Smart Phones for the Masses

[Brian.oco]

We've been talking about "upside" in the technology stock sector all week.

Hand held devices and memory cards were the sectors at the top of that list, and should stay that way.

Another side to the upside discussion is who, exactly, will be buying these products? After all, a lot of traffic in the handheld market is corporate driven. Companies are buying Blackberries and Treos for their busy staffers so they can keep in touch with the corporate mothership away from the office (which means you're never away from the office, but that's a story for another day).

What's missing from that equation? Maybe this fact will help answer that question. Of the 213 million cell phones operating in the U.S., only 4% of them are "smart phones", i.e. phones that send and receive email, access the web, and offer global positioning software, among other techno-treats. And, according to the technology consulting group M:Metric, the rate at which people have been buying smart phones is increasing rapidly. Today there are roughly nine million smart phone users in the U.S. That figure has almost tripled in the past two years.

Smart phone developers are beginning to ramp up efforts to accommodate their growing number of buyers - - and that spells opportunity in the stock market. To meet growing demand for smart phones, companies are taking on the Blackberries and i-Phones of the world with significantly less expensive smart phones for hundreds of dollars less than their pricey predecessors.

Take Palm's new $99.99 Centro, for example. Billed as the sleeker, hipper update to the business-centric Treo, the Centro is a good example of a "mass appeal" smart phone that provides all the data centric features of a business device with the price point and design of a consumer phone.

"What we've known as the smart phone market, is quickly becoming just the cell phone market," Iain Gillott, founder of iGillottResearch, tells CNet News this week. "These phones used to cost $500 and $600. Some still do, but we're seeing more and more of them come down in price and targeted for consumers."

It took some time to figure it out, but companies like Motorola, Samsung, and Palm have begun including some of the technology features that consumers want in smart phones, like motion video, downloadable music, and cameras. While those features have been highly popular on regular cell phones, few smart phone makers were adding them to their repertoire.

There's an old saying marketing that the American consumer always, always gets what he or she wants. That's what's happening now in the smart phone market. Technology-wise, Blackberry and, more recently, the iPhone have set the standard. Anyone who uses the iPhone's web browser, for example, are amazed at how easy it is -- much like surfing the web from a PowerMac G-5, but with a smaller screen.

But at $300 to $500, such phones are priced out of the budgets of many consumers. Hence the lower price units like the Centro. At $99.99, the phone, which will initially be sold exclusively through Sprint's network, opens the door to an audience that loves the technology of smart phones, but has been waiting for the price to come down.

As I said above, the American consumer always gets what he or she wants. And right now, the consumer wants cheaper smart phones and cheaper smart phones are on the way.

They'll be buying them in droves, I bet.

[jwenting]

maybe that's true in the US, but in Europe (and probably even more so in Asia) almost everyone walks around with a smartphone.
They've become status symbols, and from that are now becoming commoditised.
With prices for new model phones always having been in the €300-€500 region here that's hardly surprising.
When I bought an N70 last year, it cost me the same as did the 6110 I bought in 1999. Both phones were also supplied at a steep discount by the network operator, in exchange for buying a 2 year plan instead of a 1 year plan that would have come with a lower spec phone.

So the price of phones supplied with regular plans here hasn't changed much (though a lower priced segment has opened up, mainly to fuel the large numbers of prepaid phones being sold to schoolchildren).

Most people buying such phones don't necessarilly buy them to use all that functionality though. Almost everyone in the office (and I work in a hightech firm, supplying among other things a Blackberry application) uses much of that functionality.
The exception are those having Blackberries supplied by the company, which are used to track and respond to emergency messages sent by our monitoring systems when things go wrong with our platform.
But the web browsers, Java capabilities, music and video players, etc. are hardly used at all (to the chagrin of the telcos, who'd love it if those things were used, as such use would generate income for them). In fact the only times I see those things used are teenagers and students I see in trains and on trainstations, who probably don't have to pay their own bills (just as corporate users don't have to pay theirs).

Studies here have (unsurprising in the light of the above) shown that the slow adoption of mobile internet and related services has 2 main reasons:
1) the cost of using those services is too high and opaque (service providers and telcos deliberately make it hard to understand how much something is going to cost you, so most people aren't going to try for fear of getting skyhigh bills)
2) the devices are too small and cumbersome to use, especially the screens. Watching television on your mobile phone has been possible for some time now, but image quality is appalling on the small screens of your typical phone so people don't bother (especially with the cost which can run up to a Euro per minute).