I knew things were bad for smartphone makers that weren't named Apple or Samsung, but I had no idea they were this bad. A new report out of Wall Street has a stunning conclusion: Not a single smartphone maker other than the two leaders made any profit during the first three months of the year.
The report by analyst T. Michael Walkley of Canaccord Genuity shows that while Apple has lost considerable market share to Samsung, it remains -- for the moment, at least -- the big kahuna of the bottom line, taking 57 percent of the industry's profits. Samsung snagged the remaining 43 percent.
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The report calls into question the future of competition in the mobile industry. "This can't continue," say Chris Hazelton, a mobile analyst at the 451 Group. "No one is going to crash and burn right away, but at some point you'd expect to see consolidation." Consolidation, by the way, is polite industry speak for companies merging or dropping out of the market altogether. That means BlackBerry, HTC, LG, Nokia, Sony, and Google's Motorola Mobility unit are all at risk.
However, Hazelton and other industry analysts are relatively bullish about the prospects of BlackBerry, the company formerly known as Research in Motion. BlackBerry has a fairly clean balance sheet, notes IDC analyst Ramon Llamas. Perhaps more important, says Hazelton, it has a surprisingly strong residue of loyalty in the enterprise.
It's a two-horse race in smartphones
"A year ago, it was common to see previous market leaders Nokia, BlackBerry (then Research in Motion), and HTC among the top five," says Llamas. But there's abundant evidence that the smartphone market has quickly become a two-horse race. IDC looked at smartphone shipments in the first quarter of the year and found Samsung's share of shipments was 32.7 percent and Apple was 17.3 percent, with LG at 4.6 percent and two Chinese companies -- Huawei and ZTE -- at 4.2 percent each. All the other smartphone makers combined add up to 36.4 percent of sales, each at under 4 percent. (Shipments aren't the same as sales, of course, but the share numbers still give a very good idea of what's happening in the market.)
I take the trouble to give those exact numbers for a reason: Neither BlackBerry nor Nokia, the primary maker of Windows phones, shows up in the top five. Both companies face a long, long road back to relevance.
The state of the smartphone industry outside of Apple and Samsung is so dire that the AllThings D website had a great tongue-in-cheek headline on a story about the Canaccord report: "Apple and Samsung share of profits declines to 100 percent." The "declines to 100 percent" headline sounds preposterous, but it isn't. The last time Cannacord tallied the profits, Apple and Samsung had more than 100 percent because other companies lost money. Yeah, that's a little wonky, but it shows a teensy bit of progress for also-rans such as BlackBerry, HTC, LG, Motorola, Nokia, and Sony. There's a smidgen of hope for some of these companies.