Research in Motion Still Leading the Smartphone Pack

By Bob Blandeburgo
Associate Editor
Money Morning

There's a lot of figures in the news being tossed around about the smartphone market, and while it may be difficult to make sense of it all, one thing is clear: The market is growing at a rapid pace, and will soon take over conventional mobile phones as the device of choice among consumers and corporate users alike.

In spite of tough economic times, smartphone sales represented 23% of all mobile phone sales in the fourth quarter of 2008, up from just 12% a year earlier, according to market research firm The NPD Group Inc. Another firm, Gartner Inc. (NYSE: IT), says smartphone sales will increase 25% even as the overall mobile phone sector contracts.

Some of the millions of jobless Americans are turning to smartphones as a tool in their job searches, as a means to enhance communication with potential employers.

"I don't know if it's really an expectation, but if another job candidate returns an e-mail message eight hours later, and you get back immediately with a message that says 'Sent from my iPhone,' I think it has to be a check box in your favor," jobseeker Helene Rude told The New York Times.

While Apple Inc.'s (Nasdaq: AAPL) iPhone typically gets all the headlines, it is Research in Motion Ltd.'s (Nasdaq: RIMM) line of BlackBerry phones that commands 55% of the market share versus Apple's 20%, according to market research firm International Data Corp.

The key factors in RIM's success are market penetration, choice of models, price and, most recently, enticing promotions such as buy one, get one free. BlackBerry phones are on all U.S. carriers, and range in price from $30 to $250. Apple's two iPhone models, the 3G and 3G S, will cost any user who signs a new contract $99 and $199, respectively.

Smartphones are proving to be profitable, as well. Canada-based RIM last week announced a net income of $643 million, or $1.12 per share diluted on revenues of $3.4 billion. That compares to a net income of $482.5 million, or 84 cents per share diluted on revenue of $2.2 billion in the same period a year ago. Approximately 81% of RIM's revenue came from sales of BlackBerry devices.

Few smartphones are limited to one carrier. Among them are the iPhone, which can be used only on AT&T Mobility LLC's network, and Palm Inc.'s (Nasdaq: PALM) newly launched Pre, available only through Sprint Nextel Corp. (NYSE: S).

Apple's recent price drop on its 8 gigabyte iPhone 3G model to $99 will be interesting to watch, as it will put the company's wildly popular App Store in the hands of more consumers, who are being bombarded by a series of "there's an app for that" TV commercials.

Other smartphone makers are playing catch-up in the app department, which will not only be an important factor in consumers' purchase decisions, but another revenue stream for smartphone makers and their wireless carrier partners.

Apple Chief Executive Officer Steve Jobs told The Wall Street Journal that his company's App Store generated $1 million a day in its first month.

Apple's App Store launched in July last year, followed by Google Inc.'s (Nasdaq: GOOG) Android Market (for HTC Corp.'s G1 phone) in October, BlackBerry App World in April and finally, Palm App Catalog, still in its infancy after its debut with the June 6 launch of the Pre.

News and Related Story Links:

• The NPD Group:
  Despite Recession, U.S. Smartphone Market is Growing
• The New York Times:
  Smartphone Rises Fast From Gadget to Necessity
• CNN:
  New iPhone 3G S Heats Up Smartphone Wars
• The Wall Street Journal:
  iPhone Software Sales Take Off: Apple's Jobs
• Apple:
  iPhone Commercials