Innovation, Upheaval Rule Smartphone MarketInnovation, Upheaval Rule Smartphone Market

Until recently, when you thought of smartphones, you thought of the BlackBerry, maybe the Treo. Now, an array of innovative and relatively inexpensive devices--from both upstart and established manufacturers, mostly aimed at new customers--is hitting the market. Meantime, the spread of operating systems such as Windows Mobile, Symbian, and Linux that run many different devices is rallying developers of smartphone applications.

The smartphone surge dates to the release, in spring 2006, of Motorola's Q, the first "prosumer" smartphone. With a full QWERTY keyboard and Windows Mobile in a thin, elegant design, and priced well below $200, the Q kicked open the door for a new category of devices that appeal to customers for whom a $400 BlackBerry is out of reach. That trend continued with Research In Motion's answer to the Q, the Pearl, a thin device released late last year with much of the capability of a BlackBerry and a price tag of less than $200. Smartphone activity has accelerated over the last few weeks at the 3GSM conference in Barcelona, Spain, and at last week's CTIA Wireless show in Orlando, Fla.

At CTIA, Taiwan's High Tech Computer debuted two interesting devices: the Shift and the Advantage. The Shift isn't really a smartphone per se but what's called an ultramobile PC. About the size of a pair of CD jewel cases laid end to end, the Shift has a tilt-up screen and a full laptop-style keyboard, plus multiple connectivity options, including GSM, Edge, UMTS, HSDPA, Bluetooth, and Wi-Fi. Cellular voice calling requires a headset.

Rather than run on a conventional mobile operating system such as Windows Mobile or Symbian, the Shift runs on the full Windows Vista Business. Being cellular-capable, the Shift is eligible for carrier subsidies that will bring the price far below the $2,000 at which HTC is likely to list it.

While the HTC Advantage also has a unique form factor, it's more in line with the smartphone-centric Windows Mobile devices for which the company is known. Cramming a lot into a small package, it offers all the same wireless capabilities as the Shift but has a thin QWERTY keyboard that connects to the screen magnetically. Both devices will be available through regular HTC channels later this year.

Founded in 1997, HTC epitomizes the transformation of the smartphone industry: It has moved from being a pure OEM, making devices for sale by other companies, to a manufacturer that markets smartphones under its own brand. Four or five companies now control 80% to 85% of the smartphone device market, notes Stuart Robinson, director of handset component technologies at Strategy Analytics, "and then another 100 are struggling for the other 15%. HTC seems to be one of those that is growing quickly."

STUFFY NO MORE
Approaching the market from the consumer electronics angle, Korea's Samsung has in the last year released a series of elegant and powerful smartphones under the Ultra and BlackJack lines, including the F700, a thin model with a nifty slide-out keyboard, as well as a touch-screen keyboard similar to Apple's forthcoming iPhone.

Mobile virtual network operator Helio, a joint venture launched by SK Telekom and EarthLink last May, introduced the Helio Ocean last week at CTIA. The device has a large screen, and the dual-slide design reveals a numeric keypad when slid up and a full QWERTY keyboard for messaging when slid sideways. The Ocean, which will sell for about $295 when it's available later this year, offers GPS, Web browsing, and cellular coverage over Sprint's EV-DO network.

Searching for a hit to follow the Q and the Razr, Motorola last week introduced a series of nondescript consumer phones plus the MC35, a durable voice/data communications device. Along with the already released MC50 and MC70, the new smartphone is an outgrowth of Motorola's acquisition last year of Symbol Technologies, a maker of ruggedized enterprise devices. Called an "enterprise digital assistant," the MC35 includes built-in GPS, Wi-Fi and Bluetooth connectivity, mobile e-mail over high-speed Edge wireless data networks, a camera, and a bar-code scanner.

Sony Ericsson, which hasn't kept up with the advent of fashion-conscious smartphones in the North American market, last week introduced the Z750, which isn't a new Nissan sports car but a slim, round-edged feature phone that comes in a variety of trendy colors and supports both corporate e-mail (using Microsoft Exchange push e-mail) and personal e-mail via POP3/IMAP gateways. Running over HSDPA and Edge networks for coverage in the United States and abroad, the Z750 doesn't have a U.S. carrier yet.

OPENING UP THE OS

What many of these new devices have in common is that they run on either the Windows Mobile (updated to version 6 last month), Symbian, or Mobile Linux operating system. Given the rumored acquisition of Treo maker Palm, which hasn't updated its native operating system in years, and the fact that BlackBerry runs on what's essentially a closed hardware-plus-software system (though RIM execs beg to differ), the broadening of the smartphone category to include more devices running on so-called open-standards operating systems means that the days of proprietary platforms are numbered.

About 75 million smartphones were sold worldwide last year, according to Gartner, of which some 51.7 million run on Symbian, which dominates outside the United States and which released the latest version of its operating system, version 9.5, last week.

Gartner analyst Todd Kort sees sales of Treos--including devices that run on the native Palm OS and ones that run on Windows Mobile--peaking in the next year, while Windows Mobile devices gain a larger and larger share of the market. Total BlackBerry subscribers, meanwhile, will go from about 7 million at the end of 2006 to around 8.5 million in 2007--impressive growth, but nothing like the near-doubling (from 2.5 million to 4.9 million) that RIM recorded in fiscal 2006.

In other words, Treos and BlackBerrys aren't going away. But they'll be marginalized as companies that are more standards-oriented grab market share--including Nokia, the world's No. 1 handset maker, which didn't debut any smartphones at CTIA but has put out an extensive line under the E-series moniker.

Trendiness aside, the flourishing of nonproprietary operating systems is good news for business technology managers, many of whom have shied away from buying BlackBerrys and Treos in bulk, treating smartphones the same way they do cell phones--letting approved employees buy and expense them. While it's unlikely we'll see companies buying thousands of smartphones this year, many of the industry executives at the CTIA show last week called for a "rationalization" of mobility purchasing.

Even though smartphones are becoming more essential for business users, said In-Stat analyst Bill Hughes, "corporate payment of wireless bills is completely irrational." Companies should just foot the bill: Smartphones have become far too valuable, and too reasonably priced, to be limited to the executive suite, Hughes said at CTIA's Smartphone Summit.

Agreeing with that assessment is one former U.S. employee: George H.W. Bush. During his keynote address at CTIA, Bush senior said, "This hour I'll be up here is about the longest I ever go without using my BlackBerry."