RIM Puts Apple in It's Place—Third
News Analysis. OMG, I was wrong—and that's unusual—about Apple beating Research in Motion for third-quarter smartphone shipments. But there is a reason. |
According to Gartner, Apple didn't sell as many iPhones in third calendar quarter as the company claimed. It's one of those semantics things. If you carefully listen to Apple's earnings call, the company claims 6.9 million iPhones shipped and about 2 million in inventory. Like many other people tracking the company, I assumed that the number in inventory meant in addition to the 6.9 million shipped. Not so.
By Gartner's math, then, Apple sold 4.72 million iPhones worldwide in third quarter. From a revenue perspective, Apple can claim 6.9 million units, since it shipped units to carriers that paid for them. But by marketshare the number is less, putting Apple behind RIM for third-quarter smartphone shipments.
I e-mailed Roberta Cozza, Gartner's principal analyst for mobile devices, to confirm the accounting. "Yes, we track sell out, and not sell in," Roberta responded.
Overstated: Apple's iPhone Sales Numbers
Sales-in versus sales-out of the channel is one of those sticky topics. For years, I've watched companies grapple with this counting problem. Apple can justify the 6.9 million figure because many other companies count sales into the channel. Microsoft has repeatedly done this with Windows Vista, claiming hundreds of millions copies sold that were really shipped into the channel and possibly never deployed.
Gartner's counting makes a huge difference in real iPhone sales and should be a lesson to everybody observing Apple. How much of those big Mac sales claims are real versus inventory waiting to be sold? Where else is Apple counting shipments into the channel? I strongly encourage Wall Street analysts making haughty claims about future iPhone sales to review their projections. Apple's mobile had a great boost from iPhone 3G's July 11 launch, but real sales were about one-third less than what many Apple observers assumed.
The 4.72 million versus 6.9 million units is the difference between second and third place in worldwide smartphone share. RIM hasn't given up the second spot yet to Apple, either in the United States or worldwide. RIM is No. 1 in smartphones here, followed by Apple, according to Gartner.
Despite all the iPhone hoopla, BlackBerry shipments remain quite strong, with 81.7 percent year-over-year growth in third quarter. True, iPhone shipments jumped 327.5 percent, but that was off a favorable year-ago comparison. Apple's iPhone had limited distribution in third quarter 2007 and even more limited compared to BlackBerry.
But Apple and RIM compete in a category feeling the global economic pinch. While year-over-year smartphone sales increased 11.5 percent, to 36.5 million units, growth was weakest compared to every other quarter Gartner tracked the category. Unlike Nokia, which shipped about one-third of all phones in the quarter (about 118 million units), Apple and RIM only sell smartphones.
"The current economic climate is negatively impacting sales of higher-end devices," Roberta warned in a statement accompanying the findings. "Going forward, we should expect the smartphone device market to continue to grow but at a slower pace"—that despite increasing carrier subsdies. "To reach lower prices [carriers] tie the device to two-year contracts with monthly data plan rates which remain too expensive for the mainstream user."
Nokia Feels the Competition
Nokia had a rough quarter, recording its first ever retraction in the smartphone market. That's somewhat surprising since new E61 and E71 smartphones are compelling, particularly for business users. But Apple and RIM smartphones are available subsidized from many carriers. Nokia's flagship smartphones are generally sold unlocked without subsidy in the United States, the fastest growing market for the device category (68 percent in third quarter).
"Nokia is feeling the pressure from increased competition in the consumer smartphone market," Roberta said in the statement. Nokia's major failing was "its lack of a commercial touchscreen device in its smartphone portfolio," which "prevented Nokia from capitalizing from consumer demand for this feature."
On Monday, Nokia announced the N97, a touchscreen smartphone with QWERTY keyboard and compelling digital media features, such as 5MP camera and DVD-quality video recording capabilities. "It is unfortunate that the device will not be available before the first half of 2009 as this is a competitive product in today's market," Roberta said.
Nokia's Symbian OS was the big loser for mobile operating systems, with market share plunging from 63.1 percent to 49.8 percent, or a decline of 12 percent. During the quarter, 18.179 million units of Symbian OS were shipped compared to 4.72 million units of iPhone OS. Symbian declines partly can be attributed to broader sales problems in the Japanese market, which Nokia pulled out of in mid-November. Smartphone sales plunged 23 percent in Japan during third quarter.
Apple's real OS numbers are much greater from a platform expansion perspective because of iPod Touch. These uncounted units benefit Apple's push to establish a mobile platform replacing the PC as a dominant computing platform. It's there that Google has yet to flex its marketing muscle with the Android mobile operating system. Apple and Google offer mobile application stores and have compelling stories—granted, different—to sell developers. RIM shouldn't be discounted, either. Windows Mobile is an also-ran.
Roberta observed the importance of applications. "In 2009, application portfolios will become one of the key strategic considerations for smartphone market players and, if successful, they deliver an alternative revenue stream and will improve consumer stickiness," she said.
Stickiness is important for establishing successful platforms. Vendors look for that killer app that will woo customers, who, once there, don't go away. App Store gives Apple a huge early advantage over smartphone rivals.
[Please send your tips or rumors to watchtips at gmail.com].
Comments (7)
This is embarrassing- any second grader knows that "its" is possessive not requiring an apostrophe.
"It's place" reads "it is place."
Makes a lot of sense, huh? Of course, we see a lot of this nowadays- "it's place," "your not spelling it correctly..."
How did these people pass English? Do they ever read? Wait- how do writers screw this up?
Posted by auramac | December 5, 2008 11:08 AM
Interesting figures indeed, especially with all the recent hoopla that the iPhone is “ready for the enterprise.” It might be ready but will it be adopted for enterprise-wide usage and are there companies in the market developing mobile apps for the iPhone that companies can use for their mobile workforce?
Sure, the games on the iPhone are fun, and it’s great having weather reports for all the traveling I do, but what companies really need to offer their mobile workers are ways to securely access data, documents and programs from anywhere. These workers need means to access customer data, inventory and other important back-office data.
Apple has certainly proven that mobile applications are popular with consumers – what Dexterra is working toward is making applications useful for the mobile worker, whatever mobile phone they use – and that includes the iPhone.
Posted by Benjamin Wesson | December 5, 2008 1:13 PM
Besides counting iPhone shipments, not sales...
I believe the report also only counted HTC sales as ones with the HTC label. If you also counted the phones HTC makes under other labels, the number would be much, much larger.
Seems like a lot of reports juggle the figures in order to get the iPhone in the headlines. Sells more reports that way.
Posted by Kevin | December 8, 2008 12:39 PM
auramac,
Usually it annoys the hell out of most everyone when people complain about such trivial stuff. See, people are typing pretty fast and I don't think most care to go back and edit their posts because *it just ain't worth it*. Shoot, I can even live with people using all upper case.
That said, such an error in the title is a little off the mark.
Posted by tudza | December 8, 2008 7:10 PM
You can bet that neither Nokia or RIM dismiss that 327.5% as easily as the author of this article does. Regardless of how "favorable" the comparison is to last year, the "hoopla" around the iphone is clearly more than just that...so much so that it has caused a "Storm" at RIM as they try their best to fight against the "hoopla" with such innovations as a click when you type. Yep, the future looks bright over at RIM.
Posted by Jim | December 8, 2008 7:24 PM
auramac,
Read a dictionary before you post your IQ! They usually have a section on Punctuation.
Basic research has been clinically proven to reduce embarrassing posts!
BTW, second graders aren't taught these subtlties!
As for the article, great info. The news media has otherwise lost the passion to "enforce-by-exposure" the fleeting thought of "truth in advertising". Unfortunately, the definition of "truth" itself is now subject to interpretation.
Posted by Ralphy | December 12, 2008 1:17 PM
Joe, you need to listen to the conference call more closely. I know it was clearly stated that 2M was in channel inventory, and I find it hard to believe any analyst would not know that channel inventory to 3rd parties counts as sold.
Also, Apple already notes inventory levels, as a matter of routine so that analysts can compare channel inventory from one quarter to another, to check for channel stuffing, something that Microsoft is famous for. If you have followed Apple for many years, you'd know that they've never stuffed the channel, since Steve's return. There's never more than 6 weeks of inventory in the channel. That's Ron Cook's doing. So, no need to warn analysts. They get the inventory level every quarter, no need to ask.
Posted by KenC | December 16, 2008 3:21 AM