There is much fretting among technology investors and users about Research in Motion facing an increasing number of competitors. Misses on sales or earnings projections (as occurred in the fourth quarter) lead to discussions whether the latest sneeze marks the onset of a seasonal cold or a terminal case of pneumonia. And the stockrides every twist and turn in the news flow, giving it the volatility of a roller coaster.
But the smartphone market is going to be big and its still in the early stages of lifting off. At this stage, it seems premature to worry about the growth rate of companies like RIM and Apple. There is still a lot of room for the leaders to expand in leaps and bounds without anyone raining on someone elses parade. As IDC Canada wireless analyst Kevin Restivo says, there is plenty of room for multiple players in the market a rising tide lifts all ships.
Last year, RBC Capital analyst Mike Abramsky described the smartphone market as huge, nascent and under-penetrated. It represents the next wave of computing, as profound as the historic technology shift from mainframes to PCs.
Forecasts of the size of the market show huge numbers: writing in the investment advisory Personal Finance, Elliott Gue and Roger Conrad foresee U.S. wireless firms revenues shooting up from $10 billion (U.S.) to $100 billion (U.S.) over the next eight years. Growth rates in the emerging countries are expected to be even more dramatic.
Restivo believes every cellphone is going to be a smartphone. With smartphones claiming little more than 15 per cent of the mobile handset market right now, there would appear to be a great deal of growth potential. Abramsky estimates that global smartphone penetration will rise over the next three years to about a third of the handset market. And by 2011, smartphone sales will surpass shipments of personal-computers (400 million a year).
Sure, RIM has some challenges to make its product offering as alluring as the iPhonein the consumer segment. There is a good analysis of these company-specific variables in an article by Joe Castaldo. Lets look at some of the more important ones.
One of the knocks is that RIMs browser is not as good. True, but RIM is working on an upgrade and it should be a vast improvement over the 1990s-style clunker in the BlackBerry. Will it be as good as the iPhones? Hard to tell — but it should be good enough, along with RIMs strengths in areas such as secure and efficient transmission of email messages, to keep the buying frenzy going.
Another knock is that the BlackBerry doesnt have as many third-party applications and as we know from the battle of the PC operating systems, Microsoft won in large part by having so many third-party applications attached to it.
Restivo, however, doesnt see the smartphone market unfolding the same way as the PC market did. Third-party apps wont play such a central role in giving one wireless company a monopolistic advantage. In the wireless context, the apps are not tied as exclusively to one platform as they were in the PC context…. Its not a zero-sum game like it was before. Wireless players have learned the lessons from the PC market.
Restivo sees the wireless market ending up not dominated by one company but with 4 to 5 global providers co-existing, each with their own areas of strength. In the meantime, there is plenty of growth to go around for everybody.