Is There Room for All Smartphone Makers?

Who will be right on the smartphone makers? On the bearish side are analysts like breakingviews.com columnist Robert Cyran, who asks: “Can every smartphone maker be better than average?” On the bullish side are analysts like IDC Canada wireless-communications specialist Kevin Restivo, who is quoted as saying there

is room for multiple players in the market – a rising tide lifts all ships.

Smartphones, of course, are cellphones with software operating systems that allow them to increasingly function like personal computers. That is, they can do tasks such as web browsing, downloading of movies/music, and sending email (and getting better with each upgrade to handsets and networks).

Cyran thinks the below-expectations Q2 report from Research in Motion (RIMM) signals more disappointments ahead for the sector. RIM, Apple (AAPL), and Palm (PALM) recently cut prices on their smartphone offerings, “which could indicate an increasingly tough fight to attract customers – indeed, RIM lowered its gross margin forecast for next quarter,” he writes. And competition is only going to intensify as new models from Motorola (MOT) and Taiwan’s HTC hit the market. Nokia (NOK) is also a smartphone entrant.

Restivo, however, thinks it may be premature to worry about one company being better than the other. The market is taking off and there is room for many smartphone providers to enjoy strong rates of growth, in his opinion. The shake-out is some ways off, considering (among other things):

• The mid-August research report of RBC Dominion Securities analyst Mike Abramsky described the smartphone market as: “huge, nascent and under-penetrated” and declared the shift to smartphones was “the next wave of computing ….profound as the historic technology shift from mainframes to PCs,”
• Smartphone penetration of the global handset market will rise over the next three years from the current 15% to 35%, and 2011 smartphone sales will surpass shipments of personal computers (400 million a year), Abramsky expects,
• Sales of smartphones climbed 27% in the second quarter of 2009 (over the same quarter a year ago), according to Gartner Research – a respectable growth rate considering it occurred during one of the worse economic downturns in decades.

Comments

[CGP:]

Too early to make a call on this.

The real test does not come until LTE and WiMax have a strong presence in all of the major markets, so peg that date around late 2010 to mid 2011. More importantly, when will spectrum from analog TV be put to use?

The $64k ques. now is which players can stay in the game while lining up their ducks?

Sep 28 06:04 PM

[JamesApple:]

Smartphones are not PC like, just like PC are not mainframe like. The closest characteristic of smartphones is iPhone's ability to self-correct typos are you type on the iPhone using its virtual keyboard. The characteristic that least resembles a smartphone is the insistance of Rim's putting a physical QWERTY keyboard on its junky blackberrys. I mean...how much dumber can a smartphone get than to block out half of its face with a dead plastic QWERTY keyboard? how smart can a keyboard be? Don't forget the key of a smartphone is 'smart', not 'phone'. Another key characteristic is the software running on the smartphone, and that includes every single piece of code on the phone. What purpose does the piece code serve? Why is it there? Is each piece of code collaborating with each other piece of code without duplicating pieces of redundant code? Are these code meaningful to the owner? Can the phone recognize me? How well does the phone know me? How many tricks can the phone do? Do I have to explicitly command the phone in everything I need from the phone? How many mistakes does the phone make? Does the phone learn how to please me without being patronizing?

As we can all see these are all software issues which require extremely good programmers and fantastic OS and software platforms to deliver a truely smart phone. The number and quality of apps are important, but even more important is how smart the phone is. One smart thing a phone can do is the ability to sense its owner's heart problems and automatically call 911 for emergency.

So far, I can only see Apple as the candidate to deliver a real smartphone, all the others are wannabees, and Research In Motion definitely has no business trying to compete with Apple in delivering smartphones. There is no way Rim can survive making real smartphones. Palm has the potentials but not the resources. Motorola has an outside chance. You may see that the candidates I am choosing MUST have a very strong background and resources with making intelligent devices.

Rim has its root as a pager maker. The blackberrys and BES are just pagers and paging devices and services with eMail attached. blackberrys, blackberry OS and BES are dumb products with severe limitations and restrictions which are extremely hardwired and mechanical. It is impossible for anything Rim to become smart.

Rim is going to go bankrupt no later than year 2012.

Sep 28 07:14 PM

[Tom B:]

Too early-- agreed. I think the tide may raise several companies in the short term, but we all know how this story ends.


On Sep 28 06:04 PM CGP wrote:

> Too early to make a call on this.
>
> The real test does not come until LTE and WiMax have a strong presence
> in all of the major markets, so peg that date around late 2010 to
> mid 2011. More importantly, when will spectrum from analog TV be
> put to use?
>
> The $64k ques. now is which players can stay in the game while lining
> up their ducks?

Sep 28 10:33 PM

[JamesApple:]

I anticipate 3 out of 5 trading sessions ending with Rim stock price down rather than up. I don't think the Rim stock price would reach $89 for the remainder of 2009, but I think the Rim stock price would go down to $47 before the end of this year.

Rim stock price may go down to $24 in year 2010, $8 in year 2011, penny stock status in year 2012, and chapter 11 bankruptcy in year 2013.

The major reason is due to Rim's failure to upgrade its technology platform and product lineup with added value or innovation.

Apple would capture 78% of the North American market with the remaining 22% shared by Palm, Motorola, Google, and Rim would hold less than 3% from its current 51% by year 2012. Rim would not be able to sustain its business, since Rim holds no patents of its own, and there are no valuable assets within Rim, Rim should go into chapter 11 bankruptcy without anyone interested in acquiring any Rim assets.

Waterloo Ontario is already a ghost town with Rim shrinking all of its operations and capacities. Rim had spent a lot of money in buying and building plants, warehouses, and offices, over $1 billion in capital spending already. But with declining profit margin, Rim's ROI would diminish greatly, thin cash reserves, cashflows could become dangerously low in a matter of months. The $237 million payout for patent infringement would have an adverse effect on Rim that is hard to shrug off. Although Rim presents a healthy balance sheet now, the outlook for Rim is dim ahead. With an uncertain economy ahead Rim's sales is really much more heavily dependant on Verizon's purchasing from Rim to sustain Rim's revenue. If Verizon cancels or cuts back on purchase of blackberrys, it could spell the end of a vital source of revenue for Rim, Rim is most unlikely to survive losing or even declining sales to Verizon. International sales of blackberrys are also declining. The declines are small now, but with Apple iPhones increasing sales channels and distribution in China and other nations such as South Korea, it is only a matter of time for international blackberry sales to drop significantly.

I fail to see Rim operating as a business entity beyond year 2013.

Sep 29 01:40 AM

[happyshorter:]

I tend to agree 100% with JamesApple .
But the question is not so much which smart phone will get the biggest share of the market, which one will offer the best "gadgets".
It is how are the signal will be transmitted with such a trafic!
Some events, like Obama's election and Jackson's death totally jammed some service providers.
Especially in Europe (and France more precisely), lots of people do not own "traditional" phones at all, do not even use cable Internet.
The future belongs to those service provider who will be able to redirect the signals through other means then WY-FI, like they are starting to do in Japan.
I think the smartphone sector has become a bubble ready to explode, like the dot.coms many years ago.
Let's go to search what the next best sector will be.
I'm looking to the companies who produce the parts that those smartphone producers need, and not to the smartphone producers them-selves, because for sure, people will keep buying them, but much cheaper than a few years ago.
And looking to sectors that will rebound pretty soon, like oversea transportation of goods.
Because, sooner or later, the Americans will forget their promise to save, and will start buying again: all was made so that "the good old capitalism" would be back on track as soon as possible, although the real good capitalism does not seem to exist anymore. And by this I am not opposing "capitalism" to socialism, or communism, I am opposing capitalism as it should be and made America the greatest economy, and capitalism as it has become in the past 10 years or so, and that could well mark the decline of the great America.

Sep 29 02:30 AM

[mollytjm:]

I see Apple emerging as top dog...it's already the leader of the pack in innovation and market share growth. They alone are dedicated to innovation...they spend a lot of $$$ on it but they also have the brainpower to do it well...and fast.
I see Rim as i see Palm... they both had a good thing going so they just sat on it. Palm with it's Treo is now in last place and they will probably never catch up in time to stay solvent with profit. Rim made the same mistake and just coasted. It's paying the price now.
Long APPL

Sep 29 08:41 AM

[Uncle Miltie:]

As bullish as I am on Apple, I don't see RIM going bankrupt any time soon. They have a sizable moat in the IT departments of most major corporations. Due to the ability of RIM devices to be securely administered remotely, and all the existing infrastructure dedicated to RIM devices in the enterprise, they have the necessary moat that Apple is still trying to overcome. My iPhone is much improved over the last 2+ years, but it's still not as easy for an IT department to administer as my wife's blackberry.

Also, don't count out RIM for people who primarily use their device for e-mail and text messaging. For those people - and there are a lot of them - the BB is still much easier to type on than an iPhone.

There is in my opinion room for both companies products, and both products have significant owner loyalty and satisfaction. They don't call them Crackberries for nothing. As much as you'd have to pry my iPhone out of my cold, dead fingers, you would have to do the same to my wife's blackberry.


On Sep 28 07:14 PM JamesApple wrote:


> Rim has its root as a pager maker. The blackberrys and BES are just
> pagers and paging devices and services with eMail attached. blackberrys,
> blackberry OS and BES are dumb products with severe limitations and
> restrictions which are extremely hardwired and mechanical. It is
> impossible for anything Rim to become smart.
>
> Rim is going to go bankrupt no later than year 2012.

Sep 29 10:38 AM

[JamesApple:]

Many companies no longer issue blackberrys to their employees. The trend is a collaboration where the employees bring their own cellphones or texting phones to work instead. Cost savings are great for the companies, and employees get to use whatever phones they choose to. It is a win win situation. Most people buy the iPhone and use them at work.

It's not a matter of prying blackberrys out of cold dead fingers, it's a simple matter of letting them know that there are better alternatives to the old outdated blackberries, and there's really no need to be so stressed over owning or not owning a blackberry. I increasingly found that whereas the blackberrys used to be a source of pride in ownership, the reverse is the case now due to the thrashing of its own brand name by nobody else but Rim itself thru the perenial BOGOberry giveaway campaigns.

Sep 29 11:05 AM

[jack dee:]

James Apple said

>>>I anticipate 3 out of 5 trading sessions ending with Rim stock price down rather than up.<<<


This is non investor BS. James is a fan of apple and will stamp on ANY other investment OP in order to protect the company he loves.

Classic cheerleading, BS.

Sep 29 01:22 PM

[aaavoid:]

i have both blackberry and iphone, it is still easier to type on physical keyboard. many of my friends including me have since stopped using the iphone. it's just pretty, but typing on a screen is just not my style...

Sep 29 02:54 PM

[Lsente:]

BES integration (albeit costly), and secure infrastructure is a corporate must for the foreseeable future. Nothing in the pipe will replace BES.


On Sep 29 11:05 AM JamesApple wrote:

> Many companies no longer issue blackberrys to their employees. The
> trend is a collaboration where the employees bring their own cellphones
> or texting phones to work instead. Cost savings are great for the
> companies, and employees get to use whatever phones they choose to.
> It is a win win situation. Most people buy the iPhone and use them
> at work.
>
> It's not a matter of prying blackberrys out of cold dead fingers,
> it's a simple matter of letting them know that there are better alternatives
> to the old outdated blackberries, and there's really no need to be
> so stressed over owning or not owning a blackberry. I increasingly
> found that whereas the blackberrys used to be a source of pride in
> ownership, the reverse is the case now due to the thrashing of its
> own brand name by nobody else but Rim itself thru the perenial BOGOberry
> giveaway campaigns.

Sep 29 03:04 PM

[JamesApple:]

What's stopping everybody else from cloning the BES adapting it for Apple, Nokia, Motorola, Palm, Samsung, LG, HTC, Sony? BES is only a program written in C++ and Java.

Good Technologies already sells programs that do the same things BES does. And there are at least half a dozen companies like Good Technologies. iPhones already provide advanced security capabilities like remote deletion of data on lost or stolen iPhones. BES is showing its age. Rim servers are highly stable too. Just last week Rim server outages knocked out thousands of Rim server users for hours, and there is long and horrible history of such Rim outages causing untold damages to its clients. One only need to google and gather up the facts of the inferior Rim products and services.

Sep 29 11:56 PM

[Lsente:]

BES is not software, it is infrastructure, tried and proven. I am not a bull on BB, but the device maker has a beautiful moat, and you arguing against that statement is inane. There are sunk costs that will keep BB a player in the e-mail client space through 2012. In this economy, with cap-ex bleeding out, you and your brethren think a quantum leap in corp IT spending is going to occur. Don't be such a f*cktard.

Let's talk like the grown-ups. The foreseeable future has some crappy, boring, primitive smart phone from Canada in it. The next wave, the sub 30nm video chipset/processor die smartphone is when the party really gets interesting.

I'll open up the floor when we have some real innovation.

Sep 30 03:44 AM

[JW.USC:]

So basically you are complaining about James commenting on Apple the way you comment on Micro$uck?


On Sep 29 01:22 PM jack dee wrote:

> This is non investor BS. James is a fan of apple and will stamp on ANY other investment OP in order to protect the company he loves.

Classic cheerleading, BS.

Nov 09 03:47 PM