“Why is everyone so interested in mobile? It's a new way of computing...”

“Why is everyone so interested in mobile? It's a new way of computing...” Eric Schmidt, CEO of Google

Within this decade, smartphones will account for most, if not all, of mobile phone sales.

The Gartner research firm predicts that in 2013 smartphone sales will account for 43% of worldwide mobile phone sales, a three-fold increase from 2009. Further, Gartner predicts that in the same time period, smartphone sales in Europe and North America will reach 70% of all mobile phone sales. Smartphone sales are about to reach a breakout phase. In the next three years, smartphones will become prevalent in most developed countries. As prices continue to come down with scale, it is only a matter of time before smartphones replace traditional mobile phones entirely. And since the standard cellular contract is 2 years, after which most people are given incentive to upgrade to a newer device and renew their contract. People will be replacing their mobile phones or smartphones roughly every two years. This considerably faster refresh rate will mean the dynamics of the mobile device market will change very rapidly.

Blackberry, Android, and Apple: Research in Motion was one of the original smartphone pioneers, launching their first smartphone device back in 2002. Much of BlackBerry’s success over the past decade is due to their incorporation of push email service. The combination of the push email service and a full keyboard helped to make the BlackBerry the corporate staple it is today. However, push email service is now standard on all major mobile operating systems. Further, more advanced mobile operating systems have emerged in recent years that are beginning to threaten Research in Motion’s dominance.

When current BlackBerry owners were polled about their next smartphone purchase, 40% of current BlackBerry owners said they would prefer an Apple iPhone as their next device. Further, 30% of BlackBerry owners said they would prefer an Android powered smartphone as their next device. The survey claims a margin of error of +/- 10%, but even those numbers should be alarming to Research in Motion. Unsurprisingly, 90% of current iPhone and Android device owners said they were planning to stick with their current platform. Much of Research in Motion’s future success will be pinned to the BlackBerry 6 mobile operating system. They will need to deliver some very compelling hardware alongside the new mobile operating system to sway current BlackBerry users from switching platforms.

In less than two years, Google’s Android mobile operating system has rocketed to become the only formidable competitor to Apple’s dominance in the market. Google has been developing the Android mobile operating system at a breakneck pace and waging a full-on advertising assault. It is abundantly clear that Google wants Android to be running on any mobile wireless device not manufactured by Apple. By this strategy, Google is positioning itself to become one of the largest players in the mobile operating system space.

Today, Apple is the second largest company in the United States. Only second to ExxonMobil. Much of Apple’s recent success has been fueled by its best-selling product ever, the iPhone. Released in 2007, the iPhone redefined the smartphone and left competitors scrambling to catch-up. In less than four years, the iPhone has turned into Apple’s largest revenue stream. According to Apple’s second quarter earnings release, the iPhone now accounts for over 35% of Apple’s total revenue. The iPhone is the most profitable device that Apple sells.

In the technology space, smartphones, tablets, and mobile computing have the most potential for growth. For someone with a long term perspective and steady nerves, the leading companies in this area could provide significant pay-offs.

Credit to Jason Smyth for his work in this area
www.smythfinancial.com

Disclosure: I hold positions in Apple, Research in Motion and Google