Telecom & Wireless

Are Smartphone Sales Cooling Off? (AAPL, SSNLF, MMI, GOOG, HTCKF, NOK, MSFT, RIMM)

When Apple Inc. (NASDAQ: AAPL) reported that it sold 17 million iPhones in the third quarter of this year, that meant that the company’s smartphone market share fell from about 17.4% to about 14.6%. Samsung Electronics (OTC: SSNLF) did not say exactly how many smartphones it sold, but the best estimate is about 28 million.
 
Motorola Mobility Holdings Inc. (NYSE: MMI) reported sales of 4.8 million smartphones, as the company prepares for its acquisition by Google Inc. (NASDAQ: GOOG). Then this morning, Taiwain’s HTC Corp. (OTC: HTCKF) reported that it sold 13.2 million smartphones in the third quarter.The numbers tote up to a net increase of about 14% in unit shipments from all smartphone makers for the quarter, but HTC noted that it now expects to sell 12-13 million units in the fourth quarter, less than it sold in the third quarter and considerably less than the 15 million units that analysts had previously expected.
 
Apple, which does not forecast unit sales, said only that it expects to ship a record number of iPhones in the current quarter. But are smartphone sales growing or not?Apple’s quarterly sales were most likely less than expected due to the cacophony of speculation about surrounding its latest iPhone announcement. New product introductions often cause consumers to see what’s coming before they decide to make a purchase. No one wants to buy yesterday’s technology at tomorrow’s price.

In the market for Android-based phones, the situation is a little fuzzier. There are so many competing manufacturers that it is nearly impossible for consumers to keep track of which is the latest and greatest Android phone. Samsung’s Galaxy II S was highly anticipated in the US, but the phone did not arrive until late in the quarter. Since its introduction, HTC and Motorola have both announced new products with specs that beat the Samsung phone. As with the iPhone, consumers wait to for the latest product.

The market for smartphones remains enormous. In the US, of the roughly 230 million mobile phones in use, only about a third are smartphones. Globally, the percentage is probably even smaller. But high prices for smartphones are keeping buyers away.

HTC, in its earnings announcement, stated that it has no plans to introduce a cheap — sub-$100 retail smartphone. The company plans to roll out its first 4G LTE phone in the first quarter of 2012. Samsung, Nokia Corp. (NYSE: NOK) and Microsoft Corp. (NASDAQ: MSFT), and Research in Motion Ltd. (NASDAQ: RIMM) all continue to compete at the high-end of the market, where Apple reaps the majority of the profit and the other companies compete for volume in order to make a profit. That competition takes the form of “specsmanship”, which, while not truly a commodity marketplace, certainly resembles one.

The slower projected sales that HTC is predicting probably does not mean that smartphone sales have hit their peak. But cash-strapped customers are not going to be willing to plunk down $300 or more for a phone that could be yesterday’s news before they even get it out of the box. In this weak economy, getting good value is more important to more people than getting the latest technology.

Only Apple may be immune from that, both because of its loyal customers and its image as the industry leader. The Android-based smartphone makers are playing a game of technology leapfrog at a time when wary consumers want to know that they’re getting their money’s worth.

Paul Ausick

Want to Retire Early? Start Here (Sponsor)

Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?

Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.

Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.