Smartphones in Q4 2011

The news for some smartphone platforms and handset makers was good for 2011. For other key players, it was bad. Basically, Android and iOS were both up. Android apparently dropped a little relative to Q3 2011, but year-over-year they have improved their position. Apple is up both year-over-year and relative to Q3 on strong sales of the iPhone 4S. The 4th quarter is a period where unit sales should be higher for everyone. For 2 key players, even the holiday shopping surge that most companies see didn’t happen. Guess who? Microsoft and RIM. Both saw decreased unit sales, not just marketshare, for the 4th quarter. Again, this happened during a key time in retail sales.

The 4th quarter is typically bigger, saleswise, than any other quarter. That quarter encompasses the holiday shopping season, which is composed of the US post-Thanksgiving shopping surge (Black Friday, Cyber Monday) as well as Christmas. It is in this period that retailers expect some of their largest sales volume (the name Black Friday supposedly originates from the idea that retailers are in a loss position when it comes to revenue, and that the increased sales “put them in black”, in terms of making a profit. This story may be apocryphal). With that surge in retail sales comes an increase in unit sales for product manufacturers, including electronics manufacturers. This year, records were apparently set for things like single-day iPhone activations, mobile app purchases and other smartphone and tablet related activities.

It appears, though, that neither Microsoft nor RIM were beneficiaries of that. I don’t believe that the RIM numbers should be a surprise. They have been engaged in a form of controlled flight into terrain for the past couple of years now. RIM really didn’t do anything meaningful in the last quarter of 2011 (or even for much of 2011, sure “Blackberry 7, blah blah bah”. More of the same, for all practical purposes). It is Microsoft that should probably be disappointed and a bit surprised.

The new Nokia Lumia devices running Windows Phone came out in the second half of 2011. There has been a great of deal of excitement, and some outsized expectations, on these new devices. They have been getting generally positive reviews, they have attractive industrial design, and Nokia clearly put some effort into these things. But once again, consumers and businesses ignored them. Yes, they sold reasonably well. The early numbers place their sales at north of 1 million devices up until the end of 2011. That means they could represent somewhere around half of all Windows Phone devices for Q4. That sounds impressive, when viewed in that context.

But when you step back and look a the big picture, Nokia’s sales didn’t help the overall numbers. Year-over-year, Windows Phone sales dropped from about 3.4 million units down to 2.8 million units. That’s a drop of about 600,000 units, or nearly 1/6th of the 2010 numbers. The iOS numbers are more than 10-times what Windows Phone sold. Android outsold Windows Phone by more than 20:1. Windows Phone was barely relevant at 5% marketshare, became maybe-still-relevant-because-its-Microsoft at 3.5%. Now, they are only about double the “other” category. If it wasn’t Microsoft, I suspect Gartner wouldn’t have even bothered breaking them out in detail. ¬†Even Symbian, an effectively dead mobile OS, and Bada, Samsung’s homebuilt oddball, outsold Windows Phone.

There is a key component in part of what I just wrote: Windows Phone sales dropped. As did RIM’s. This is during a time where there are a few things at play. First, both are actively trying to gain marketshare. This isn’t like Symbian, which we expect to drop simply because Nokia is placing its bet with Windows Phone. But Microsoft and RIM are trying to actually sell more units. They have commercials, print ads, on-line ads and other visible activities trying to build and grow their brands. And it isn’t making a difference.

Second, the holiday shopping season should see sales at least holding steady, and maybe even show a slight increase, not just year-over-year but compared to the previous quarter. What is truly sad (or disappointing?) is that this is the second year in a row that both Microsoft and RIM saw sales decreases in what should be one of the better quarters for electronics sales.

Last, they are smartphones, and the market is going through a shift from feature phones to smartphones. For the first time, smartphone sales were higher than feature phone sales in the US. The expectation is that smartphones will be majority of sales globally in 2012, and the majority of phones in people pockets in the next 24 months. It’s a rising tide. It should be lifting all boats (at least, those boats that want to stay afloat). Apparently, though, neither Microsoft nor RIM are participating in the benefits of this rising tide.

In the end, this is just more fodder from blogs like this, and more evidence of who the next leaders will be in mobile computing technology. It isn’t going to be Microsoft or RIM. As computing shifts more and more to mobile platforms, and away from traditional desktop/laptop PC’s, Apple and Google are going to lead the way.

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