Search This Blog

Thursday, April 3, 2008

The mobile phone recession?

A Gizmodo author wrote a sobering analysis in Popular Mechanics of the CTIA conference on the wireless industry this week:

It's been nearly a year since the Apple fanboys first camped out to scoop up eBay-bound iPhones, and the biggest mobile players are still trying—and failing—to mount a serious challenge to its dominance of consumers' hearts and minds. While Apple was a trade show no-show for the annual wireless and telecom industry showcase here, I've been feeling their pulse pretty much everywhere while reporting live from the trenches at the Las Vegas Convention Center.

It's the trend that just won't die: Cellphone powerhouses are still forcing themselves to play catch-up to the new guy. In fact, it's become almost impossible to look at any of the major new handsets unveiled at CTIA or through our revolving gadget doors at Gizmodo without being reminded of the iPhone. While in some cases this is merely because Apple has cast such a long shadow, it's more often because other companies are intentionally mimicking the look and feel of Apple's year-old device.

My take of the slow CTIA show is actually much simpler: nine months is not long enough for competing vendors to reverse engineer and certify a true iPhone competitor. The result: we're still seeing phones that were designed based on the original descriptions of the iPhone from January 2007, not on actual iPhone experiences. And while I think the iPhone will actually be very challenging to imitate successfully, it's too early to claim competitors will completely fail.

The result: I don't expect a mobile phone recession. But Research In Motion's earnings results announced last night do reflect a trend we can expect: profit compression due to lower prices. With consumers struggling to pay mortgage and credit card bills, I think we will see many vendors cut their prices and margins on mobile phone handsets to entice those cash-strapped consumers. The only problem: price cutting almost never works as a long-term strategy.

At the end of the day, handset vendors will win and lose on innovation and brand value. Those that choose to compete on low prices will engage in a race to bankruptcy, not success. And if you need proof of that fact, just go ask Motorola how competing on mobile phone prices without innovation worked out for them.

No comments: