Technology research firm Gartner recently released its survey on third-quarter mobile phone and smartphone sales. For technology investors, these worldwide sales figures help to define the breadth of the market, aid in determining winners and losers, and see what trends are forming in the industry.
Gartner focuses on mobile phones sold during a particular period, allowing investors to detect trends more quickly, but the results can vary more than installed base figures that include preexisting users. Gartner's survey also goes beyond mere handset makers -- such as Samsung (NASDAQOTH: SSNLF), Apple (AAPL +2.91%), Xiaomi, and Huawei -- by including operating system statistics from Google's (GOOGL +1.26%) (GOOG +1.18%) Android, Apple's iOS, and Microsoft's (MSFT +4.64%) Windows Phone. Here are three key takeaways from Gartner's report.
"Dumb" phones are dead -- long live smartphones
Perhaps the biggest takeaway in mobile is the rapid shift from regular -- or dumb -- phones to smartphones. Led by gains in developing markets, quarterly sales of smartphones jumped 20% year-over-year from about 250 million to 301 million units. However, the sales number barely budged for overall mobile phone shipments. The table below provides proper context:
| Q3 2013 | Q4 2014 |
Year-Over-Year | |
|---|---|---|---|
| Smartphones Only | 250,296.8 | 301,009.9 | 20.3% |
| Mobile Phones Total | 455,706.5 | 455,784.7 | 0.02% |
| Smartphone Percentage of Total | 54.9% | 66.0% | --- |
Source: Gartner. Figures in thousands.
As you can see, when looking at the total mobile phone market, there's really no overall growth. However, what is actually happening is that customers in developing countries are purchasing smartphones rather than mobile phones, pushing the percentage of smartphones within the broad market to nearly 66%. This shows a significant opportunity for the various OS ecosystems and hardware manufacturers to transition to lower-cost smartphones in order to better serve those markets. China's Xiaomi went from a bit player to the fourth-largest smartphone maker worldwide by taking advantage of this trend.
It's tough to be the king
The leading manufacturer of mobile phones -- both smartphones and dumb phones -- is Samsung. However, this report builds upon earlier data painting a rough year for the Korean conglomerate, which was the only smartphone device maker that saw its shipments fall. While the full smartphone industry grew by the aforementioned 20%, Samsung's smartphone sales to end users dropped by nearly 9% year-over-year from 80.4 million to 73.2 million units.
For the mobile phone market overall, the drop was even more pronounced. The company saw a drop from 117.1 million to 94 million units -- a 20% decrease. This comes on the heels of a horrible third-quarter earnings report in which the company specifically blamed mobile phone weakness for a 60% plunge of operating profit from the same quarter last year.
Good news for Google and Apple -- OK for Microsoft but BlackBerry struggling
When it comes to smartphone operating systems, there's good news all around -- unless you're BlackBerry (BBRY +3.53%). Each of the top three operating systems increased units sold figures. Android increased its dominance during the quarter by growing its OS market share from 82% to 83.1% year-over-year.
Sales growth of 26% drove Apple's market share from 12.1% to 12.7%. That's impressive considering the newest iPhones -- the iPhone 6 and 6 Plus -- were only available for two weeks and in a limited number of countries during the reported quarter.
Although Microsoft's Windows Phone lost market share with sales growing at a slower place than the overall industry, the company did boost sales by 1.3% on a year-over-year basis. Not the upside Microsoft wants, but after the third-largest handset vendor in this survey, Huawei, abandons your product and says "nobody made any money in Windows Phone," it is good to demonstrate any growth in sales.
In addition, Microsoft benefits from BlackBerry's underperformance -- sales fell 45% year-over-year from 4.4 million to 2.4 million units. It's safe to say BlackBerry's newest operating system, BlackBerry 10, hasn't panned out as the savior the company needed. Instead, CEO John Chen has provided a breath of fresh air to the company amid talk of a refocus on the enterprise market. To be fair, its newest phone, the BlackBerry Passport, was released with less than a week to go in the third quarter and may need more time to be properly evaluated as a success or a flop.
