As smart-phone sales go, so go the fortunes of the operating systems that make the hybrid phone/computing devices run for prosumers and enterprise customers.
Recent research by Compete Inc., which measures online consumer interest in the United States, however, shows that shoppers familiar with Microsoft Corp.’s Windows Mobile operating system will seek that OS in selecting a device, which actually makes the connection between smart phones and operating systems a “a bit of a chicken or the egg thing,” according to Rachel Lashford, analyst with the London-based Canalys Ltd. market research firm.
The relative market share of operating systems—Nokia Corp. dominates with its Symbian OS at 69 percent, Microsoft’s Windows Mobile has 12 percent, Research In Motion Ltd. has 8 percent, the Palm OS owned by Japanese firm Access has 6 percent and the “other” category, primarily Linux, claims 4 percent—are expected to change as players such as Motorola Inc. and upstarts such as A la Mobile bring Linux more into the mainstream and shoppers seek out devices running on Windows Mobile.
In fact, recent projections by Dallas-based The Diffusion Group suggest that next year, the Symbian OS market share will begin to decline as Linux-based OS’ and Windows Mobile increasingly gain traction. By 2010, according to The Diffusion Group, Windows Mobile may claim as much as 29 percent of the market and Linux 26 percent, while Symbian slides to third place with 22 percent. The other quarter of the market will be comprised of niche plays. According to The Diffusion Group, Palm OS will migrate to sit atop a Linux OS.
Recent quarterly results from Research In Motion Ltd. and Palm Inc. demonstrate the vagaries of the market: RIM’s revenues last quarter were up 35 percent and profits down slightly from the year-ago quarter. But its outlook for BlackBerry device sales and new enterprise subscribers, particularly outside the United States, were strong, boosting its stock. Palm, on the other hand, showed strong financial results, but a weak forecast for the next quarter’s sales of its Treo, largely a consumer/prosumer device, sent its stock tumbling. The Treo is the predominant device using Access’ Palm OS.
“RIM has been able to repeat its U.S. success in Europe by gaining a foothold in the European offices of American companies and increasing partnerships with operators,” Lashford said. “That attention to operator partners has moved to the Asian-Pacific region and now it has launched in Singapore, Hong Kong, and starting in China, Japan and Taiwan. Push e-mail, of course, is the key application.”
Palm is the No. 1 smart-phone vendor in the States, where the company’s installed base likes the Palm operating system, according to Lashford. The launch of the Microsoft Windows Mobile-based Treo boosted sales for Palm by attracting people who are looking for Microsoft’s OS, but that boost has been stymied by Motorola’s launch of it relatively inexpensive Q.
“The Palm OS is in flux,” Lashford said. “Access is looking to develop a Linux kernel for the Palm OS that might reduce the bill of materials, reduce the cost to vendors and bring these phones into the mass market.”
Palm the device maker remains the main customer for the Palm OS, though Samsung Electronics Co. Ltd., which has a multiple-OS strategy, has produced a few devices running Palm OS.
Symbian dominance
But for now, the successful operating system story seems to belong to Nokia’s Symbian OS, which runs the Finnish handset maker’s smart phones. Nokia has more than half the world’s market share in smart phones, a fact that Lashford attributes to simple, solid business practices.
“Nokia succeeds through its existing mobile-phone channels, which are more dominant outside the United States. Nokia has these pre-existing channels in Europe, the Middle East and Africa and in Asia-Pacific markets,” Lashford said. “Nokia also has developed a smart-phone platform that enables it to introduce several new E series phones each quarter.”
Global smart-phone unit shipments for the first quarter of 2006 totaled about 16.7 million units, according to Canalys’ research, which is less than 10 percent of the more than 200 million mobile handsets sold in the quarter—a segment that is expected to grow as 3G networks are built out and competition brings down the price of smart phones.
Windows boost
Already, the Motorola Q, disruptively priced at $200 (with rebates and service contract) in a market that often commands $300 to $400 per device has, for instance, taken a bite out of sales of the Palm Treo, according to CitiGroup research. The Motorola Q runs Windows Mobile, while the Treo traditionally has run on Palm OS, but recently added a Windows Mobile version.
Linux line-up
Which brings the conversation around to Linux and its prospects. Despite several efforts in the wireless industry to boost Linux’ prospects as an open source operating system, Motorola announced a new Linux alliance with other major players—Vodafone Group plc and NTT DoCoMo Inc. among others—that it acknowledged is an attempt to meet the competition presented by Nokia. Despite skepticism from industry analysts, Motorola seems determined to have results by next year that handset vendors could then take to market.
At the same time, recently launched A la Mobile, backed by venture-capital firm Venrock Associates, announced that it would make available its new open source Linux operating system to speed time-to-market for handset vendors and disrupt the proprietary OS market. According to A la Mobile President and Chief Executive Officer Pauline Alker, the firm adds value to an open Linux platform by adding two integration engines, one for handsets, one for the network. Alker acknowledged that the company as yet had no anchor customers; she called from Germany on a European swing to acquaint vendors and operators with her firm’s offering.
“Although all the efforts you’ve been hearing about come under the broad umbrella of `Linux,’ it’s almost as if you’ve got competing systems,” Lashford said. “Essentially what Linux needs to progress as a smart-phone operating system is a coherent set of standards. The industry seems to think that Linux would be a cheaper alternative to licensing the available OS. We have yet to see whether that will be true.”
