Smartphones set to jolt world mobile industry (Feature)

By Andrej Sokolow Feb 13, 2011, 18:15 GMT

Barcelona - A portentous number slipped past almost unnoticed last week when technology news concentrated on Nokia joining forces with Microsoft to develop platforms for mobile phones.

Sales of smartphones topped those of personal computers for the first time. According to research from the International Data Corporation, vendors delivered 101 million smartphones during the fourth quarter of 2010, well above the total of 93.5 million PCs - signalling an entry into a new age in computing.

At Mobile World Congress, an annual mobile phone expo running Monday to Thursday in Barcelona, Spain, there are likely to be some uncomfortable meetings between the losers and gainers.

Smartphones are in effect pocket-sized computers that just happen to also make phone calls. A world that carries its computers around in its pockets will come up with new varieties of advertising and money-making ideas.

About one in five mobile phones sold worldwide last year was a smartphone. Market analysts remain divided in their predictions about what will happen next, agreeing only that it depends on the price of tomorrow's smartphones.

Carolina Milanesi at Gartner, a leading analyst, suggests smartphones could claim 35 per cent of the market within two years.

'And that's a conservative estimate,' she said. If smartphones become cheaper, the share might range above 50 per cent. And if they become really affordable on all continents, maybe the share would be 70 to 80 per cent.

The sales figures in 'mature' markets such as Western Europe and North America, where already more than half the phones sold are smartphones, suggest the way ahead.

But invert the figures and one sees that worldwide, eight out of 10 mobile phones currently sold are not smartphones. The industry term for them is 'dumbphones,' made for phone calls only and economic to buy.

The prospects send a chill through Nokia of Finland, the company that makes hundreds of millions of 'dumbphones' per year and currently rules the roost. If the trend continues, Nokia could soon be a blast from the past, a maker of yesterday's technology.

That is why Nokia announced Friday it was ceasing further development of its Symbian operating system and would adopt Windows Phone from Microsoft for its high-end phones.

The gainers from the smartphone boom are Google and Apple. Web search giant Google leads an alliance pushing the Android operating system for phones, while Apple has given the world its iPhone, running Apple's proprietary operating system iOS.

With each iteration of their software, the two giants set the bar even higher for potential competitors. That was where Symbian lost out.

Their notable achievement has been to create 'platforms' that allow each user to turn a telephone into a 'smart' device by loading applications or apps to suit their needs. Selling apps has become a key revenue stream for big web companies.

Market analysts estimated last year that annual sales of apps brought in 5 billion dollars worldwide, and that the market could expand to more than 15 billion dollars in four years' time.

That is revenue that the wireless companies operating networks, the big kids on the block in the 'old system,' largely miss out on.

Wireless companies can still decide what operating systems and what phone models to sell in their shops, but the platform model cuts them out of the business selling the money-spinning apps.

Gartner's Milanesi said they have been degraded to service providers in the emerging system and forecasts they may not be able to escape from this niche. But Google and Apple are also well aware that a smartphone is nothing without a fast web connection.

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