Parks Associates Blog

Wednesday, December 03, 2008

Smartphone Market Competition Ratcheted Up

There were several news headlines regarding the mobile phone industry in the past couple of days. First, Nokia launched its N97 touch-screen smartphone yesterday and touted as the most revolutionary mobile internet device. Indeed, the specs are quite impressive: 5-megapixel camera, 32GB internal memory, tri-band HSDPA 3G, flash in the browser, and a 3.5-inch touch screen, etc. The price tag is eye-popping too—around $700. Separately, news from the U.K said that T-Mobile UK started to slash the price of the first Android phone G1. It is now not only free to customers who sign up for an 18-month contract with the carrier, but also costing less to a user on a monthly basis: the contract term is reduced from £40 to £30 per month. Consider the fact that G1 was only launched a month ago, the price cutting speed is unprecedented for a hotly pursued model. Then late yesterday afternoon, Research In Motion issued an earning warning for the 3rd quarter ending in November. The company will fall short on both subscriber numbers and the revenue goal, even its CEO described the new Blackberry Storm sales as “exceptional.”

All signs indicate that mobile handset makers have significantly boosted their efforts in the smartphone market. As a result, consumers will see not only more capable/enticing models out this year and the next, but also strong motivation from handset makers and carriers to push inventory through the channels. The hope is on the smartphone category to raise overall mobile handset sales volume, and all the sweeteners might come at the expense of margins from carriers and handset makers. RIM’s miss is a strong indication of the intensity of competition. Not that the Blackberry is no longer cool, but consumers today and in the future will have a lot more choices with an attractive service plan than in the past. This new reality clearly benefits consumers and will help shorten the replacement cycle for those who are in the mood for an upgrade.

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