Smartphones key as phone vendors regroup

After a poor fourth quarter, mobile phone manufacturers turn to smartphones to save their bacon.

LG and Samsung have the same problem but to a lesser extent, since they have deeper pockets.

But siding with one or two platforms, at this point, will be very difficult. "The software platform market is still very uncertain, so if it can be avoided people don't want to make hard decisions," said Blaber.

Motorola has already decided against Symbian, continuing to work with Android and Windows, but it had to make a decision because research and development funds at the company are limited, according to Blaber.

"Samsung has effectively said it doesn't want to put all its eggs in one basket, and it'll make a decision when it has to, and I think it's too early to do that at the moment," Blaber said.

An important part of upcoming smartphones will be usability and the application stores that come with them, and the iPhone showed what can be achieved with that combination, according to Milanesi.

Users will start looking at the platform as a whole, not just the hardware, but the extent to which there are applications allow for personalization of phones, Milanesi said.

Last year, touch displays became a sought-after feature, according to Milanesi. But reality is that all touch phones aren't going to be great, she said.

"We have some examples on the market where touch doesn't add anything more to the keypad. You just press the screen instead of the keys, and that's not really what the iPhone is doing," said Milanesi.

This year, that won't be enough to convince consumers to buy a new phone. Now that everybody has touch, consumers will start asking whether the feature actually helps improve their phone experience, according to Milanesi.

Apple, with the successful iPhone, will continue to play an important role in the smartphone segment.

During the last three months of 2008, iPhone sales dropped to 4.4 million units, compared to 6.9 million in the previous quarter. This can be explained by a combination of a large inventory in the channel left over from the third quarter, and the economy.

"I talked to people in the U.S. who got an iPhone for Christmas, but didn't accept it. Although it was nice of the friend or the relative to pay for the phone, there was also a two-year contract they needed to pay for, and right now they just felt they couldn't do that," Milanesi said.

That has convinced Milanesi something has to be done about the long and expensive contacts that come with devices like the iPhone. But that would also mean the phone would become more expensive at the time of the initial purchase. "It's all a bit of a vicious circle," she said.

Everybody is also waiting for the next iPhone product launch.

"If Apple can produce something and move it down the price curve then that's going to be best for it in the long term, and I am convinced it'll do it. I am sure we'll see something announced before the end of spring," Blaber said.

Apple definitely needs to widen its portfolio, because it can't keep the current momentum with just one device, according to Milanesi, but she isn't convinced a cheaper model is in the cards.

"If you listened to their conference call it said it is not in the business of becoming number one, and is not going to go down in price. So what Apple might do is come out with other form factors," she said.

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