Mobile Solutions CI

Wireless in the third quarter of 2011 - FierceWireless

wireless industry perform in the third quarter of 2011

via www.fiercewireless.com

Great recap of handset manufacturers and carriers reported Q3 results.

Is the high end of US smartphone market saturated?

A WSJ blog entry has been surfacing across many links this week, citing Morgan Keegan analyst Tavis McCourt. He analyzed VZW and AT&T recent quarterly results and interpreted their flattening sales as indication of both iPhone hangover (consumers waiting to upgrade) and smartphone adoption in general slowing down.

The first point I can't speak to but still have doubt. Each quarter over time we've seen a steady rise in the percent of iPhone sales in the US which come from new, non-iPhone customers. iPhone is already well past RIM's peak of replacement sales (indicating market saturation for the current product) and hovers around 80%.

The second point is harder to pull apart. The argument that a slowing quarter in smartphone growth is attributable to the high end of customers already having smartphones may be true. However lower and mid-tier android adoption continues to accelerate. Wouldn't these consumers trade up over lifecycle to more advanced devices?

I wouldn't doubt that we will see a blockbuster Q4 for iPhone. However, I do doubt this signals a mass defection of android consumers ("We believe slowdown in Android/Blackberry/WP sales at AT&T/Verizon likely indicates a reasonable number of customers choosing not to upgrade in Q3, but rather waiting to switch to the iPhone in Q4.).

One culprit here may be a massive slowdown in RIM sales. We'll know in a bit if that is the case, and it wouldn't surprise me at all. Another would be Verizon's aggressive pricing. Most of their very limited SKU selection is above 149, several at 199, and even a couple at 299 all with full subsidy on 2YC. Verizon is shaping demand by only going after the most price insensitive customers.

The declaration that 45% smartphone penetration is a saturation threshold just doesn't sit with me. I agree that more carriers will experiment with pricing plans, but as much because hardware innovatoin is outpacing consumer need as anything. Not because we are at a ceiling--I think 85% is a more likely top end of smartphone adoption by 2012.

What do you think? Did sales slow because of pricing, iPhone hangover, or consumer saturation?