Apple Gaining Ground in Smartphone Race

These are heady times for the smart phone market, with consumer buying plans at near record levels. Moreover, electronics spending in general shows signs of a pick up. But what impact are the new Apple iPhone 3GS and Palm Pre models having on the market?

A September 14-21 survey by ChangeWave Research provides an up-close look at the impact of the new Apple (APPL) and Palm (PALM) offerings, along with an update on Research In Motion (RIMM) and overall smart phone industry trends going forward.

The survey of 4,255 consumers shows strong growth continuing in the smart phone market, with 39% of respondents now reporting they own a smart phone – up two points since June and nearly double the level of two years ago.

Looking ahead, while the current survey shows a slight dip in consumer buying plans for the next 90 days, that’s to be expected in the aftermath of the huge iPhone 3GS and Palm Pre product launches back in June. A total of 11.6% now say they plan on buying a smart phone in the next 90 days – three points less than in June but still one of the highest percentages ever recorded in a ChangeWave survey.

Smart Phone Demand: Apple vs. RIM vs. Palm

Current Market Share: RIM (40%) remains the current market share leader among consumers, but it has fallen one point since the previous survey and is at its lowest level in two years.

Apple (30%) has seen a huge market share jump since the previous survey. Not only has the iPhone 3GS release enabled the company to gain five points overall, for the first time it has also placed them within striking distance of the number one spot in the consumer market.

Palm (7%) remains far behind in third place, but we note that this is the first survey in nearly two years where its share hasn’t fallen – and that’s a clearly encouraging sign.

Next 90 Days: Going forward, Apple’s share of planned smart phone purchases has settled back somewhat after the huge spike of excitement it enjoyed in June from the iPhone 3GS release. Note that its eight point drop between June and September (from 44% to 36%) is far less than the 22 point drop it picked up a year ago after the iPhone 3G launch.

What’s more, Apple remains the leader in terms of planned buying going forward – 36% of those who plan to purchase a smart phone in the next 90 days say they’ll get an iPhone.

RIM is still in second with 27% of planned purchases – up four points since June, but below its percentage from a year ago. Palm, meanwhile, remains unchanged at 8% – which is not surprising given the burst of momentum it previously received in June with the Pre launch.

Cell Phone Customer Satisfaction

The Apple iPhone continues to maintain the highest customer satisfaction rating in the industry among major cell phone manufacturers – with 74% of owners reporting they’re Very Satisfied with their iPhone.

RIM ranks second with 43% saying they’re Very Satisfied, down five points since June. Third place LG customers (39%) rate their cell phones a few points behind. Also, note that while Palm’s Very Satisfied rating is only 33%, it has been on an upswing since the Pre entered the market.

Bottom Line

In the horserace among manufacturers, the release of the iPhone 3GS has led to a big jump in smart phone market share for Apple and has placed them within striking distance of Research In Motion – whose slew of models are still number one but have fallen to their lowest level in two years.

There are very few things for RIM to crow about in the current survey results. Besides its downtick in market share, the firm’s Very Satisfied rating among Blackberry owners has fallen five points since June to its lowest level ever in a ChangeWave survey.

Also, while it’s up four points in terms of planned purchases, that’s below its number of a year ago when new Bold, Storm and Pearl models were either already in stores or approaching release. In short, RIM has its work cut out to regain its momentum in the fourth quarter.

All this notwithstanding, RIM is expected to have multiple device launches and will introduce new services in the coming months. Moreover, it continues to outperform in its core corporate smart phone market. Thus, despite RIM’s underperformance in the current consumer survey, longer term trends suggest that it is still well positioned for long term growth and will continue to remain one of the premier players in the rapidly expanding smart phone sector.

In terms of Palm, the new Pre model has helped reverse the firm’s long, multi-year slide. For the first time in nearly two years of surveys, their market share is no longer falling.

Comments

[Yagottabe K...:]

The survey was NOT of "4255 consumers" but instead "4255 high income high education senior tech-field consumers".

I think that may have import w.r.t. how well this survey is representative of the general phone consumer population.

Oct 29 02:27 PM

[User 493158:]

I see that Apple's cell phone satisfaction is down 5% also compared with March. I don't see why you don't make a comment on that too. Maybe the market is just more exigent.

Oct 29 02:29 PM

[hardymaine:]

This is a very high quality article with some very good information. But I think that RIMM is very undervalued. A graph in the article clearly shows AAPL's rise but it also shows that the vast majority of that rise did not come at RIMM's expense. It also shows that RIMM is far from going away.

And for you gross margin folks RIMM's gross margin is about 10 points better than AAPL. AAPL is a great company. But everyone knows that. What the market does not seem to appreciate is RIMM. I don,t own because my strategy is too short term to stay with it. But a long term investor should take a long look at RIMM.

Oct 29 03:14 PM

[JamesApple:]

The reason why Rimm seems undervalued is because Rimm is going out of business no later than year 2012. When you keep on making junky phones unable to wow your customers you are going down, even if your stock goes down into penny stock, it's only a matter of time before going bankrupt sooner or later.

Rim is beseiged again, this time by giants. iPhone, Pre, Pixi, MyTouch, Hero, Droid, Moment, these are all skull crushing smartphones that simply take the heads off the Storm 2 slaughtering Rim blackberrys. Rim's storm 2 and bold 2 are far 2 little 2 late, dragging Verizon down with it.

Oct 29 03:29 PM

[JamesApple:]

Rim storm is by far the worst made device in history. It still is.

Oct 29 03:35 PM

[hardymaine:]

The comments above reflect the conventional Wall Street perspective. Who knows they might be right. But there is no evidence of it.

RIMM has 32 million subscribers which is up from 14 million subscribers just a couple of years ago. Moreover, if you study the market share graph RIMM's share in July 2007 was 38%. It is 40% now. AAPL's rise did not come at RIMM's expense as most assume.

Far from going out of business, RIMM is enjoying very substantial sales. In their 2Q their sales were 8.2 million, up from 6.1 million for the prior year. In 3Q they expect 9.5 million up from 6.7 million for the year ago period.

A year ago I owned RIMM's stock when the Street was down on RIMM for investing in new phones and the Street was dead wrong about that. The new phones are what are now enabling them to compete.

A major complaint against RIMM is that they expect the average price of their sold phones to decrease some $25 . The company argues that it is smart business to grab a leadership position in a growing business. With the kind of subscriber growth that they have enjoyed who are we to second guess them.

Again, I am not long RIMM at the present time.

But I do have a BlackBerry Curve and I have no plans to give it up. I have been very impressed by how smoothly it works compared to a smart phone I had from another company.

Oct 29 04:40 PM

[jmmx:]

@ hardymaine:
"And for you gross margin folks RIMM's gross margin is about 10 points better than AAPL."

One reason for that is that while Apple is mainly a hardware company, RIMM gets a significant portion of income from its subscriptions which have much higher gross margins. So the comparison may not be fair.

Oct 29 05:42 PM

[scottg:]

Still impressive that a company like Apple can enter the phone industry with 0% market share (Rim was steady at 38% share) and move to 30% so fast.

The graph shows RIM is really competing with the other carriers, yet RIM's drop in customer satisfaction is solely attributed to rushing smartphones to market to compete with Apple. Bad move.

Oct 29 05:55 PM

[scottg:]

RIM is now Palm (99-2007). And Palm is now Sony Ericsson. Very historical happenings going on in this space.

Oct 29 05:59 PM

[JamesApple:]

Rimm's profits last year came at Verizon's expense. The Verizon Buy1 Get1 Free Blackberry campaign since June 2007 has been proven a major expensive mistake by Verizon hoping to lure subscribers by giving away blackberrys. If the blackberrys are in any way desirable why would Verizon have to give them away? The result is America got literally flooded by these blackberrys half of its 'sales' were dead giveaways running on Verizon's outdated CDMA technology both Rim and Verizon fallen 2 generations behind ATT and Sprint. People are fed up with ancient junky Rim products and services, they are leaving Verizon in droves and no Buy1 Get1 piece of junk free deals can stop them from jumping ship to ATT & iPhones. Look at the jump of iPhones market share from 2% in 2007 to 30% now and Rim even with its giveaway phones like the junky storm 2 and bold 2 have recently dropped from 52% to 40%! It appears iPhone would jump to 70% from 30% after this apparently all-Apple Christmas and New Year season.

People buy quality, usefulness, brand name, good experience in smartphones. If people want truely secure mobile devices they would buy the Asus or Acer netbook computers equipped with a RSA dongle key, even internal Rim employees use RSA dongle key and a Rim issued notebook computer for doing work remotely, not using the blackberrys. This leaves people only the iPhone and iPod, definitely not the Rim blackberrys.

Verizon has to bring in Android smartphones hoping to stem the bleeding of businesses to ATT, Rim blackberrys had been a major cause of customer leaving Verizon, especially after the releases of Rim storm 2 and bold 2, which again disappoint people greatly. Rim blackberrys cannot even hold candles to the Moto Droid, HTC Hero, and Samsung Moment, let alone the number 1 iPhone. This Christmas and New Year season will see huge drops in sales of Rim blackberrys. When Google and Apple vastly bolster the security aspects of their products, Rim will lose all its enterprise businesses as well. Google, Apple, Microsoft and IBM are the most technological advanced and richest enterprises in the world, I cannot see how Rim can compete and survive in the longer term. Of course, there are other vaunted competition such as Motorola, HTC, Samsung, LG, Nokia, Sony, and Ericsson which beated out Rim in recently acquiring LTE technologies and rights from Nortel over Research in Motion which is going to pay out its $237 million lawsuit loss for IP copyright infringement.

How can Research in Motion not go bankrupt no later than year 2103?

Oct 29 06:17 PM

[JamesApple:]

Typo: year 2013, not 2103.

Oct 29 06:17 PM

[JamesApple:]

Apple is mainly a Unix company. Its world best OSX Unix software is the heart and soul of Apple products from the iPhone to the Apple servers. Unix is currently the world's number 1 enterprise operating system running on multibillion dollar supercomputer clusters and grid computing platforms concurrently serving billions of people worldwide. Rim is very small hardware driven niche player offering nothing more than special purpose email messaging phones and a smartphone management program called BES. Rim is not able to go beyond this niche market and Rim appears to be certain to be phased out by Apple and other vastly significant competing products and services.

Oct 29 06:29 PM

[rich168:]

RIMM is very good in EMAIL.
Thats all Folks. No things else follows.

That business model is prone to competitive pressures.
Much like the electronic pagers of the 1980s. It will be heading to obsolescence

What people are unaware of is that in GSM only countries.
RIMM is being canned.
Look at china.... Blackmarket for Iphones have flourished.
Do you hear RIMM there????

Somethings got to change in RIMM's business model.

Oct 29 09:39 PM

[JamesApple:]

Google gmail and Apple MobileMe are miles better than Rim email plus gmail and MobileMe are already cloud services but Rim email are unreliable because the Rim servers are prone to crashing hanging all the Rim subscribers who are paying hefty fees to Rim. Many corporations have already terminated Rim email services, allowing individuals to bring in their own mobiles to work.

Oct 30 12:00 AM

[rich168:]

Remember

EMAIL is FREE.
How RIMM is making money out it still puzzles me.

Corporate EMAIL. Where RIMM makes it dough.
But soon corporations will negotiate aggressively with pricing.
and RIMM's revenue will drop

Oct 30 12:10 AM

[User 506787:]

Do you ever have anything to say positive about RIMM? What is your point? RIMM is not going out of business. It is foolish to think that this company is so awful. I have an IPhone and Blackberry.

Wall Street expectation is to high for RIMM. If they don't beat all expectation their stock gets slammed.

Apple does the same and will guide much lower than the street expects and their stock goes up. Apple has lower expectation than RIMM.

I am holding Apple now and hope it goes to the moon. I have made a few hundred thousand dollars on RIMM in which I will be buying some soon.

This is what it is all about.


On Oct 29 06:17 PM JamesApple wrote:

> Rimm's profits last year came at Verizon's expense. The Verizon Buy1
> Get1 Free Blackberry campaign since June 2007 has been proven a major
> expensive mistake by Verizon hoping to lure subscribers by giving
> away blackberrys. If the blackberrys are in any way desirable why
> would Verizon have to give them away? The result is America got literally
> flooded by these blackberrys half of its 'sales' were dead giveaways
> running on Verizon's outdated CDMA technology both Rim and Verizon
> fallen 2 generations behind ATT and Sprint. People are fed up with
> ancient junky Rim products and services, they are leaving Verizon
> in droves and no Buy1 Get1 piece of junk free deals can stop them
> from jumping ship to ATT & iPhones. Look at the jump of iPhones
> market share from 2% in 2007 to 30% now and Rim even with its giveaway
> phones like the junky storm 2 and bold 2 have recently dropped from
> 52% to 40%! It appears iPhone would jump to 70% from 30% after this
> apparently all-Apple Christmas and New Year season.
>
> People buy quality, usefulness, brand name, good experience in smartphones.
> If people want truely secure mobile devices they would buy the Asus
> or Acer netbook computers equipped with a RSA dongle key, even internal
> Rim employees use RSA dongle key and a Rim issued notebook computer
> for doing work remotely, not using the blackberrys. This leaves people
> only the iPhone and iPod, definitely not the Rim blackberrys.
>
> Verizon has to bring in Android smartphones hoping to stem the bleeding
> of businesses to ATT, Rim blackberrys had been a major cause of customer
> leaving Verizon, especially after the releases of Rim storm 2 and
> bold 2, which again disappoint people greatly. Rim blackberrys cannot
> even hold candles to the Moto Droid, HTC Hero, and Samsung Moment,
> let alone the number 1 iPhone. This Christmas and New Year season
> will see huge drops in sales of Rim blackberrys. When Google and
> Apple vastly bolster the security aspects of their products, Rim
> will lose all its enterprise businesses as well. Google, Apple, Microsoft
> and IBM are the most technological advanced and richest enterprises
> in the world, I cannot see how Rim can compete and survive in the
> longer term. Of course, there are other vaunted competition such
> as Motorola, HTC, Samsung, LG, Nokia, Sony, and Ericsson which beated
> out Rim in recently acquiring LTE technologies and rights from Nortel
> over Research in Motion which is going to pay out its $237 million
> lawsuit loss for IP copyright infringement.
>
> How can Research in Motion not go bankrupt no later than year 2103?

Oct 30 12:52 AM

[JamesApple:]

What is the point of staying mum when the correct thing to do is to warn investors against buying Rim which is going bankrupt in a couple more years? There are people who wish to see investors lose money but I am not one of them. Nortel had already lost a lot of investors' money, I would not want to see same thing happen again with investors dumping money into a bankrupting Rim.

Oct 30 02:26 AM

[mollytjm:]

the added plus to Apple stock is that it has multiple streams of income, no debt and piles of $$$...but the cherry on the sunday is customer satisfaction. no matter who does the survey, Apple comes out on top...in computers, in mp3s, in iPhones, in app stores...in just about anything they do, they create quality products.

In a tight money economy, people do buy quality.
so maybe this good article was based on a survey base that was educated and had higher income. Those have traditionally been the people who've bought smartphones, starting with the Treo years ago. The market will trend to the general public and seems to be doing that pretty fast... and other companies might make it ok...but Apple is the surest of the tech stocks to be here in 10 years and I'm a buy and hold investor, so.....

Oct 30 11:17 AM