Smartphones Sales Up: iPhone Hot, Palm Pre Not

Smartphones represent the fastest-growing segment of the mobile market with Apple posting big gains in worldwide market share. But analysts are taking note of the tepid sales for the Palm Pre, the latest iPhone contender

Forty million smartphone sales worldwide in the second quarter, a 27 percent gain from the same period last year, show that the high-end handsets are sustaining the ability to shine amid a wider slump in the mobile market, according to research firm Gartner.

Worldwide mobile phone sales totaled 286 million units in the second quarter of 2009, a 6.1 percent decrease from the second quarter of 2008, Gartner reports in “Competitive Landscape: Mobile Devices, Worldwide, 2Q09.”

The report reveals an emerging trend showing that consumers are opting for either low-end or high-end handsets — cutting out mid-tier devices — and mirrors the Q2 earnings for wireless carriers such as Sprint who realized 938,000 new prepaid customers and just scooped up Virgin Mobile.

“Despite the challenging market, some devices sold well as consumers who would usually have purchased standard midrange devices either cut back to less expensive handsets or moved up the range to get more features for their money,” Carolina Milanesi, research director at Gartner, said in a statement.

Apple’s (NASDAQ: AAPL) expansion overseas and price cut on the older 3G iPhone is proving to be profitable for the company, according to the report, which states that the impact of iPhone 3GS sales won’t be seen until the second half of the year.

Sales of 5.4 million units in the second quarter of 2009 indicated a 51 percent growth in shipments and helped Apple maintain the No. 3 position in the smartphone market, where it’s been since the third quarter of 2008. Still, the company’s smartphone market share grew from 2.8 percent to 13.3 percent year-over-year.

Apple’s big gain in market share contrasts starkly with No. 1 Nokia, which slipped from 47.4 percent market share to 45 percent, and No. 2 Research In Motion’s (NASDAQ: RIMM) nudge up to 18.7 from 17.3.

Palm’s push

This quarter also saw the debut of the long-awaited Palm Pre (NASDAQ: PALM) based on the new webOS mobile platform, but so far, Gartner isn’t impressed in terms of sales volume.

“This device attracted a lot of media attention but showed mixed results at the cash register as sales only reached 205,000 units,” Cozza said. “Palm currently ranks tenth in the smartphone market and Gartner remains concerned about its ability to gain traction outside the US market, where its brand is less strong.”

HTC, the company behind the T-Mobile Android handsets myTouch and 3G, remained in the No. 4 position behind Apple in the smartphone category, where it has been since the third quarter of 2008. It reported lower expectations for the second half of 2009 due to product delays and now expects 2009 revenue to decline by low- to mid-single digits year-on-year, far below its previous outlook of 10 percent annual growth, according to the report.

In the smartphone operating system (OS) market, Nokia’s Symbian has 51 percent share worldwide, down from 57 per cent a year ago, while Research In Motion and Apple grew their shares year-on-year from 17 to 18 percent and 2.8 to 13 percent respectively.

Google’s (NASDAQ: GOOG) open-source Android share was 1.8 percent of the market but more Android-based devices will come to market in the fourth quarter of 2009, intensifying competition in the smartphone OS market, particularly for Symbian and Windows Mobile.

Microsoft’s (NASDAQ: MSFT) share continued to drop year-on-year from 12 percent to 9 percent of the market in the second quarter of 2009, signaling that the Windows Mobile 6.5 update expected later this year can’t come soon enough.

Expanding Microsoft and Nokia’s reach

Meanwhile, however, today Nokia and Microsoft announced an alliance that will bring Microsoft Office Mobile and Microsoft business communications and collaboration suites to Nokia’s enterprise-focused handsets. The move is aimed at making Nokia a viable competitor to RIM in the enterprise segment and at expanding Microsoft’s reach in the mobile OS arena.

The two companies will begin collaboration on the design, development and marketing of mobile enterprise productivity and communication software for select Symbian-based Nokia devices.

In an unprecedented move, Microsoft will be developing for another software platform in an effort to expand MS Office’s reach into the mobile space. By 2010, Nokia devices, specifically E-Series devices, will bundle mobile versions of Microsoft Word, Excel, PowerPoint and OneNote applications for the Symbian OS.

The alliance also intends to bring mobile SharePoint, Office Communicator and device management functionality to Nokia enterprise devices.

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