Posted by Tomi T Ahonen communities-dominate
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)
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.
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.