The Smartphone Rocket Slows Down

Got a nosebleed from clinging to the rocket growth in smartphone sales? Investors might want to get ready for a soft landing.

Research firm IDC on Monday released figures on worldwide smartphone shipments, which showed that the market grew 61.3% to 491.4 million units year over year. Looks good, right? No problem there.

But compare that with the rock-star year-over-year growth rate of 75.7% in 2010, and you start to get the picture. Our baby's growing up. This sector is maturing.

And when 2012 comes to a close, IDC analysts expect that growth to further slow.

"The market is maturing, and we can expect smaller volumes" of shipments, says IDC analyst Ramon Llamas, who's still crunching the numbers to figure out how much smaller that growth will be.

Is the sky falling?
Keep in mind, though, that the market is still growing. IDC still expects double-digit growth for the foreseeable future. Of all the mobile-phone shipments last year, smartphones accounted for only 32%, Llamas says. However, that figure was up from 22% the previous year.

So with continued room for growth -- just not quite as much as before -- who has the best star to latch onto? Take a peek at IDC's chart on worldwide smartphone shipment volumes for the fourth quarter of 2011 and the year-ago comparisons.


While Nokia (NYS: NOK) was the clear loser in the fourth quarter, as Apple's iPhone and Samsung's Android phones continued to deliver a one-two punch to the struggling handset maker, Llamas says Nokia is getting a lift from its partnership with Microsoft and its revamped Windows Phone operating system.

Apparently, app developers are taking note. At the end of 2010, there were roughly 2,000 Windows Phone apps, Llamas says. In 2011, that figure rose to 30,000. And last month, it reached around 50,000. Apparently the lovefest around Nokia's first Windows phones, the Lumia 800 and 710, helped pump up the numbers.

"This star is taking off," Llamas says.

However, for the year, Nokia saw its smartphone position slip from No. 1 in 2010, when its market share stood at 32.9%, to No. 3 last year, with a 15.7% slice of the market.


iPhone and Android duke it out
Buoyed by the popularity of Android, Samsung shot to the No. 1 spot among smartphone vendors last year, holding 19.1% of the market share based on units shipped. That's a Cinderella story for Samsung, which ranked No. 4 in smartphone shipments in 2010, with 7.5% of the market.

This hasn't been lost on Apple, which has a slew of patent infringement lawsuits against Samsung's Android-based Galaxy smartphones and tablets.

Apple, meanwhile, is gaining traction. While it lost out to Samsung by a whisper, with 19% of the worldwide smartphone market last year, it grabbed the No. 1 spot in the fourth quarter. The iPhone maker scored 23.5% of the market share in the fourth quarter, compared with Samsung's 22.8%.

And the strong performance of Apple's iPhone 4S played a substantial role in juicing up the company's financial results, leading to a blowout quarter.

Foolish takeaway
Although it's easy to get swept up in the individual performance of each of the smartphone players, it pays to keep an eye on the overall industry performance and where it's headed. Got tissues to clean up that nosebleed?

Learn more about three companies that are cashing in on the smartphone market in our free Motley Fool report called "3 Hidden Winners of the iPhone, iPad, and Android Revolution." Two of the companies are tight with Apple, and the third company is key to delivering the Android platform to the marketplace.

At the time thisarticle was published Fool contributorDawn Kawamotoowns no stocks in the companies mentioned. The Motley Fool owns shares of Microsoft and Apple.Motley Fool newsletter serviceshave recommended buying shares of and creating bull call spread positions in Apple and Microsoft. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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