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The Flap over IDC's Report, Market Spin & the Ongoing Smartphone Wars

1 AA - IDC's Mobile Phone Stats Cause Uproar with Apple in Fifth Spot
There was a huge uproar this week over the latest IDC report that placed Apple in fifth position for Q3 2011. And while the core argument was pointed out that Samsung's figures weren't based on actual facts concerning their handset number breakout, it was still a bit of an overkill reaction. Market spin has been a long standing practice by the industry in general and isn't limited to IDC. In the current Smartphone wars, market momentum is going to shift between the industry players in a dramatic way every year. And so getting overly excited over a single IDC report isn't worth losing perspective over. True champs don't go whining over a single picture covering a transitional quarter. Keep your eyes on the prize as they say. Just take all the noise in stride.  


A Look at Some of the Key Points Found in IDC's Latest Report


There was a huge uproar of IDC's current report covering the top five mobile phone vendors, shipments and market share for Q3 2011. Those most angry focused on a single stat pertaining to Samsung. But to be fair, IDC's report had a lot of balanced commentary about the quarter that shouldn't be overlooked. Here are some of the key points found in that report worth noting:


"The combination of economic uncertainty and anticipation over fourth quarter or late third quarter product releases caused some consumers to delay their smartphone purchases," said Kevin Restivo, senior research analyst with IDC's Worldwide Mobile Phone Tracker. "Many waited for products such as the iPhone 4S, which was announced after the quarter closed, or Research In Motion's BlackBerry 7 phone series, which were released in the final weeks of the quarter."


However, smartphones drive the overall mobile phone market and will continue to do so in the quarters and years to come.


"Smartphone centricity continues to be the hallmark of the mobile phone market," says Ramon Llamas, senior research analyst with IDC's Mobile Phone Technology and Trends team. "Two years ago, smartphones comprised just a small portion of overall shipments among the leading vendors. Today, that proportion has grown considerably, thanks in large part to LG, Motorola, Samsung, and Sony Ericsson making Android smartphones a priority. At the same time, the growing presence of companies focused exclusively on the smartphone market - Apple, HTC, and RIM - also demonstrate the impact that smartphones have had on the mobile phone market as a whole."


Top Five Mobile Phone Vendors


Nokia reversed a global market share on a sequential basis last quarter thanks to stronger feature phone sales in key regions as well as the clearing of inventory backlogs in traditional strongholds, namely China and Europe, which led to a sharp year-over-year shipment and share decline last quarter. Nokia's smartphone fortunes could improve in quarters to come now that it has introduced the Nokia Lumia devices, powered by Windows Phone 7, to markets where its brand is still relatively strong and in areas where the company has lost share over the past two years.


Samsung registered double-digit growth compared to the third quarter a year ago and also outpaced the market. The company's growth was again driven by smartphone sales, such as the Galaxy S2. Smartphone sales were notably higher in emerging markets including China. Samsung outpaced the feature phone market as well in terms of growth. The vendor didn't close the market share gap on Nokia for the top mobile phone position, but it remains within striking distance.


LG Electronics maintained its position as the number 3 mobile vendor worldwide for the twelfth quarter in a row, but continued soft demand for both its feature phones and smartphones led to volume levels not seen since 2Q 2007. With only a few new devices launched and an aging feature phone portfolio, LG's warnings of lower year-over-year shipment volume appears to have come to fruition. By the end of the year, LG's grasp on the number 3 position may be loosened as Apple's aggressive smartphone campaign takes hold in 4Q 2011.


ZTE jumped into the number 4 position thanks to momentum carried into 3Q 2011 with key devices shipping into strategic regions. In China, ZTE has nearly doubled its smartphone volumes from the previous quarter, while within North America, ZTE's entry-level voice-centric phones at AT&T have gained greater depth. At the same time, ZTE's target of 12 million smartphone shipments worldwide in 2011 became more of a reality with the introduction of two new Android-powered smartphones for the North American market.


Apple gained share and posted the third-highest growth rate of any Top 5 vendor but dropped to the number 5 position globally. Global iPhone shipments declined sequentially during the same quarter that company founder Steve Jobs handed the CEO reins to Tim Cook. The decline, not coincidentally, happened as Apple readied itself for the 4S launch, which many waited for. Apple's ability to upgrade 3GS users to the 4S, for example, and make continued inroads into developing economies, where it has been less successful, will help dictate the company's smartphone fortunes in the future.


Putting Stats into Perspective


One has to but statistical data into some perspective in order to keep a cooler head. You could read about Apple's current iPhone and other stats in Seeking Alpha's transcript for yourself. In this particular case, I don't necessarily buy into Apple's reasoning for slower iPhones sales wholesale. Stats are in-part about bending perception. Like Apple not stating that iPod sales were down over 26%. For that sat Apple keeps the stats to a low key number of 6.6 million iPods vs. 9.1 million iPods a year ago. It doesn't sound as bad as being down 26%.


Then there's the whopping 61% uptick in Mac sales. It sounds like a stunning number doesn't it? Yet the total number of Mac units that they were actually talking about here, only represents a measly 760, 000 Macs. And somewhere in that statistic Apple claims that that they had "very strong growth in MacBook Air" units. In context, HP sells 760,000 PC's in a little over 4 days based on 16.2 million PC's sold last quarter. So spouting off about Apple having a whopping 61% uptick in PC growth over 4% of the PC industry actually means nothing, zip, nada. After eleven years of the big Mac's comeback, 760,000 Macs in a quarter is really pathetic. But hey, Apple's statistical spin is something else, isn't it? Somehow Apple turned pathetic into a whopping 61% statistical wonder.


Furthermore, for years Apple refused to breakout their shipment numbers on certain product lines for "competitive reasons." In fact, in this last quarter, Apple talked about strong MacBook Air sales but they were lumped into "Mac" sales in general that were down 26% for the year. So where are the exact MacBook Air numbers for this quarter that proved strong MacBook Air sales? – Yes, hidden in the numbers. So it's a little hypocritical of some to now slam Samsung for the using the very same policy of not breaking out their handset numbers last quarter, isn't it?


It is true however that that IDC's report appears to be listing hard stats for Samsung's handset numbers in their current report when they really don't exist as such. IDC's original press release, on the other hand, doesn't mention the use of other party methods as some are alluding to. And one has to keep in mind that IDC's Tracker Methodology, which is linked to in their recent report, has a standing formulation listed for how they generally arrive at their statistics. It's the same standing formula used when Apple had a higher standing in previous quarter reports. Did anyone on the Mobile side go whining in the press at the time? Maybe, but to the point of calling the numbers "Bullshit" as some are now yelling. It's hypocritical to slam IDC when the stats don't go your way and yet cheer them on when they do. So in the big picture, you have to put stats into perspective.


2 - Samsung Q3 2011 financial results PDF doesn't break out phone set stats

Will Apple Hold a Superior Standing Next Month? – To be Sure


Yet with all that noise aside, it's evident that Apple will definitely enjoy a huge bounce in the next quarter if the iPhone 4S's battery problems don't persist going into the crucial Christmas shopping season. But it's not like Samsung will be sitting around idly either. Samsung's Q3 results PDF point to their Q4 outlook that pushes LTE phones that will definitely attract buyers, contrary to Phil Schiller's view that it doesn't matter that much. The consumer is brainwashed that LTE is better and it will win a lot Christmas shoppers over plain and simple. So we'll just have to wait and see if Apple's new iPhone 4S has enough sexiness to it to take second spot in the next quarter.


3 - Samsung's Q4 handset outlook.

Apple's iCloud and Siri Services will Appeal to Some but Not All This Christmas


Apple's new iPhone 4S feature called Siri is seen by some in the community as being a game changer. Time will tell if that's true. It's both consumer cool and yet highly gimmicky. Perhaps over time Siri will continue to evolve and make a stronger case for itself. But for now, I don't need to be talking to my iPhone for reminders and I'm not overly sold on having to be connected to iCloud yet.


I'm not going to use or pay for Apple's iCloud's MusicMatch and many others won't either. I don't like the fact that iCloud has been constantly in my face informing me that I don't had enough storage backup when I clearly have 1.5 GB to spare. But the question was clear; do I really need or want to be using iCloud storage at all? I don't mind manually syncing my stuff – as I've done it for years. So while Apple has rolled in iCloud for everyone to plug into with iOS 5, I've now opted out for now.


Many will love this new trend over the Christmas holiday season. But Apple's competition could point out that Apple's iCloud can be intrusive and costly over time. On the other hand, Apple won't be alone on this front of course, as Microsoft will be releasing similar cloud services with the release of Windows 8 next year.


Cloud services definitely make sense for the Enterprise market, but I'm not sure it will be as important for consumers for many years to come. Understandably times change and so it's far too early to forecast its popularity just yet. There's no doubt that in the shorter run Apple will have some success with the diehards in the Mac community who buy into most of Apple's cool features. Who doesn't get that? But Apple's iPhone customer base is made up of at least an equal number of PC diehards, if not more, who really don't buy into a lot of Apple's marketing. So it will take time to see how this really pans out as Apple will be pounding the table in the short terms how iCloud and Siri are winners. But we really won't know how this will play out for years.


At the End of the Day


Is Apple's iCloud going to be a disruptive force going forward? Yes – without a doubt - but over time. Will it make a real impact on the smartphone market as a whole over time? Time will tell, as the ongoing smartphone wars will continue to roar for another decade and market momentum is bound to shift back and forth between all of the industry players such as Apple, Samsung, Microsoft, Nokia and others as new technological breakthroughs come to market each and every holiday season to capture the consumer's thirst for cooler and cooler features.


To make that point clearer, news broke late yesterday that Apple may have acquired a company called C3 Technology to expedite Apple's desire to bring 3D mapping to a future iPhone. And so the race to win consumers over with the coolest features is only going to explode over the coming years and it may take over a decade before we see the ultimate winner emerge.


So some reporters getting all bent out of shape over a single IDC report, in the big picture, is really a myopic knee jerk reaction. It's not exactly the end of the world and everyone with a brain realizes that Apple will definitely rebound this coming quarter. Even IDC's report noted that Apple's iPhone "decline, not coincidentally, happened as Apple readied itself for the 4S launch, which many waited for."


At times we should all know that spin gets in the way, and Apple surely isn't blameless here as I've pointed out in this report. It's an all too common practice used to appease Wall Street and dazzle their respective wide-eyed fan base. Yet to be honest, it's just a common business and marketing practice that has gone on forever.


On the flipside, we could only hope that IDC will force Samsung in the future to back-up their smartphone numbers or risk being excluded from future IDC reports. IDC reports should be relying more on factual publicly filed stats and not on hidden Voodoo Marketing. Their current Tracker Methodologies, however genuine, have proven to be lacking in this very important report that paints a momentary picture of a vital growing marking – a market at war. And let's face it, no one can or should have to live with spin as facts forever.


At the end of the day, if the latest overdone uproar over the IDC numbers actually forces IDC to get tougher on Samsung, then maybe, just maybe it was all worth it in the end. But in the meantime, just take the uproar and spin in stride as the smartphone wars won't be over for a long time to come and losing a single quarter in sea of quarters to come, really doesn't mean a thing.


TT 05 - STEVE JOBS - Think Different Forevermore





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