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ECommerceTimes.com

Smartphone Sales Surge as Dumbphone Demand Dips

By Richard Adhikari
Feb 23, 2010 11:37 AM PT

Global iPhone sales grew in 2009 at the expense of Windows Mobile devices, according to Gartner's worldwide mobile sales report, released Tuesday.

Smartphone Sales Surge as Dumbphone Demand Dips

The report also showed sales of Android and Research In Motion's Blackberry devices going up year over year.

Overall, worldwide mobile phone sales fell 0.9 percent in 2009 from the previous year's levels.

However, they grew 8.3 percent year over year in the fourth quarter of 2009, possibly signaling more growth this year.

Sales Stats

In 2009, worldwide mobile phone sales to end users totaled just over 1.2 billion units. The fourth quarter of the year saw more than 340 million units sold to end users.

The upward trend is likely to continue. "We expect growth in 2010 to be between 11 and 13 percent," Carolina Milanesi, a research director at Gartner, told the E-Commerce Times. "That's being driven by higher consumer confidence, lower average selling prices on smartphones, and rich product offerings."

Gartner expects average selling prices to stabilize as the recession eases. It thinks the smartphones sector has good opportunity for growth because these devices are positioned as an alternative to computers.

Smartphones took some market share from lower-end mobile phones. At 172.4 million units sold in 2009, smartphone sales were almost 24 percent higher than in 2008. The results were even more spectacular in the fourth quarter of 2009, when smartphone sales totaled 53.8 million units -- just over 41 percent higher than the figures for Q4 of 2008.

Apple's iPhone took 14.4 percent of the worldwide smartphone market in 2009, and Blackberry had 19.9 percent. Those figures were up from 8.2 percent and 16.6 percent, respectively, in 2008.

"RIM and Apple will continue to grow, but at a slightly lower pace than in 2009, while Android growth will accelerate," Milanesi predicted.

Android's growth has been spectacular, although it could be argued that since it took off from a very small base, any growth at all would look impressive. Android smartphones had 0.5 percent of the smartphone market in 2008, but in 2009, they took 3.9 percent. That's almost an 800 percent increase.

Meanwhile, Windows Mobile lost just over three percent of its market share, going from 11.8 percent of the market in 2008 to 8.7 percent in 2009. It's not clear yet whether Microsoft can restore its fortunes with its spanking new, fully redesigned Windows Phone 7 Series, as the latest iteration of its Windows OS for smartphones is called.

The Big Boys Fall

Nokia's market share fell 2.2 percent year over year, from 38.6 percent to 36.4 percent, although it remained in first place. The company had a strong fourth quarter, outperforming industry expectations for sales and revenue, but the average selling price of its smartphones is falling because of competition.

The first half of 2010 will be tough for Nokia, according to Gartner. The cellphone maker recently opened up its Symbian operating system and, together with Intel, launched the open-source Meego platform. New products based on Meego won't be launched unitl around the second half of the year.

"We will probably not see Meego devices before the end of the year," Milanesi said. "Smartphones, netbooks and tablets are good candidates for this platform."

That late launch date could spell trouble as a host of contenders will hit retail shelves around then. They include the Apple iPad and Google's netbooks.

Nokia's Symbian operating system has been losing market share. Although it is still the market leader, it had 46.9 percent of the worldwide smartphone operating systems market in 2009 as opposed to 52.4 percent in 2008. Still, Nokia's not giving up on the OS; at the Mobile World Congress, held earlier this month, Nokia announced that it will roll out Symbian 3 by the end of the first quarter and Symbian 4 by the end of the year.

Samsung, which took second spot for worldwide mobile phone sales, had 16.9 percent of the worldwide mobile phone market in 2009, up from 16.3 percent in 2008. Gartner attributed this to improved channel relationships with distributors and a rich mid-tier portfolio. For 2010, Samsung is betting on Bada, its new operating system.

The Future of the Market

Gartner expects worldwide smartphone sales to return to low double-digit growth, but it predicts that vendors' profit margins will be slim because of competition, despite the stabilization of average selling prices.

Smartphone vendors will focus on operating systems, services and applications rather than hardware, Gartner predicts.

"The focus in smartphones in 2010 will be on the overall user experience," Alex Spektor, an analyst at Strategy Analytics, told the E-Commerce Times. "The user interface, application availability and quality, and the hardware design will all play an important role in determining the winners and losers in the smartphone space."

That should give Apple a boost as its iTunes App Store, with close to 140,000 apps, is the clear market leader in the mobile app space. Whether or not this position will be challenged by Android, the new BlackBerry OS and Microsoft's Windows Phone 7 Series remains to be seen.


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