The battle for the smart phone market is heating up this year because the smart phone market is the only game in town. Although smart phones account for just 1 in every 7 mobile devices sold, this segment has doubled its share of the global mobile phone business over the past three years. Revenues from smart phones are expected to double, to half the industry total, by 2014.
Recent figures from market research company Gartner confirm this trend. Gartner’s figures showed that shipments of phones that allow web surfing, email and other popular software applications rose 27 percent in the second quarter to 41 million units. This occurred even while overall handset sales remained on track for their first full-year decline ever. For the three months to June 20, overall mobile phone sales fell 6.1 percent to 286.1 million units. Even during the recession it seems consumers are abandoning ‘dumb’ phones when, for just a little bit more money, they can get a pocket-sized computer instead.
One thing is certain about the future of the smart phone market – competition will become even more intense. Other competitors are piling in. Motorola is preparing to launch smart phones based on Google’s Android operating system. Even Dell is working on a mobile device. Meanwhile, Apple continues to raise the technological bar.
Investors can draw two conclusions from this melee in the smart phone market. The first conclusion is that as the line between phones and computers continues to blur, the key point of differentiation for handset makers may very well be the software that is inside the phones. The second conclusion is that intensifying competition means that the days of fat margins, such as Apple’s iPhone gross margin of over 50 percent, are numbered.
Investors can participate in the growth of the smart phone market by owning companies that are the leading players in the marketplace. These would include the following five companies:
Microsoft (NASDAQ: MSFT) – the software giant was caught off guard by the entire mobile market, but they seem to have awakened.
Google (NASDAQ: GOOG) – the search giant’s Android operating system is winning more and more converts and is definitely a major player in the mobile phone marketplace.
Apple (NASDAQ: AAPL) – a true technological leader in many areas and their iPhone is one of the major combatants in the smart phone market.
Research in Motion (NASDAQ: RIMM) – this company’s Blackberry product has many “addicts” including President Obama. The leader in smart phones for the corporate market.
Nokia (NYSE: NOK) – the global leader in mobile phone sales. Nokia is the leading company in mid-level priced smart phones and far away is the leader in mobile phone sales in the fastest growing markets – the emerging markets.
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