It's a Smartphone World
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
You would have to live under a rock to ignore the rise of smartphones, the new generation of mobile phones that essentially serve as small handheld computers. They're one of the fastest-growing segments of the mobile industry; in fact, smartphones are expected to account for half of all mobile phones in 2013.
The tech press is flooded with retrospectives on Steve Jobs, the Apple (NASDAQ: AAPL) CEO who passed away a year ago. His company transformed the industry with the iPhone. Before the iPhone, the smartphone was a curiosity, beloved by geeks and businesspeople who primarily relied on Research in Motion's (NASDAQ: BBRY) BlackBerry line.
Recently, Apple posted a profit of $25.9 billion, with sales of $108.24 billion. Research In Motion, on the other hand, only had a profit of $1.16 billion, despite sales of $18.4 billion. The Blackberry-maker has become better known by the tech press for its constant managerial shake-ups and consistently missing the boat rather than its products, which still have a dedicated cult following (especially in the corporate world).
Although about half of the phone market will still be "feature phones," the term probably won't mean much when smartphones become more prevalent. “Feature phone" used to refer to phones that had, well, more features than the standard Nokias and Motorolas of the late '90s. By the mid-2000s, almost all the cell phones being sold were feature phones.
The lower-end phone manufacturers are moving up into the higher end market as well. America Movíl's (NYSE: AMX) entry-level prepaid phone brand Tracfone has an Internet-capable LG phone with a QWERTY keyboard available for $10. (I also happen to own that particular phone, in the interests of disclosure. Hey, just because I write about stocks doesn't mean I'm made of money!)
A lot of the growth will come from the prepaid market. Since these carriers don't have to check people's credit histories, they can be sold outside of traditional mobile phone stores, including in discount stores. It's not hard to understand why prepaid phones are already a staple of the electronics section of many discount stores, even if they are basic models.
It seems that smartphones are already starting to work their way into the prepaid market, though the handsets are more expensive than in conventional postpaid plans where the carrier subsidizes them. Leap Wireless's (NASDAQ: LEAP) Cricket brand has Apple's iPhone available, but you'll have to drop $600 on the phone and live in the San Diego area. Like a lot of telecom companies, however, it operates on a loss. Last year, it posted a loss of $314.63 million, though it had an EBIDTA of $547.22 million.
Sprint Nextel's (NYSE: S) Virgin Wireless has all of the hipness people have come to expect from the Virgin brands, as well as iPhones and Androids, but that unfortunately hasn't stopped its parent company from posting a loss of $2.89 billion last year.
The growth of this segment shows that we're clearly living in a smartphone world as the phones get better, faster, smaller and cheaper and ubiquitous.
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