Apple Gaining Ground in Smartphone Race

Includes: AAPL, BB, PALM
by: ChangeWave Research

By Paul Carton

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 (OTC: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.