RealTime IT News

Smartphone Shipments Up, Profits Down

Smartphones continue to be the darling of the mobile sector, reaching a record number of shipments for a single quarter - up 4.2 percent, according to third-quarter data out from IDC.

During the last reporting period, 43.3 million smartphones shipped worldwide, up 4.2 percent from 41.5 million in the same period a year ago, and up 3.2 percent from shipments of 41.9 million in the second quarter of this year, according to IDC's Worldwide Quarterly Mobile Phone Tracker report.

Though the relative ranking of the top players in the space remains the same, analysts predict that the new Android-powered handsets will soon have a significant impact.

Nokia (NYSE: NOK) continues to retain the No. 1 spot worldwide, despite ongoing struggles in the US, with 6 percent year-over-year growth and 37.9 percent marketshare for Q3, up only slightly from 37.1 a year earlier.

No. 2 vendor Research In Motion (NASDAQ: RIMM) did well, posting a 35.7 percent surge in year-over-year growth and a 19 percent share of the market for the third quarter, up from 14.6 percent. RIM just launched the Storm2, the gem of its touchscreen consumer family, on Verizon.

Apple (NASDAQ: AAPL) posted its highest-volume ever in a single reporting period, according to IDC, retaining the third spot with a 7 percent year-over-year gain, and marketshare for Q3 at 17.1 percent, up from 16.6 percent in the third quarter of last year.

The shining stats mirror the overall glow on the smartphone category as it sees unprecedented alliances, spawns new operating systems, supports a thriving developer community and even makes high-profile appearances on Capitol Hill.

Android buzz reaching critical mass?

Competition is going to get more intense, too, as devices powered by Google's open source mobile platform Android start gaining traction in the marketplace. T-Mobile is selling the Motorola Cliq, Sprint carries the HTC Hero and Verizon is now offering the Droid and Eris.

"With the release of Android-based handsets from several different OEMs, most recently Motorola, but also HTC, Samsung LG, and Sony Ericsson, the buzz surrounding Android OS is reaching critical mass," William Stofega, research manager of IDC's mobile devices technology and trends unit, said in a statement.

"The release of new Android devices has picked up dramatically over the past several months and the release of version 2.0 demonstrates that Android is rapidly evolving and responsive to suggestions from OEMs and developers. With an expanding portfolio of handsets and a just released update of the code, Android is poised to mount a serious challenge to the incumbent smartphone OEMs for the first time in its brief history."

Infonetics Research, whose findings in a biannual report show that the high-end devices will continue to perform well amid a wider slump in the mobile phone market, echoes the success of the smartphone sector cited by IDC.

"Smartphones are on track to post a 14.5 percent increase in the number of units sold worldwide in 2009, and a 21 percent compound annual growth rate from 2008 to 2013, significantly better than other mobile phone segments," Richard Webb, mobile analyst director at Infonetics, said in a statement.

However, Webb sees a bad-news-good-news scenario playing out as the high-end handsets become more popular. "While smartphone revenue is expected to dip in 2009 mainly due to price erosion and lower-ARPU units coming to market, we expect it to pick up in 2010 and continue growing, easily outstripping the combined revenue of standard mobile phones by 2012," said Webb.

He's also bullish on Android, especially in terms of how it will affect Apple. "The iPhone OS is sure to face stiff competition from the open-source Android platform," said Webb. "Apple will have to fight hard to drive its market share back above 10 percent."

Meanwhile, Webb isn't the only one predicting less revenue for smartphone vendors, despite growing sales.

Strand Consult, another research firm, believes the smartphone sector will continue to grow due to dynamics beyond consumer demand, but that average sales prices will decrease.

"We believe that the smartphone market will explode over the coming years -- an explosion that is not due to an increased demand for smartphones, but rather that a number of market players will put smartphone operating systems into their medium-end handsets," the research firm said in a report.

While Strand sees smartphone sales significantly increasing, it also expects the ASP (average selling price) that handset manufacturers receive for their smartphones to plummet.