Microsoft overtakes BlackBerry to become third player in smartphone market

Microsoft has increased its global smartphone market share to 3.3%, overtaking BlackBerry for the first time.

According to Gartner, Microsoft’s 3.3% market share puts it in third position in the smartphone race, behind Android (79%) and Apple (14.2%).

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BlackBerry saw a decline in market share over the past year from 5.2% in the second quarter of 2012 (2Q12), to 2.7% in the second quarter of this year (2Q13).

The mobile manufacturer launched a new operating system, BB10, as well as a new flagship smartphone halfway through the year period, but this has yet to save the troubled company. This week its board of directors has been considering selling the smartphone arm of the company to focus on BB10 and its enterprise server BES10.

Microsoft on the other hand has increased its market share from 2.6% (2Q12) to 3.3% (2Q13).

Anshul Gupta, principal research analyst at Gartner said that Nokia can be thanked for this increase due to its expanded portfolio of Windows Phone devices. The range includes smartphones like the Lumia 520 at the $200 price point as well as its flagship Lumia 1020 at the top end.

The multiple price points of the Lumia portfolio allowed Windows Phone to be accessible to most users.

“Microsoft should continue to focus on growing interest from app developers to help grow its appeal among users,” said Gupta.

Apple’s iOS sales continued to grow, but its market share dropped from 18.8% to 14.2% year-on-year. Gartner claims that this is because the company dropped the price of its iPhone 4 model, which is still selling strongly alongside the iPhone 5 flagship device.

But Android’s market share continued to grow from 64.2% in 2Q12 to 79% in 2Q13. The operating system’s growth can be linked to the sales of smartphones globally which has overtaken sales of features phones for the first time.

“It’s increasingly becoming a three ecosystem driven market,” said Gupta.

He said that with BlackBerry losing out in the smartphone race, enterprises in mature markets will continue to look at iOS as the smartphone leader.

“But in growth markets, enterprises are going with Android and the added solutions from mobile device management (MDM) players providing security around the platform.”

Smartphone sales hit 225 million units, up 46.5% from the second quarter of 2012, but sales of feature phones reached 210 million units which is a decline of 21% year-on-year.

Gupta said that the decline in feature phone sales is due to the tightened price gap between feature and smartphones.

“Years back, a smartphone device started at $200, now in the first quarter of 2013, smartphones begin at $60. This price gap has shortened significantly. It may not have the latest OS or screen technology, but people are happy because it’s better than a feature phone.”

Samsung kept its number one position in the mobile phone sales, with its market share growing from 21.5% in 2Q12 to 24.7% in 2Q13.

While Nokia’s sales dropped over the year due to the decline of the feature phone market and strong smartphone competition, the company still held on to its second position. Its total mobile phone sales dropped from 83 million (2Q12) to 61 million (2Q13), but sales of its flagship smartphone range, the Lumia grew 112.7% thanks to its varied portfolio at different price points.

BlackBerry turns to 7 OS with social networking features for new 9720 smartphone

BlackBerry has launched the 9720 smartphone running the 7 OS in a bid to stay relevant in the growing low end of the smartphone market.

The launch of the new device comes as BlackBerry on Monday formed a committee to explore strategic alternatives for its future that could include joint ventures or a sale of the company.

As its new BlackBerry 10 operating system struggles to get off the ground, the company is still depending on the old version 7. During its last fiscal quarter BlackBerry shipped 6.8 million smartphones, but only 2.7 million phones running the new OS.

The launch of the BlackBerry 9720, which runs a refreshed version of the BlackBerry 7 OS, may play to the company's dwindling strength. The smartphone has a re-engineered physical QWERTY keyboard with a dedicated BBM key, a trackpad and a a 2.8-inch touchscreen with 480 x 360 pixel resolution.


The smartphone also has a 5-megapixel camera and an FM radio. Connectivity options include HSPA, 802.11n and A-GPS.

On the software side, BlackBerry has focused on social networking features. Users can write a message once and post it simultaneously to their friends on BBM, Twitter and Facebook, for example.

The updated interface also lets users swipe to unlock the phone or access the camera from the lock screen, among other enhancements.

The company didn't provide pricing, but beginning in the coming weeks, the BlackBerry 9720 smartphone will be available in select markets from retailers and carriers in Asia, Europe, Africa, the Middle East and Latin America. BlackBerry didn't disclose plans for U.S. availability.

NEC to Exit Japanese Smartphone Market

The retreat in the face of competition from an American and a South Korean company highlighted the country’s shift from electronics industry leader to laggard over the course of the last decade.

“We were late to enter the smartphone market, and we were unable to develop attractive products,” Isamu Kawashima, the chief financial officer of NEC, said at a news conference here. “That’s what it comes down to.”

Like other Japanese phone makers, NEC clung to old-fashioned flip phones — great for making phone calls, taking pictures or playing simple games, but not for much else — as rivals elsewhere were developing smartphones that put the entire Internet and more in users’ pockets. The first NEC smartphone did not appear until 2011, four years after Apple’s iPhone.

The strategic failure cost NEC hundreds of millions of dollars in losses as its share of the Japanese cellphone market slipped into the single digits. And corporate Japan suffered another blow to its once vaunted reputation for innovation.

“NEC was like the face of the Japanese phone industry,” said Nobuyuki Hayashi, a technology consultant and writer. “Losing them will be very upsetting for those who take pride in Japanese manufacturing.”

NEC’s surrender is the latest in a series of consolidations. In 2010, NEC absorbed the remnants of the mobile phone divisions of two other Japanese stalwarts, Casio and Hitachi, with NEC holding a controlling stake. In 2008, Kyocera acquired the phone-making arm of Sanyo. In 2010, Fujitsu and Toshiba combined their handset businesses; Fujitsu bought out its partner last year. Mitsubishi, another big electronics company, got out of the phone business entirely.

Analysts say NEC and other Japanese cellphone makers were tied too closely to Japanese network operators, developing what has come to be known in that country as a “Galápagos” effect; devices were cut off from the evolution of the phone business elsewhere. As a result, the makers failed to grasp the significance of the rise of the smartphone.

As Japanese consumers embraced the smartphone in a big way, the companies had nothing to offer. Although flip phones from NEC and other Japanese makers are still in wide use in the country, smartphones now make up a majority of new sales. Japanese brands struggle to compete with imported smartphones, especially the iPhone.

“As the market for mobile phone handsets, including the rapid spread of smartphones, has dramatically changed, economies of scale have become increasingly important for the maintenance and strengthening of competitiveness,” NEC said in a statement. “However, NEC’s mobile phone handset shipments are following a downward trend, and it is difficult to foresee improved performance in the future.”

By last year, Apple had become the market leader in Japan, where the iPhone had won 25.5 percent of overall cellphone sales, according to the MM Research Institute. Even Samsung, which has been slower to establish a foothold in Japan than elsewhere, surpassed NEC last year, with a 7.2 percent market share.

In smartphones, Apple is even more dominant, with 40 percent of the Japanese market in the first quarter, according to another research firm, IDC.

For NEC, the final straw may have come when NTT-Docomo turned to a Samsung smartphone, the Galaxy S4, in an effort to stem the loss of subscribers to two rival network operators, SoftBank and KDDI, which have been marketing the iPhone aggressively.

Docomo does not offer the iPhone; instead, it has been featuring the Galaxy S4 and a Sony smartphone, the Xperia A, in a summer sales promotion. It is the first time that Docomo has featured a Samsung phone so prominently. Given the longstanding ties between Docomo, a former state-owned monopoly, and domestic phone makers, the decision was widely seen in Japan as a slap in the face to the Japanese industry.

There could be further bad news in store for the Japanese smartphone makers. Docomo has been talking with Apple about adding the iPhone to its range.

“Nothing has been decided and we’re always considering which models to launch,” Docomo said in a statement.

“There will be further consolidation in the industry,” said Jean-Philippe Biragnet, a partner at the Bain & Company consulting firm in Tokyo. “There is not space for more than two or three of these players. The question is, Who?”

Among the domestic brands, the leaders last year, according to MM, were Fujitsu, with a 14.4 percent share of the overall mobile phone market; Sharp, with 14 percent; and Sony, with 9.8 percent.

Panasonic and Kyocera are much weaker, though they were slightly ahead of NEC, whose share of the business had fallen to about 5 percent last year from nearly 28 percent in 2001, according to MM.

Among the remaining contenders, only Sony has a significant presence outside Japan. The other Japanese phone makers have been outflanked at the high end of the smartphone business by Apple, Samsung and others, and at the low end by a growing number of Chinese manufacturers.

NEC was in talks with one of the Chinese companies, Lenovo, about a partnership aimed at saving the smartphone business, but the negotiations broke down several weeks ago, making the company’s announcement Wednesday inevitable, analysts said.

For fans of retro-styled Japanese flip phones, which have come to be known here as “gara-kei,” short for “Galápagos phone,” there was at least one saving grace in NEC’s announcement. The company said that even though it was quitting the smartphone business, it would continue “developing and producing conventional mobile handsets.” 

Apple's smartphone market share drops to three-year low

Apple's share of the smartphone market dropped in the second quarter to its lowest level in three years, research firm Strategy Analytics said.

The share of the iPhone slipped to 13.6 percent in the quarter from 16.6 percent in the same quarter last year. The largest vendor Samsung Electronics, however, saw its share soar to over 33 percent from over 31 percent in the same period. Samsung shipped over two times the number of smartphones Apple did in the quarter, Strategy Analytics said.

Apple is at risk of being trapped between 3-inch Android smartphone models at the low end and 5-inch Android models at the high end, the research firm said Thursday. The market share of the iPhone in the second quarter was the lowest since the second quarter of 2010, it added. In contrast, Samsung saw strong demand in China and other countries for its flagship Galaxy S4 device, which helped increase volumes.

Sales of the iPhone hit 31.2 million in the April to June quarter, a record for the period, Apple said earlier this week. It had sold 26 million phones in the same quarter last year.

Overall, smartphone shipments grew 47 percent year-on-year to reach a record of 230 million units in the second quarter of 2013, Strategy Analytics said. LG had a share of 5.3 percent, while ZTE had 5 percent and Huawei Technologies had 4.8 percent of the smartphone market. The research firm listed other vendors as together having a share of 38.2 percent in the quarter.

IDC reported Thursday a 52.3 percent growth in the smartphone market with 238 million units shipped in the second quarter. Buyers may have postponed iPhone purchases expecting the launch of a next-generation device in the fall, it added. Apple's sales could accelerate globally if it launches a lower-cost iPhone and continues to penetrate prepaid markets in the quarters to come, IDC said.

The worldwide mobile phone market grew 6 percent year-over-year in the second quarter of 2013 to over 432 million units, according to IDC. Strategy Analytics said shipments reached 386 million units, an increase of 4 percent year-on-year.

The research firms did not immediately comment on the reason for the variations in their estimates.

Nokia's share dropped in the handset market to 15.8 percent as its shipments fell 27 percent to about 61 million in the second quarter, said Strategy Analytics. The Finnish vendor was hit by "fading Symbian smartphone volumes and lackluster feature phone demand," as it continued to struggle in the big three markets of China, U.S. and India, the research firm said.

Chipping Away at the Smartphone Leaders

Samsung is now more profitable than Apple, according to second-quarter financial results released by Samsung on Friday in Seoul. But while the two rivals have successively one-upped each other with ever sleeker, more technologically sophisticated phones, new competition is stirring.

Already, the combined share of the worldwide smartphone market controlled by Apple and Samsung slipped to 43 percent in the second quarter from 49 percent a year earlier, IDC, a research firm, reported on Friday.

Some of the companies that are chipping away at the leaders are familiar names trying comebacks, like Sony, Nokia and HTC. Others are relative newcomers, like LG of South Korea and Lenovo, ZTE and Huawei of China.

“The story is no longer Apple versus Samsung,” said Bryan Wang, an analyst at Forrester Research. “Going forward, they will both face similar challenges.”

Analysts say buyers are more willing to look at alternatives to Apple or Samsung because the differences among smartphones are becoming less pronounced.

The proportion of phones running Google’s Android operating system keeps growing, and technical specifications are converging. Like Samsung’s Galaxy S4, a number of other phones, including Sony’s Xperia Z, also include high-definition 5-inch screens.

That makes price, where the Chinese smartphone makers have an edge, an increasingly important selling point.

Those challenges were evident in the latest earnings report from Samsung on Friday, when the company said it expected competition in the smartphone business to stiffen in the third quarter, with new models pending from LG and other rivals. “The strong growth streak for the smartphone market is expected to continue in the third quarter, albeit at a slower pace,” the company said in a statement.

Samsung remains a powerhouse, reporting big gains on Friday in sales and earnings for its latest quarter. Net income rose 50 percent, to 7.77 trillion won, or $6.96 billion, from 5.19 trillion won a year earlier. Revenue rose to 57.46 trillion won, or $51.6 billion, from 47.6 trillion won.

On Tuesday, Apple posted quarterly net income of $6.9 billion on revenue of $35.3 billion.

Strategy Analytics, a research firm, said Samsung had passed Apple for the first time to become the world’s most profitable maker of mobile handsets. Samsung, which does not break out results for its handset-making business, generated $5.2 billion in quarterly operating profit from the unit, Strategy Analytics estimated, compared with $4.6 billion for Apple.

Samsung previously pulled ahead of Apple in market share, and its gains continued in the second quarter, when it controlled 30.4 percent of global smartphone shipments, compared with 13.1 percent for Apple, according to IDC.

Samsung has had to work harder than Apple to achieve those gains. Ubiquitous TV ads around the world and big-ticket promotional events like an introductory party for its flagship model, the Galaxy S4, at Radio City Music Hall, have driven up marketing costs. And while the S4 has been selling at a brisk pace, it has fallen short of some analysts’ expectations. Investors have grown accustomed to bigger gains, and the share price of Samsung, like Apple shares, has taken a beating this year.

“In a way, Apple and Samsung have become victims of their own success,” said Pete Cunningham, an analyst at the research firm Canalys. “When these companies report many billions of profits every quarter, it’s hard to say they are doing anything wrong.”

While the old generation of phone makers — Nokia, Motorola, BlackBerry — struggle, together Samsung and Apple still collect more than 90 percent of the profit in smartphones, analysts say. Yet that success has emboldened more companies to try to challenge them.

Individually, none of these companies pose a threat to the top two. Collectively, however, the next three top players showed strong growth over the last year. No. 3 LG’s share of worldwide smartphone sales increased to 5.3 percent from 3.7 percent in the second quarter, according to Strategy Analytics. No. 4 ZTE rose to 5 percent from 3.7 percent and No. 5 Huawei went to 4.8 percent from 4.2 percent.

IDC had a slightly different ranking, with Lenovo replacing Huawei in the top five and also showing solid growth, to 4.7 percent from 3.1 percent.

As recently as the first quarter of 2011, three Western companies — Apple, Nokia and BlackBerry — topped the IDC list.

The eastward shift reflects the growth of sales in China, which has surpassed the United States to become the biggest smartphone market, and other developing economies. Analysts say much of the growth in coming years will occur among lower-priced smartphones, an area in which Chinese makers are strong and Apple is notably absent.

But both Apple and Samsung face new challenges at the high end of the market, where their dominance has been most pronounced. Sony, for example, has shown renewed strength in Japan, where its Xperia Z has been outselling the iPhone, and Europe, where IDC showed Sony’s market share rising to 10 percent in the first quarter from 6 percent a year earlier.

LG, which said in the last week that its smartphone shipments had more than doubled in the second quarter from a year earlier, to 12.1 million from 5.7 million, clearly has bigger ambitions in the United States. For the introduction of a new flagship model, the company has planned a splashy event along the lines of Samsung’s Radio City extravaganza, sending out a “save the date” notice to journalists for Aug. 7.

Why are rivals to Samsung and Apple so optimistic? Despite the slowdown in growth that the market leaders have signaled, the business continues to expand. Smartphone shipments worldwide rose 52 percent in the second quarter, to 238 million phones, according to IDC.

“The smartphone market is still a rising tide that’s lifting many ships,” said Kevin Restivo, an analyst at IDC. “Though Samsung and Apple are the dominant players, the market is as fragmented as ever. There is ample opportunity for smartphone vendors with differentiated offerings.” 

How Intel's modded chips make your smartphone a better listener

For years, Intel and other chip makers designed processors like stock engines, dropping them into PCs, notebooks, and servers. Now, Intel has shown a newfound willingness to mod custom silicon for server customers, tweaking them with hardware and software accelerators to improve their performance.
These same servers are the ones powering cloud applications that include email and storage, but also interpret the gestures and spoken commands of smartphone users. On Monday, for example, Intel and Nuance Communications disclosed that Intel is developing an accelerator to improve Nuance’s voice recognition, which powers as many as 6 billion connected devices, according to Sean Brown, Nuance’s senior manager of innovation.

Intel has also developed custom chips for both eBay and Facebook, said Jason Waxman, general manager of Intel’s data center group, at an Intel datacenter event on Monday.

IntelIntel’s Jason Waxman holds a server motherboard.
The bottom line? By specifically improving these cloud functions, smartphone and PC users will see their performance increase over time, for free, with new capabilities. “With advanced natural language processing, you can really say anything to [connected devices] and have a natural response,” Nuance’s Brown said. “But the personal systems of tomorrow will be proactive, when you need it automatically.”

Intel has been designing “accelerators” for decades, Waxman explained, dating back to the MultiMedia eXtensions (MMX) instruction set that it shipped with 1997’s Pentium MMX. Those chips included dedicated hardware registers that were designed to accelerate software written with the MMX software in mind, a technique that Intel used with subsequent chips up to and including its Core processors. Most of today’s server chips ship with dedicated hardware logic blocks on board designed to specifically accelerate functions like encryption. Accelerators for technologies like Nuance take the same approach, but are optimized for a single company.

IntelIntel’s Pentium with MMX Technology.
Meanwhile, incoming Intel chief executive Brian Krzanich has invited non-competing chip customers to manufacture their chips at Intel’s own fabs, analyst Patrick Moorhead of Moor Insights and Strategy noted. Intel has had partners that would like Intel to design accelerators around their technology, but lacked the resources, Waxman said. The new spirit of collaboration benefits both sides.

Waxman referred to Intel’s new approach as an “SoC methodology,” an industry term for the systems-on-a-chip (SoC) approach used by many consumer manufacturers, including rival AMD, to optimize chips for specific products.

As an example of Intel’s commitment to custom chips, Intel announced a 14-nm “Broadwell SOC,” Intel’s first semi-custom chip, that will ship as part of Intel’s Atom line in 2014 or later. For years, Intel has shipped its Xeon chip to server customers, but recent shifts in the server space caused Intel to beef up its Atom tablet and set-top chip line to address enterprise customers.

In part, Intel’s hand is being forced by ARM and the smartphones and tablets that those chips power. ARM is riding three trends: first, a general shift away from the PC—Intel’s center of power—to slimmer, cheaper, tablets and smartphones. That’s a segment of the market Intel hopes to address with its Atom processor, whose “Bay Trail” derivative could power Windows and Atom tablets and convertibles as low as $150 by the holidays.

Intel has already begun mixing and matching chips to various customer segments.

An ARM chip.
”The first thing [that’s different about Intel] is that they’re using an array of products,” said Nathan Brookwood, principal analyst at Insight 64. “If you go back a few years, they designed a chip for the desktop, and then they optimized it a little bit for mobile, and they put a bigger cache on it and called it [a] server [chip]. And there were three basic markets being served by one design. And now, they’re taking stuff that was designed for mobile... Atom stuff, that can also can go into servers, with server stuff. And now they’re taking another chip that they designed for a laptop, and they’re beefing that up... for desktops.”

The second trend that benefits ARM is that ARM, unlike Intel, doesn’t manufacture its own chips. Instead, it licenses its processors as essentially a kit—intellectual property that can be used as is, or surrounded with a chip designer’s own peripheral logic. That’s forced Intel’s hand, Moorhead said. “So they’re going to have to be custom, and more flexible, to keep their 95 percent market share,” Moorhead said of Intel.

Finally, while the PC has remained generally unchanged for decades, server manufacturers have shown a willingness to optimize their servers for specific functions, known as “disaggregation”. Currently, racks of servers perch one over the other in a server chassis, all with their own CPU, storage, and memory.

 Eventually, the idea is that servers will have “pools” of computing, storage, and I/O resources, much like the a bunch of flash chips are combined together to make a single flash “drive”.

In recent years, Intel has arguably invested more in the server space than it has in the PC, into software, services, networking, storage, and other areas. For right now, the trend is toward custom-designed servers, with specific applications in mind.

“Flexibility is the key, because the architecture is disaggregating, meaning the only way to efficiency in the datacenter is workload by workload, where virtualization is not cutting it,” Moorhead said. “In the scale out data center, you have to have a specific server type for a server workload, whether it be Web tier, data mining, Hadoop or otherwise.”

The talk now is of a software-defined future, where applications “ask” for resources, which are managed by a central server—powered by Intel, the company hopes. ARM is hoping to cash in on the third trend, with low-power 64-bit server processors it will ship later this year. For right now, however, Intel hopes it can control the conversation—part of the reason executives are holed up with analysts and customers this week. 

Motorola’s Not-So-Secret Secret Smartphone

Andrew Gombert/European Pressphoto Agency Eric Schmidt, Google’s chairman, with what appeared to be Motorola Mobility’s next flagship smartphone on July 11.

  4:42 p.m. | Updated to add information about Motorola event on Aug. 1.
Motorola Mobility’s efforts to keep secret the details of its first flagship smartphone since the company was bought by Google have run up against reality.

Rumors about Motorola’s smartphone, usually called Moto X, have leaked all over the Web, from small tech blogs to mainstream news outlets. And Eric Schmidt, the chairman of Google, has even been out in public using what appeared to be the new device.

Motorola won’t confirm details about the new device. But all the early exposure, some of it the company’s own doing, makes it seem like this pseudo-secrecy could just be a way to prime the hype pump.

Last month, Motorola’s chief executive, Dennis Woodside, made it known during an onstage interview that Moto X devices would be made in the United States. He coyly admitted that the phone was in his pocket, but shook his head when asked to show it off.

No matter: Mr. Schmidt apparently took care of the visual while at a business conference packed with reporters, holding a new Motorola phone to his ear. “I’m not allowed to comment on the nature of this phone,” Mr. Schmidt said, according to Rachel C. Abrams of Variety.

Mr. Schmidt didn’t need to say much. A day before Independence Day, Motorola advertised the phone in newspapers. The ad hinted that the device would be customizable — “The first smartphone that you can design yourself.” Joanna Stern of ABCNews was quick to clarify that customers would be able to choose the colors of the phone case and add an engraving.

But what can the phone do exactly? Google executives have offered some clues that future Motorola phones would include artificial intelligence and sensors that recognize people’s voices in a room. Spoiling the surprise, the tech blog Ausdroid spotted a video on the Web from Rogers Wireless, a Canadian carrier, showing the Moto X.

The video, which Rogers asked Ausdroid to take down because of copyright infringement, suggested several details, like that the phone constantly listens for a user’s commands and reacts to them. The initiating command is “O.K., Google Now,” similar to the “O.K., Glass” command to control Google Glass. The video also said that the phone would be released in August.

On Friday afternoon, Motorola sent invitations to the press for an event to be held Aug. 1 in New York, where Moto X will most likely get its official introduction.