DvDand Solutions, LLC

That’s right browser wars are coming. Only this time, they are coming to a mobile phone near you. So far we have Microsoft Mobile IE,  Apple’s Safari, Opera, Google’s Chrome and the Blackberry’s proprietary browser. Add to that mix the recently announced and currently undergoing alpha testing, Fennec, the mobile browser from Mozilla, the maker of Firefox open source browser.

Given all these browsers, there is bound to be a shakeup. However, on the flip side of it is the fact that there are so many mobile platforms, Windows Mobile, Apple iPhone OS, Google’s Android, Symbian and Blackberry OS. So, one could argue that each of these are walled gardens and therefore the browsers work in these walled gardens. However, two of the above-named browsers, Opera and Fennec are not tied to any specific platform, though they may not work on all platforms yet. Not to mention, all the big players, except maybe RIM, have the resources to quickly make their browsers platform independent. So, while I don’t expect the browser wars to start right away, I fully expect them in maybe late 2009, early 2010.

Yesterday, AT&T announced some stellar performance numbers for the 3rd quarter 2008 led by growth in Apple’s iPhone 3G products. AT&T activiated 2.4 million iPhones during the quarter and their wireless data revenue grew to $2.7 billion. More recently, Apple also announced a great quarter with record sales of 6.9 million iPhones during the quarter. However, the future is very uncertain.

The end of last quarter saw the beginning of the economic downturn. We have already seen the effects of the downturn on Nokia which said its Q3 revenue fell by 7% from previous quarter. Sony Ericsson has also been affected by the downturn with their sales down 10% over previous quarter and profits down 1% over last quarter. No one knows how long it is going to last. As such all three companies mentioned above have lowered their forecast for the next quarter and the new year. That was expected, that is not the big story.  

The bigger story is the profit squeeze that the Mobile sector is facing. Take for example AT&T which is considered the bellweather for this sector. As I mentioned earlier, its revenue grew impressively. However, it had to subsidize the iPhones heavily, to the tune of $900 million in the quarter which amounts to a 10¢ reduction in its earnings per share. Clearly, AT&T has to subsidize the iPhones to stay competitive with RIM Blackberry, T-Mobile’s G1 and Microsoft Windows Mobile based phones with various carriers including AT&T. However, it is going to get worse going forward as consumers reduce their spending and shun expensive plans. There is a danger that consumers might shun smartphones all together. As Sanford C. Bernstein analyst Craig Moffett said to BusinessWeek:

you wonder whether the iPhone runs any risk of tilting from being the next cool gadget to suddenly being a symbol of excess.

I have a feeling that not just iPhones, but other smartphones will end up looking like “symbol of excess”. If that happens, RIM will probably be affected the most. Unfortunately for RIM, its Blackberry Storm and Blackberry Bold launches are coming in the first quarter after the major financial crisis and as US heads into a recession. Whether RIM will see the same bounce in sales as Apple did, remains to be seen.

All carriers will see further worsening of their ARPU during Q4 2008, according to the IE Market Research Corp.’s 4Q 2008 United States Mobile Operator Forecast, 2008 – 2010 report. In Q208, the ARPU declined by 1.7% across all carriers. However, Sprint and T-Mobile will be more adversely affected as it takes them longer to get a return on their their investments in WiMax and 3G respectively.

Gartner, today followed up with a press release reporting that the smartphones sales grew 15.7% in Q2 2008 over Q2, 2007. This amounts to 32.2m units sold in Q2. This is pretty much in line with what other research companies have recently reported and also what Nokia said in its forecast for Q3. Here is the breakup of sales according to Gartner:

What is interesting is that Samsung and LG do not make it on this list considering that they are 2nd and 3rd mobile phone makers worldwide.

NPD Group, a market research company specializing in wireless industry, announced that US consumer mobile phone market declined by 13% year over year in Q2 2008. The mobile phone industry shipped 28 million phones to US consumers during that period. However, on the bright side, the average selling price (ASPs) increased by 14% to $84 during the quarter. Also, digging into the numbers further, the sales of feature-rich phones accounted for bulk of the sales, with keyboard equipped phones sales doubling over same quarter last year.

As far as the manufacturers go, Motorola maintained a small edge over Samsung and LG, accounting for 21% of the market while Samsung and LG were tied at 20%. These three were followed by Nokia at 9% and RIM at 7%.

The carriers share of the market breaks down as follows:

AT&T – 29%
Verizon Wireless – 26%
Sprint – 11%
T-Mobile – 11%