Is the iPhone Dying?

Even Apple's (Nasdaq: AAPL  ) iPhone is mortal from time to time.

ABI Research data finds that the iPhone claimed a 16.6% slice of the global smartphone market during the holiday quarter, a sequential dip from the 18.1% it notched during the third quarter.

This sounds grim, at first. Apple's latest resurgence has been triggered by the wild popularity of its wireless devices. If the iPhone has peaked in popularity, it comes at a lousy time, with the iPad -- essentially a larger iPhone, though technically closer to an iPod touch on growth hormones -- set to hit the market next month.

In a Wall Street Journal blog entry, an analyst from the research firm compared the iPhone to Motorola's (NYSE: MOT  ) RAZR -- the flavor of the month a half-dozen years ago.

I don't buy it -- and not just because I upgraded my 2G iPhone in December.

"The last time the iPhone took a dip in market share was in the fourth quarter of 2008," notes the blog entry.

Wait a minute! Clear the shovels and open the casket. This isn't the iPhone dying. This is just a case of seasonality.

It makes perfect sense. Apple has updated its phones every summer, so naturally they're going to be hot sellers during the calendar year's third quarter. Early adopters jumped on the 3GS this past summer, just as the iPhone 3G served as their trampoline a summer earlier. Comparing iPhone market share sequentially doesn't make sense, especially with its rivals typically flooding the market just before the holidays.

Strategy Analytics -- another data tracker -- pegged Apple's slice of the smartphone market at a mere 10.8% last year. In other words, let's not bury the iPhone until we see year-over-year weakness.

Killing the iPhone prematurely would be stupid.

There is a glut of product out there. Research In Motion (Nasdaq: RIMM  ) is holding up well against Apple with its BlackBerry devices. Smaller players include Palm (Nasdaq: PALM  ) and the growing number of companies making smartphones based on Google's (Nasdaq: GOOG  ) Android platform.

This is a market that will intensify. Microsoft (Nasdaq: MSFT  ) Zune Phone chatter continues to grow. This is all healthy. It doesn't seem as if anyone is going to stop Apple from selling millions of smartphones every quarter -- and probably even more if and when we get the fourth version of the device this summer.

Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor choice. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is starting to see more Apple products creep into his home lately, but he does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (8)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 02, 2010, at 11:36 AM, mikecart1 wrote:

    Yes. I took a Samsung Rogue over the iPhone last Dec.

  • Report this Comment On February 02, 2010, at 11:49 AM, JRUwing wrote:

    No, the iphone is not dying. It owns massive market share and is the leader in the smartphone market. One of the most profitable devices on the market.

  • Report this Comment On February 02, 2010, at 11:58 AM, eddlld wrote:

    There is a large group of loyal apple customers as well as a large group of 'loyal' bashers. However, those that don't care one way or the other are the one's that matter. Of those, once they try the iPhone for awhile they are usually sold. I have several friend who were lifetime PC users and never had any apple products (other than an iPod). A couple of them were given iPhones as birthday/Christmas presents and they all can't believe how much they like it. In my family we have had phones from every maker from Nokias to Samsung phones to Blackberrys to Sidekicks. We have liked some and not others but now everyone in or family have iPhones and we will never change except to get a newer model every couple of years.

  • Report this Comment On February 02, 2010, at 12:02 PM, mrmcook wrote:

    isn't sales just getting going in China?

    what about when (June or July) Apple opens the Iphone to Verizon and other carriers?

    sales will sky rocket

  • Report this Comment On February 02, 2010, at 12:06 PM, miteycasey wrote:

    How big is the pie?

    More smart phones are coming onto the market so the pie is getting larger so naturally the leader my get a smaller piece, but the piece will still be larger than the previous piece.

  • Report this Comment On February 02, 2010, at 12:09 PM, daveshouston wrote:

    To date, the iPhone has been updated every year in June. AT&T requires a two year contract. Since the upgrades have been major improvements over the prior generation, most customers want the upgrade but are somewhat stymied by the length of the AT&T contract.

    If you're going to buy one, the best timing is right when the new model is introduced. Then your two year contract starts ticking so you won't fall more than one generation behind. Customers are frustrated by the lack of coherence between the update cycle and the contract. I believe almost every user would upgrade every year if the contract economics weren't so onerous.

    With regards to the iPhone dying you should note that every Apple competitor is either working on, or has already introduced, their version of an iPhone knock-off. This includes Palm Pre, Droid, Google's Nexus One, Research in Motion's Storm, and a number of other smartphones by HTC. They're all trying to copy the iPhone but none of them has the ecosystem that iTunes supports. Over 99% of the software developed for mobile devices is for the iPhone. Competitors are hopelessly behind now, and they're losing ground every day.

  • Report this Comment On February 02, 2010, at 12:14 PM, Gabik123 wrote:

    Guys, we are all forgetting the obvious.

    Apple's activation system for the iphone makes it very hard to give the physical iphone as a gift. Instead, people buy gift cards. Therefore, the largest quarterly chunk of iphones being sold for personal use tend to go out in Q3 when the iphones are released.

    Q4 sales still stay up as people treat themselves, but unlike the first iphone that you could buy and drive away, the 3G and the 3GS require activation in store for subsidized pricing. Therefore, Q4 iphone sales tend to be spread out into Q1 of the next year, as people redeem their holiday gift cards for the iphone.

    The iphone isn't dying, just like last year (when the 3G came out and introduced the new buying model im talking about) the dip has been for when people spend less money on themselves and more on other people.

  • Report this Comment On February 02, 2010, at 12:15 PM, Gabik123 wrote:

    Guys, we are all forgetting the obvious.

    Apple's activation system for the iphone makes it very hard to give the physical iphone as a gift. Instead, people buy gift cards. Therefore, the largest quarterly chunk of iphones being sold for personal use tend to go out in Q3 when the iphones are released.

    Q4 sales still stay up as people treat themselves, but unlike the first iphone that you could buy and drive away, the 3G and the 3GS require activation in store for subsidized pricing. Therefore, Q4 iphone sales tend to be spread out into Q1 of the next year, as people redeem their holiday gift cards for the iphone.

    The iphone isn't dying, just like last year (when the 3G came out and introduced the new buying model im talking about) the dip has been for when people spend less money on themselves and more on other people.

  • Report this Comment On February 02, 2010, at 12:52 PM, ROTORROCKET wrote:

    Went for the Palm Pre over the iPhone.

    Don't care for the closed platform and the uber alles attitude of Apple.

  • Report this Comment On February 02, 2010, at 1:51 PM, artistx wrote:

    I think Rotorrocket confirmed the iPhones death by buying the Palm Pre.(lol) But seriously, closed platform? So you bought a phone that does less with an inferior interface and design. That'll show Apple for closing their platform (and trying to make money on their great design).

  • Report this Comment On February 02, 2010, at 2:17 PM, Retired31B5M wrote:

    I had an iPhone ever since the first one came out. I got the Nexus One just under a month ago and I am never going back.

    Ironically, I am still using it with ATT and I see no difference in performance between my Nexus operating in 2G mode and my IPhone which was in 3G.

  • Report this Comment On February 02, 2010, at 3:55 PM, ROTORROCKET wrote:

    Great design, artistx? (hit the fart app) I beg to differ . Pre has camera flash, physical keyboard, custom wallpaper/themes, better screen resolution, great homebrew apps community, and MULTITASKING....and not chained to the POS iTunes software filled with useless apps put together by 13 year olds. LOL

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