Apple's iPhone and RIM's BlackBerry smartphones may be tiny players in terms of market share but they command a giant slice of mobile profits. In 2008 the two accounted for just 3 percent of all global mobile phone sales but 35 percent of operating profits, according to Deutsche Bank analyst Brian Modoff. In 2009 he estimates that the two smartphone makers will take 5 percent of the market in unit terms but 58 percent of total operating profits.
Modoff is quoted in today's Wall Street Journal, which points out that while smartphones account for only about 13 percent of total mobile phone sales globally, the segment is growing - despite a decline in the whole mobile market. IDC estimates that Apple and RIM had about 32 percent of the smartphone market between them in the first quarter of 2009.
" Underlying the winners-take-all nature of the market are fat subsidies from phone carriers, particularly in the US, which lets manufacturers maintain hefty average selling prices even as consumers pay as little as $100 a smart phone - not much more than for many basic phones. The higher subsidies reflect the carriers' ability to charge higher monthly plan prices for phones that can easily surf the Web or handle email," writes the WSJ.
The iPhone, exclusive to AT&T in the US and whose users are the heaviest Web surfers, draws the biggest subsidy, at about $400 a phone, calculates Modoff. BlackBerries draw average subsidies of $200 from US operators. Basic mobile phones get barely $100.
Palm is trying to break into this lucrative market with its Pre touchscreen 3G smartphone, and both Dell and Acer have also stated their intent to join in.
Both tech companies are suffering from slumping laptop and desktop sales. IDC research shows that while netbooks are experiencing rapid growth this year, it is not sufficient to make up for declining PC sales.