guess we'll see over time.

[Mark]

Yes we should absolutely count devices that don't make phonecalls in an article that is clearly about smartphone manufacturers and operating systems.

No, wait, that would be silly.

My guess for the N8 is lower then 4 million - I'd say about 3 - 3.5 million tops. Of course you then need to add the C7 and C6-01 into that mix I suppose.

[svensson]

Thanx for the numbers update, always appreciated. Speaking of Nokia though...

I own an N8 (awesome smartphone btw) and I see one problem with Ovi Store, they are just too damn slow.
I download maybe only half of my apps and other stuff from Ovi, the rest is forum sites and blogs, most of my themes I got from private repositories.

Ovi Store has improved a lot, I'll give them that, but I rarely see something new and interesting there because I probably saw it or got it somewhere else. Or maybe it's just me being an active user haha.
Nevertheless I find this to be a positive thing (consumer-wise), better that than to be locked to Zune or iTunes. Just my experience.

[DSL Flatrate]

Thanks for sharing the information regarding the latest products launched by different countries and the reviews related to it..Your post has totally changed the picture which was set in my mind for these companies..I have a set of Nokia with me from the last 5 years and the quality of it is as good as I expected..After falling into the water it is still working with the same battery..I am surprised..

[vvaz]

@svensson

That is because Nokia model is quite open. For other platforms it is much harder to get stuff into device. On iOS it is practically impossible and not obvious on Android. This inflates numbers of apps/downloads for non-Nokia platforms.

[Mark]

@svensson

I agree. Nokia do need to speed up the approval process for Ovi and need to give priority to the big developers and providers (Gameloft, EA, etc). That said, Ovi is a million times better than it was at launch with Ovi Suite 3.0 now being particularly nice (as opposed to v 2.0 which was horrible) so it's getting there.

[Tomi Ahonen]

(will respond in sets)

Hi Baron95, Piot, Hillshire and sell

Baron95 (both comments) - Good comments. First on 4G, yeah, if that ITU statement will hold that anything anyone wants can be sold as 4G, I've gotta accept that, but am hoping someone there in Geneva comes to their senses about 4G definitions.. But as long as the surprising ITU position stands, I won't waste my time arguing haha..

Your Android projection is aggressive. We'll see haha.. I am expecting a 'surprisingly' strong Q4 for Nokia and solid Japan Symbian sales too and that many analysts will be stunned at how Nokia is able to fight back so hard - where Q3 is always Nokia's worst quarter of year in market share and Q4 is best.. Nokia always put extra effort to have their big new phones for Xmas sales when people are buying gifts. The N8 rumors are indicative that it may have been a good quarter, but also, especially in light of the numbers I posted today for Samsung, HTC, LG and Huawei - I am expecting N8 to do significantly better than the 4M the published estimate says. Then again, look at how badly I got it wrong with RIM this year haha, so who knows.

But on the OS, that is not right. If the analysis is of smartphones - as this blog series is, then we do not count other WiFi devices etc. It is phones. The iPod Touch is a nice pocket computer and media player, it is not a mobile phone. Not relevant to this argument just as much as the Sony PSP is not a phone. Similarly the iPad, its a nice portable PC, it is counted in PC stats, not in phones. Just because they use the same OS does not justify their addition into this category. We also do not count the TV sets that use Android.. The iOS family is of interest to Apple and its followers. It is not relevant to smartphones. Only iPhones are relevant if we count phones. When you count cars, you don't add Honda's motorcycles in that statistic to give Honda more car sales.

Piot - you know fully well that we need the final numbers for Q4 before we can know. It is perfectly possible that the iPhone sells less than what I expect, OR that smartphones sell more than what I model, either of those can make my forecast correct. And based on today's 4 smartphone maker final numbers, my model has already been upgraded. I am not claiming it to be the final number but I want to let my readers know what is the number (which they otherwise would have to calculate out). It is only an estimator and it always gets more close to the final number the more data points we get in as individual makers report. We will have the first good indicator when Nokia reports, but I am not modelling the year to end at 310 million smartphones. Apple would need 16.2 million iPhones sold in Q4, if the final total Q4 number is 310 million, for Apple to have 15.5% market share ie rounded off to 16% and then I would have been wrong. But you know most analysts are modelling 16 million or less iPhones. It is very plausible that I will be proven right. So chill, Piot, you know I am not going to run away and I will be the first to admit if I was wrong. But its looking quite good for me..

Hillshire - haha, yea, well, shipped, sold. I know I know but I'll take what I can get. Its pretty pathetic anyway. Meanwhile of Microsoft history of politics, well, I remember Nokia HQ had its share of politics so I wouldn't think that would be the biggest change. I am encouraged by the gossip saying Elop listens and is very smart. If a good mind comes from the outside, especially a bit outside the phones business, then that mind can easily get past the legacy baggage of long-held assumptions and perhaps past-correct but currently obsolete concepts and beliefs.. So in other words, some fresh air haha.. But we'll have to see.

sell - I also do full phones market shares, not just smartphones. But for this year I foresaw this would be an exceptionally competitive year expressly in smartphones (as its been) and said I'd monitor smartphones specifically.

Thank you all for the comments, I'll return with more replies to the rest soon

Tomi Ahonen :-)

[Phil W]

Something that I think some people fail to realise is that percentages hide some interesting issues. Because Nokia has a higher market share than Apple, although it increased its smartphone unit sales YOY by more than Apple, it lost market share and Apple gained.

The interesting point is that if Apple increased its unit sales YOY by the same amount as this year each year it could never match Nokia's market share.

Also if Nokia continues to increase its unit sales YOY by the same as this year it would never drop to Apple's level.

[Phil W]

I probably should add that this was based on Q3s results and assumes that the overall smartphone market grows at the same rate as this year.

[kevin]

Tomi,

In recording smartphone market share results, you are correct not to include the iPod Touch/iPad as those are not phones. However, if one is thinking about what might happen in the future, and consider the impact of the overall strength of the platform/brand to that future, then the iPod Touch and iPad and Samsung Galaxy Tab etc do become relevant.

It's the same as considering non-smartphone cell phones in thinking about future smartphone sales. Nokia's strategy has been to use its dumbphone user experience and brand as a stepping stone for its users to move to future Nokia smartphones. And that's smart if there is a stickiness to that experience. Samsung is attempting the same. Motorola could've tried it, but chose not to.

Apple is also doing this but from the other device (media player) that is converging with the phone. It tries to have all its iPod Touch/iPad users become iPhone users because they already have apps. The other advantage is that it works for developers, not just users. Apple is targeting that users with an iPod touch and a Nokia/Samsung dumbphone will find it more attractive to buy an iPhone in the future, rather than a Nokia/Samsung smartphone.

[kevin]

@Phil W: The bottom-line, of course, is whether it's correct to keep doing straight-line extrapolations into the future in a rapidly growing and innovative market. The basis of the extrapolation can't simply be that that's what happened last year even if it seems that no other market variable has changed. When iPhone increased by 643% a year in 2Q09, there was clearly no basis to think it would happen again.

To me, the only value of the quarterly market share percentage metric is whether a company is gaining or losing share year-over-year (to account for seasonal differences). In other words, is the company growing sales faster than the market is growing or not (or losing sales slower than the market is shrinking or not). Beyond that, other metrics are far more interesting and informative.

[Phil W]

Hi again Kevin,

Yes I realise that. The only reason I pointed it out is that it shows Nokia is not doing as badly as some one like Lee seems to think. Basically its lies, damn lies and statistics. And you are correct past performance is not necessarily an indication of future performance.

I started reading this blog a couple of years ago, when I thought (like lots of others did) that if Nokia didn't do something drastic immediately that they would be out of business. Surely they had to respond immediately to Apple and Google, I told myself (remember, I work for them).

Actually what happened was (in portfolio terms) things got worse (N97). I then read Tomi's blog and that restored some optimism and as the time rolled forward and Nokia didn't implode and actually hung on quite well to their marketshare, which bought them time to re-organise and re-engineer, I came to realise that things in business work over a longer time frame than the analysts, bloggers & stock markets like to think they do.

I also realised that Tomi was mostly on the money with his forcasts and analysis. That means I'll take his view on things rather than most of the detractors.

Personally I think Apple will not grow market share much more, but is perfectly happy with that. Nokia will rally and begin the slow fight back and Android will continue to grow in the near future and is likely to become OS with the largest marketshare. What is important for Nokia is it remains up there with the other big players and I believe and hope it will.

[Bob Shaw]

In PC and Laptop, there are by and large no trade offs required in what features/functionality to include and what features/functionality to exclude since unlike mobile phones the consumption of power, memory and bandwith are not critical issues. Therefore Intel could keep introducing faster and faster processors and Microsoft could increase the size of the OS in every subsequent version.

In mobile phones, the limitations of power, memory and bandwith means trade off would need to be made in terms of what features/functionality to include and what features/functionality to exclude. One does not have a luxury of introducing faster and faster processors and bigger and bigger OS in mobile phones due to these limitations. A much tighter integration between hardware, software and ecosystem would be required in mobile phones compared to PCs and Laptops. It is because of this required integration that integrated players like Apple, RIM, Nokia and Samsung (with Bada) would have a much better chance for success.

[kevin]

Hey Phil,

Thanks for clarifying. And yes, the real world moves slower than what bloggers expect.

As you noted on the other thread, I am an Apple shareholder. I agree with Tomi that mobile is the best market for investment today. Thus, I've wanted to invest in Nokia since 2006 as they are a mobile company (unlike Samsung or Google where mobile is just a small piece). But I have not found any catalyst to have me believe Nokia can again dominate like it did before, so I've not invested in NOK (and so far, I've been right).

Given Nokia's strengths and weaknesses, it has probably chosen the best available strategy (i.e. profitably dominate dumbphones globally, then upgrade those users to smartphones when Qt and MeeGo are ready). But I see little to believe Nokia will execute well on MeeGo, which is critical to its mid-term and long-term future success.

I think Tomi has been and continues to be too optimistic about Nokia (and also RIM) and thus has missed or downplayed the factors causing investor dissatisfaction with Nokia; one can't just blame US analysts and investors. I also think Tomi misreads the factors leading to Apple's success; he gets half of it really well but looks to be blind to the other half.

Finally, Apple is not happy with staying at around 16-17% share of the smartphone market, even though they do know how to survive and do well with just a small market share. What's important to note is that Apple is not in a rush to be #1 or even #2. They are methodically weaving a deeply interconnected and robust foundation/platform/ecosystem across multiple mobile and non-mobile product categories, which they believe will lead to staying power and continuous market-beating growth for a long time.

[Mark]

@Lee

So... if Nokia's profits and ASP go up this quarter will you reconsider your views? Incidentally the stock price has gone up by 25% since its low point.

Things go up as well as down as a certain company that largely got by selling ARM shares during a particularly lean time will tell you.

Which reminds me, what exactly is Apple's fallback position if the iPhone loses its popularity and what do you think happens to its stock price then when there's nothing left to turn to?

[kevin]

@Mark: I would reconsider my view of Nokia if MeeGo is a decent step beyond what smartphones are today. They need to show some innovation in their execution to regain the confidence of investors.

Being up 27% from the low on 6/29 is in the right direction but the S&P 500 is up 18% and Nokia had its CEO replacement give it a boost.

Unlike RIM and Nokia, iPhone is still growing sales faster than the market yoy without any decrease in ASP, while also synergistically integrating it further with iPad, AppleTV, iPod touch, and iTunes on Macs/PCs, so your fallback question is truly hypothetical. There are weak points but Apple still has many potential cards to play if circumstances someday warrant it, e.g., multiple iPhones, cheaper iPhones, smaller iPhones, ...

[Mark]

@Lee and Kevin

First of all I don't think Nokia are doing great. That said I don't think they're doing nearly as badly as some sources would have us believe.

Nokia have absolutely ceded the high end to a number of competitors (Apple in Western Europe, Samsung and HTC in Asia for example) by failing to offer competitive products until now. The N8 and its siblings will not win the war by themselves but they will stop the rot, increase ASP and profits and give Nokia a more positive vibe provided NSN don't do their usual profit balls up.

Similarly, Nokia have not had a viable presence in the US for years and as a result are not part of one of the (if not the) most profitable and fastest growing market on the planet. This, again, is a huge problem from a profits and PR point of view.

Those points are fine. I wouldn't argue them because that would be futile.

However, and this is the point a lot of people miss, Nokia have managed to grow their customer base and transition a substantial part of that base to service friendly smartphones whilst still making a good profit on their handset division quarter after quarter (NSN tend to let the side down unfortunately). They've also maintained their global reach with the carriers and manufacturers and because of that can keep component prices at their advantage.

If this is what Nokia have done in what's probably been one of the lowest points in company history then I'm pretty optimistic for the future given the change in management (which I've been saying needed to happen for years - OPK did well with this part of strategy but didn't sell the company well enough to the investors and failed to turn the corporate culture around by not making some hard decisions that needed to be made).

So when - and it's a when, not an if - Nokia compete seriously at the high end again they will have access to that tranche of the market as well as the bread and butter of the low/mid tier market. That's why I'm positive about Nokia despite the errors they've made over the last few years.

Second, I don't think Apple are in any danger of going bust but they're playing a dangerous game. At the moment the iPhone is the world's most desired handset without question. However so was the RAZR and when fashions changed, and fashions do change, Moto had very little, in fact nothing, to fall back on.

You could ague that Apple offer a unique integrated experience and they do. However its competitors are fast catching up and they don't even need to be as good, they just need to be comparable. When that happens and the iPhone's star fades a bit the question of what else they have to offer comes in to play. Sure, you could say iPads but how big and how sustainable is that market? Again, the iPad is a cool thing to have but so were netbooks. Both smell of fad to me. Apple TV? I doubt anyone who isn't an Apple fan has bought one. It just isn't viable.

Fortunately I think Apple's core customers are considerably more loyal than Motorola's. I also think that when demand does start to stall they'll vary the product line as Kevin suggests. That may not be enough to keep them where they want to be and, as we all know, once growth potential stalls market cap comes crashing down.

As for the app/web/services question, that's purely driven by scale and scale is driven by access. SMS has a far bigger addressable market than apps so that's where the money lies.

[Mark]

@Lee

Calm down, I've already mentioned that Apple have the high end pretty much sewn up at the moment and that's where the bulk of the profits lie. The trick is holding on to that segment and, if you can't, having something to fall back on.

History is littered with the carcasses of companies and products that burned very brightly for a while only to burn out catastrophically, or at least get to a point where they became growth stagnant. Motorola are one, Microsoft are another (more saturation than failure) - remember Microsoft's peak market cap was well over $620 billion.

In Microsoft's case it's their failure to penetrate other markets after they filled out operating systems and office productivity software. Sure, they're very healthy there but in the last ten years they've not exactly pushed any other compelling products. The Xbox line looks like it may change that as it's starting to go nuclear but that's a long time to go between home runs.

Of course Microsoft still make vast amounts of profit every quarter. That won't push the stock price up though.

The same applies to Nokia - share price and market cap were based on potential for growth, particularly in the high end. The iPhone came along and nullified that growth and the last high ASP success Nokia had was the N95. That'll change a bit this quarter though not as dramatically and share price and market cap will go up. That's just the way it works.

Again though, Nokia make vast amounts of money every quarter in profit. Well, the handset division does. The albatross called NSN doesn't help...

And that's where market share matters for both MS and Nokia. When it isn't going so good for you at the leading edge you still have a lot to fall back on.

Apple's market cap, like everyone else's, is based on the projected - not current - value of the company. Personally I think there's growth to be had - clearly the release of a Verizon iPhone will stimulate growth in the same way that opening up the iPhone to other carriers in the UK and I'd be surprised if Sprint didn't follow suit - but premium products have ceilings which are largely determined by price. That leaves Apple with three options - milk existing customers with variations on a theme (iPad) and keep the price high, accept that this is as good as it gets and watch the stock tumble or diversify the product to lower priced products if they're confident in the ecosystem they've created.

Or people might get a bit bored of the iPhone in the same way they did of the RAZR. People are fickle like that.

Of course they could come out with completely new and innovative products but MS and others have shown how difficult that can be. You get a lot of failures before you get a hit.

So, no, I don't think Apple are a victim in 2010 as they're still growing sales and share. Similarly I don't think Nokia are a victim in 2010 although they most certainly have been in previous years.

Time will tell how things go. I'd love to see regional growth splits and share over 2010 and 2011. That'll show where the ceilings may be.

[Phil W]

Nice analysis, Mark, pretty much summed up my view of things.

Baron65 your arguments are wrong on a number of points. Nokia phones have been able to make video calls long before the Iphone could. Nokia have the best component supply chain in the business so Apple can't make the same phone cheaper than Nokia could. Apple don't sell the Iphone 4 for $200 they sell it for about $600, so $99 is not half price and Apple couldn't afford to sell it at that price. The carrier can subside it and sell it at that price, but they could do that for Nokia phones as well, so the argument that Nokia can't compete at that price is not right.

[Phil W]

just one comment Lee, the C3-00 is most definitely not a smartphone. It runs the S40 operating system, I should know I have worked on one aspect of it. (I won't elaborate)

For everything else, you are entitled to your opinion and you know I hold a different view, but there is no point in us continually bashing our heads together. One thing we can both agree on is that this year is going to be very interesting!

Cheers for now.