Zelos Group predicts Smartphone Takeover

(Press Release) Zelos Group predicts by 2008, sales of full-featured handsets, mobile phones that incorporate full-featured operating systems, will grow to about 290 million, or about 43 percent of global handset sales. Mainstream adoption of these devices will have a significant, disruptive impact on the entire mobile electronics sector––in markets for wireless, personal electronics and computing technologies.

“The mass adoption of full-featured handsets will be disruptive,” said Seamus McAteer, senior analyst and managing partner, Zelos Group, the report’s author. “Consumers will substitute use of PDAs, digital cameras, gaming consoles and music players. An early indication of this is Nokia becoming a leading distributor of digital cameras.”

The report, Defining the Market for Full-Feature Handsets, asserts that leaders in other portable device categories like Sony, Apple, Nintendo, Hewlett-Packard and Casio will respond to the competitive threat from handset OEMs. McAteer says these vendors will focus on improving the core functionality of special purpose devices, and by adding mobile WAN connectivity.

“As handsets with multiple gigabytes of storage are launched in the next two or three years, it is possible to envision, for example, Hewlett-Packard launching an iPod with integrated W-CDMA transceiver and dual-use headset and speaker,” observed McAteer.

Zelos Group expects that shipments of full-feature handsets will overtake shipments of personal computers in 2006. There is no economic reason to question why growth will not be explosive. Full-featured handsets will be available from manufacturers at price points as low as $157 in 2006 close to the market average selling price for a mobile phone of about $138 in that year. Mobile handsets are the largest single consumer electronics category driving research and development in electronics, power and display technologies, and the market has become a major battleground for computing operating systems.

“The market for full-feature handset platforms will continue to be highly competitive over the next five years,” commented McAteer. “In the medium term, the battle will be dominated by Symbian. But in the long term, the fight for supremacy is far from over.”

Based on Zelos Group’s analysis, the long-term prospects for Linux as the preferred operating system for connected devices are very strong. Zelos Group scored all mobile platforms across five criteria: business viability, completeness, cost, end user appeal and openness. Linux scored highest on the two criteria that matter most to OEMs and carriers: openness and low cost, whereas Microsoft scored lowest in these criteria.

Although Microsoft will be a powerful contender against Symbian in the next two years, it will not dominate the market in the long-term. Microsoft will seek a premium for the Windows brand and will seek to promote its own proprietary take on open standards.

“Symbian beats Microsoft due to the flexibility of its licensing terms,” commented McAteer. “Microsoft’s prospects will be stymied to an extent by its desire to strictly manage how its brand is used. Although we expect at least five million Windows mobile devices to ship in 2004, we find it doubtful that Microsoft will succeed in its stated goal of shipping over 100 million mobile devices running Windows in 2007.”

The full report is available directly from Zelos Group, for $1,995.


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