Ghai now estimates that Apple will sell 5.75 million iPads in the quarter that ends Sept. 25, up from an earlier estimate of 5 million, and 22 million in fiscal 2011, up from 19.5 million.
That's very close to my estimate of 21 million, though I might add that my estimate is unrevised since US supply met demand. There are still markets which don't have iPad distribution however, so we'll see if global demand can be met before year end.
By the way, the estimate of 5.75 million for this quarter is higher than all but three of 14 analysts estimates on iPad unit forecasts *for the first year*.
In first half of 2010, iPhone and iPod touch traffic increased from 33.9% to 41% in Finland. Apple's devices account for a very small percent of the total phones in use in Nokia's home country.[1] The analysis was performed by QAim on a sample of 64 million "mobile downloads".
The world’s largest mobile-phone maker’s bonds are trading as if Nokia’s rating has been cut, with spreads over government debt widening as the company strives to develop devices with the same mass appeal as the iPhone, Research In Motion Ltd.’s BlackBerry and devices based on Google Inc.’s Android software.
There’s a “significant amount of risk overall with Nokia’s business model,” said Scott Shiffman, who directs bond research at Chapdelaine Credit Partners in New York. “Credit spreads should move wider over time and ratings will continue to move lower. We think the ratings agencies will play catch-up to the business deterioration.”
I did not include all vendors for various good reasons. The first survey (market share) did include an "others" category that made the volume data complete, but in the financial data sets, I chose to include the top 7 vendors that make up 80% of device volumes.
One noteworthy vendor that was not included was HTC. HTC is an important vendor for several reasons:
it's a pioneer in smartphones having made the first Windows Mobile devices and the first Android devices
at one point it sold 80% of all Windows Mobile devices
even if it did not brand its devices, it was the name behind many re-branded or white-label operator branded phones
it has a brand of its own today and is expanding its reach
HTC has been around building devices since 2001 and so it would be a pity to exclude them from any analysis of the effect of iPhone on the market or any discussion on the effect of smartphone disruption on feature phones.
The challenge with HTC was that historically their branded devices and white label devices were not reported by the company separately. This matters because white label devices are valued differently. Typically these devices are not marketed by the original manufacturer so SG&A is not applied to their cost base. Operating margins, ASPs and hence profitability is not directly comparable with other OEMs.
But HTC has recently changed its reporting. Thanks to a reader I discovered that, since 2008, HTC has been listing its ASP and Operating Margin making direct comparisons possible. I still don't have all the data, but enough to add HTC to the analysis.
So, here are the 5 industry performance criteria, now with eight vendors listed.
Volumes
Note that HTC volumes start in 2008.
The volume of units HTC sold has been increasing at about the rate of market growth.
As a result, HTC's share has not increased as dramatically as those of the other smartphone entrants.
Sales
A similar story in the sales picture. Although a consistent performer, the growth has not matched that of RIM and Apple.
ASP
The pricing story is also a mixed one. Although HTC lies between RIM and Apple in price, the erosion is more consistent with RIM and the rest of the industry.
Margin
The margin story is also not as positive as one might expect. The margins for HTC started out above Apple and RIM but have dropped to closer to industry average. This is not what one might expect from an exclusive smartphone vendor.
Earnings
The share of earnings has remained unchanged at 5% over the period of iPhone presence. It's perhaps a credit to HTC that they did maintain their position in the market with the massive change that has come to pass.
However, here we also have to ask if HTC is riding a disruptive wave.
When I wrote the last series, my definition of “loser” was a company that had faced a long series of operating losses and has no viable software assets of its own, making it vulnerable to Android (and Windows Mobile). Motorola first, Sony Ericsson second and LG now coming into the picture. Nokia is not a loser in this sense since it has remained profitable and does maintain an investment in software. Same with RIM and Samsung (now with Bada). When/if they do have the near death experience, they might opt for the Android lifeline (flimsy as it is).
However HTC does not fit the mold of either "winner" or "loser". It's the Goldilocks company, not too hot, not too cold.
But I would add that HTC is not an example of a winner because of its adoption of Android. HTC’s dependence on Windows Mobile made their move to Android the most desperate of all. Unlike the larger OEMs, who had their low end devices to fall back on, they are completely dependent on a smartphone OS vendor. When WinMo was showing the first signs of crisis in 2007, they were the first to flee to Android (think of why they would risk the wrath of Microsoft for something so fragile as Android in 07). They are also trying hard to escape the dependence by building up their own UI (SenseUI) and I would not be surprised if they move to their own OS in the future. Being associated with Android does not confirm them as "winners" but in fact, shows their vulnerability.
What does this all say about Android?
Again here my thesis is that Google chose to sustain the industry rather than try to upend it. I don't judge their motives, but the fact is that with Android, Google is not in a position to disrupt telecom. There were high hopes dashed with the Nexus One and hearts broken with net neutrality and now there are patent wars to be fought. Android, with its licensees, is still at the mercy of operators.
On the iPhone, the firm raised their production forecasts from 14 million units to 18+ million, aided by easing constraints of display panels. Checks show consistent shortage of iPhone 4 inventory at Apple stores and there continues to be a three-week shipping delay from Apple's online store, the firm notes. As a result the firm has increased confidence in its 4QFY10 iPhone unit estimate of 11.6 million, which is up 39% sequentially.
On the iPad, the firm's build forecasts were revised up from 6 million to 7 million, which compares to their iPad shipments estimate of 4.75 million. The firm believes [there] is upside to the Q4 estimates and CY10 estimates of 13.4 million units, given the strong demand and anticipated production ramp heading into the back-to school and holiday seasons, as well as the high level of interest from business customers as expressed by AT&T.
These sound reasonable and credible. Note that production forecasts don't translate into sales forecasts as there is inventory, and some of that inventory will be held by Apple and some by the manufacturer.
My Q4 estimate sits at 12.1 million iPhones and 4 million iPads.
Many consider June 2007 to have been a pivotal moment in the history of mobile phones. Apple's entry with the iPhone has re-defined the market in many ways. However, there was a smartphone market before then. About 28 million smartphones shipped the quarter when Apple launched out of an overall phone market of 265 million. Apple's entry with 270k phones was a drop in the bucket.
I thought it would be instructive to chart what happened between that quarter, exactly three years ago and today. I collected the data from IDC, Gartner and Canalys and company reports to paint a few pictures.
First, the market shares (by units) of the top mobile vendors, Q207 vs. Q210. I highlighted the smartphone vendors by separating their wedges from the pie. Note that I also separated Nokia's smartphones from Nokia's regular phones as two separated wedges--Nokia ex-SP for no smartphones and Nokia SP as their "converged" units. I did the same with "other".
The first thing to note (beside the large increase in smartphone share) is that "other" non-smartphones are a huge part of the pie. At 20%, the share of "other" is now equal to the share of Samsung. Other consists of a group of mostly low cost Chinese vendors. The growth of the low end "other" went from 35 million units in Q207 to 65 million in the last quarter. It's this competition that is driving profit out of the core businesses of Nokia, Samsung and LG and forcing a flight to smartphones (more about this later).
The second thing to notice is that Motorola and Sony-Ericsson are highly visible victims of the last three years. Sony Ericsson shipped 25 million devices in Q207 and only 11 million three years later going from 9% share to 3%, on par with RIM and Apple. Motorola did even worse, shipping 35.5 million in Q207 and a mere 8.3 million last quarter, losing 10 out its 13 points of share.
Viewing the overall units market, one can see the gouge in units that the recession took out. The following graph shows three years of volumes by the top vendors with the smartphones separated at the top (Nokia SP, RIM, Apple, HTC and Other SP--everything above the grey band are smartphones).
However, separating out the smartphones, one can see their volume increased with barely a ripple during the recession. Although Nokia retains the top share spot, the entrants have jointly grown much faster. I have annotated a few of the competitors' volumes with the actual values.
One thing to note is that "other smartphones" has traditionally consisted of Windows Mobile licensees but that is quickly shifting now to Android. I also had only fragments of data for Samsung and Motorola, so their bands are incomplete. However, one could note how minimal their participation has been in the market. LG has been practically absent from this market. For these latecomers to smartphones, it's clear what Android offers: a chance to stay in the game.
Revenue from digital sales of recorded music grew just 3.7 percent to $169 million. That's a slower pace than the 4.5 percent growth posted a year ago and 39 percent growth two years earlier.
Thanks to Android, T-Mobile tripled its smartphone user base in one year. Evidence again of a secular shift to smartphones and the value of Android as gap-filler for Apple's inability/unwillingness to satisfy demand.
It's hard to get excited about the new RIM Blackberry Torch. It's not exciting in a positive way and not exciting in a negative way. It's just more of the same and the same is not all that bad. Then again, the same is not all that good either. Every piece of the Torch product is playing catch-up with others' innovations without enhancing the core innovation RIM itself brought into the market years ago.
RIM has a significant but deteriorating share and is a company that has done very well as an entrant in a space dominated by larger incumbents. But there is a strong smell of Palm about it. The musty smell of decomposing innovation. Wall Street seems to smell it too (two year stock price chart relative to AAPL below)
The problem seems to be that, like in Palm's case, mobile computing is a game for big companies. If you ask why Palm and RIM became uncompetitive you get two different reasons. Palm could not do hardware and distribution well and RIM can't do software well. But these reasons have remedies which neither company can bring to bear: resources and processes. Palm did not have the resources for distribution and production and RIM did not have the processes to be a software platform company.
Their values and priorities are adequate but competitiveness today, in this market, requires projecting market and development power.
I can only conclude that RIM is simply too weak to make it in the long run.
