Consumers Snap Up Smartphones Despite Downturn

Research shows consumers remain hungry for high-end devices, with the iPhone and BlackBerry still current favorites.
Posted October 4, 2008
By

Judy Mottl


Smartphones
While the national economic slump and the banking failure are hurting corporate tech spending, they aren't dampening consumers' willingness to lay out big bucks for high-end smartphones.

A new survey released yesterday by ChangeWave Research found that nearly 12 percent of the consumers it polled plan to buy a particular brand of smartphone within the next 90 days -- the highest level the analyst firm has reported in three years of research.

The report said that among those polled, 34 percent intended to buy an Apple iPhone, 30 percent craved a BlackBerry and just 3 percent were eyeing a Palm device. Another 3 percent said they are considering a Nokia (NYSE: NOK) phone, while and 1 percent plan to buy a Motorola handset.

The data continues the string of reports suggesting that the market for high-end mobile phones -- which typically offer Net access, music, video and application features -- continues growing despite the economic climate. IDC reported similar findings in April, while Gartner saw continued strength in the market last month.

It also may be one less worry off the minds of handset makers and wireless carriers, who are struggling to contend with ever-increasing, cutthroat market competition thanks to a rash of new models, services and players in the field. At the same time, both carriers and phone manufacturers are rushing to meet booming demand from users for snazzier and more advanced mobile applications.

According to ChangeWave, BlackBerry maker Research in Motion (NASDAQ: RIMM) remains in a comfortable lead in the overall smartphone market, though Apple's (NASDAQ: AAPL) iPhone has picked up enough momentum during the past month to knock Palm (NASDAQ: PALM) from second place.

RIM has been looking to expand its lead with a series of product launches expected to continue into fourth quarter, with the arrival of the newest BlackBerry, the Storm 9530. The device is viewed as the Canadian vendor's biggest attack yet on Apple's popular iPhone.

RIM will also push its BlackBerry Bold and its newly announced Pearl flip clamshell device, both announced in late summer, onto shelves within the next few weeks.

Apple, meanwhile, may face another challenge from the market's newest entrant. The recently unveiled T-Mobile G1 HTC handset, which has yet to ship and isn't noted in the ChangeWave study, is primarily viewed as an iPhone competitor, according to analysts.

Industry watchers have said the device, which features a touchscreen interface similar to the iPhone, could prove to be a game-changer due to its open source Android operating system and the brand strength of Android's chief backer, Google -- both of which may serve to woo developers to the platform.

T-Mobile Android G1
The T-Mobile G1
Source: T-Mobile
The G1's relatively low $179 price -- subsidized in part by T-Mobile, as is typical for U.S. carriers -- could further propel adoption, given that the iPhone still hovers in the $200 range with the signing of a contract with exclusive U.S. carrier AT&T.

Apple this week moved to shore up its developer support by dropping a widely criticized non-disclosure requirement -- an effort seen by some analysts as a reaction to the Android debut.

Increasingly, Nokia is seeking to contend with the iPhone and the G1 through an aggressive mobile entertainment strategy built on new, music-centric phones -- including its first touchscreen model, unveiled yesterday -- and a free, yearlong music subscription service that pundits see as a challenge to Apple's iTunes and similar services.

Nokia 5800 XpressMusic phone
The Nokia 5800 XpressMusic phone
Source: Nokia
This week saw Nokia fleshing out that plan with the debut of the touchscreen 5800 XpressMusic, which features an enhanced Symbian S60 platform that's designed to appeal to developers and carriers seeking high-end applications.

The S60 update also dovetails into Nokia's efforts to better compete for developer attention and to reshape the mobile OS landscape.

Earlier this year, Nokia announced it would buy Symbian and open source the platform, a move aimed to stave off competition from rival platforms like Android.

Such moves by Apple, Google and Nokia highlight that mobile devices' potential as software platforms is increasingly viewed as a key factor in vendors future market success, according to experts. For one thing, a robust platform is seen as the foundation for advanced, PC-like multimedia support and third-party application development -- both highly in demand by consumers.

Yet growing emphasis on the platform doesn't mean that customer service, hardware design and ease of use aren't playing into smartphone market success.

The ChangeWave report noted that Apple continues its lead as the top vendor in customer satisfaction, with 74 percent of iPhone users stating they are "very satisfied" with the device. That's a significant achievement at this juncture, given the software snags and network burps the new iPhone 3G has experienced since its arrival in early June. iPhone carrier AT&T has been under fire that network glitches aren't delivering reliable high-speed data services, and at least one lawsuit has been filed over what consumers claim have been false marketing promises.

Despite those issues, the ChangeWave report indicated little difference between the satisfaction of original iPhone users and new iPhone 3G users, with both groups reporting they were highly satisfied with their phones.

RIM ranked second in overall satisfaction, with 55 percent of its customers reporting being "very satisfied." Landing in third place is LG, with 44 percent of customers "very satisfied".

On the low end of customer service, Palm ranked worst with 22 percent of users noting "very satisfied." It trailed behind Samsung, with 28 percent, Motorola, with 32 percent and Nokia, which had 34 percent.

The market statistics don't bode well for Palm or Motorola. Palm is cited by ChangeWave as the vendor most likely to be hurt by RIM's upcoming products, with 30 percent of current Palm users indicating they will buy a BlackBerry in the future.

That statistic just adds more work to Palm CEO Ed Cooligan's "three P" to-do list, which focuses on people, products and platforms.

As the vendor's mixed earnings report illustrated in mid September Palm is clearly struggling to regain the market leading traction that its maturing Centro products once snagged.

Palm has stated its new operating system platform is on target to arrive by year's end with devices arriving in the first half of 2009. Analysts have said the time lag could sink Palm's chances for regaining market share.

This article was first published on InternetNews.com.






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