How Many Smartphones Can the Market Support?

Especially When Half the Cellphone-Owning Public Just Wants to Talk?

By Published on .

For weeks now, speculation has been brewing that Dell would enter the smartphone market and today a Wall Street Journal report cited sources comfirming it. This comes as Taiwan-based PC maker Acer is preparing to announce its smart phones at the Mobile World Congress next month.

Sure, smartphones are a bright spot in these dim economic times and it makes sense that as mobile handhelds are poised to become portable computing devices the PC vendors would want to get on board. But we can't help but be a little skeptical that the offerings aren't outgrowing market.

One question is whether in these recessionary times people ready to spring some $200 on a new smartphone, with a hefty data plan in tow. Recent data indicates that demand is slowing.

Consider that AT&T saw a sequential quarterly drop-off in iPhone activations last quarter, selling 1.9 million units versus 2.4 million in the third quarter and Verizon sold 1 million units of its flagship smartphone, the Blackberry Storm, since its November 22 launch. By one calculation, it took Apple less than 10 days to sell 1 million 3G iPhones. In contrast, it took Verizon more than 70 days to sell 1 million units of Storm, whose marketing blitz sucked up $100 million in what is the most expensive product launch in the carrier's history.

And the field is getting crowded. Earlier this month, Palm unwrapped its Pre smartphone and word has it that a slew of handset makers are coming out with Android-based phones later in the year. Meanwhile, rumors are flying about the new iPhone Apple may unveil this summer.

To top it all off, the full cellphone-using public may not be fully ready to embrace multimedia phones. An NPD study this month says about 45% all cellphone users prefer to only use the phone for making calls even though a majority of these phones have GPS and multimedia capabilities -- suggesting that carriers and handset makers need to throw some resources behind a pitch aimed at getting subscribers to use more than just voice.

The PC makers surely will face some obstacles, says Avi Greengart, an analyst at Current Analysis. A key differentiator today in the smartphone space is the software, a piece which includes not only the user interface but also the applications that enable users to personalize and customize their handsets. And in software, PC makers by definition do not excel.

"We're not in a hardware era ... software is not the core competence of Dell, Acer and HP," Mr. Greengart said.

In this article:
Most Popular