How Apple Cracked the Top 5 in Global Handsets

Just over three years since introducing its first phone, Apple is now among the top five handset vendors on the planet, passing Research In Motion for the fourth spot, although still well behind the incumbents of Nokia, Samsung and LG. Research firm IDC noted Apple’s leap past RIM, based on reported third quarter sales. Although both Apple and RIM trail the top 3 by a wide margin, it’s noteworthy that each only sells smartphones, while the trio at the top sell feature phones as well.

Overall, IDC reports 340.5 million handsets shipped last quarter, of which 14.1 million were from Apple, far behind the 110.4 million sold by Nokia. The numbers are similar to those reported today by Strategy Analytics, another research group confirming Apple’s leap to the top five.

Apple’s year-over-year growth, however outpaces all competitors: the release of the iPhone 4 surely help boost sales for Apple, which saw sales grow 90.5 percent over the prior year, says IDC. By comparison, Nokia eked out a 1.8 percent gain in sales from the year ago period and still lost market share: overall smartphone sales are climbing, but Apple, RIM, and even Samsung are showing higher growth rates than Nokia and LG. Why? Because while feature phones still connect billions, the next generation of smartphones, apps, and services are quickly gaining prominence in our digital world thanks to broadband.

Source: IDC

Indeed, the fact that Apple could crack the top five in a market it didn’t even enter until 2007 and did so without a feature phone is a foretelling of the future. Vendors such as Nokia, Samsung and LG can’t rely on their feature phone dominance and branding as a guarantee for continued success. Nokia took too long to revamp its smartphone interface and is just now recovering. LG’s CEO resigned last month due to poor performance within the company’s mobile segment in the second quarter, and the company fared even worse it the third: profits plunged 99 percent and the mobile division lost $ 270 million. While feature phone sales still outnumber smartphones by roughly a factor of 10, the entire market is shifting; perhaps faster than some handset makers anticipated.

With its iPhone, iOS platform and application ecosystem boasting 300,000 mobile apps, Apple is best positioned for the shift. The company began selling smartphones at possibly the best time: as mobile broadband became reasonably inexpensive and fast enough to provide a solid web experience, particularly in Apple’s home market. While others simply waited for such enablement from the wireless web, Apple saw the opportunity and designed a device, operating system and developer tools to capitalize on it.

History tells us that this is nothing new for Apple. At least twice before, the company has re-defined an existing or potential market: a strategy Apple uses to either dominate a product segment or be content with a smaller market share with higher profit margins. Look at the iPod, which arrived when plenty of digital audio players were already on the market. The iPad is another recent example as tablet computers launched well over eight years ago. Apple’s rise to smartphone dominance is yet another example of watching others not get a product quite right and marching in with many of the problems solved at the most opportune time.

Two additional thoughts come to mind when reviewing Apple’s new place in the global handset market. Issues surrounding the antenna and signal strength clearly didn’t hurt iPhone 4 sales, as the company experienced a record quarter. Part of the increased sales can also be attributed to the iPhone selling better outside the U.S., where it is available in 89 countries.

There’s still more growth coming for Apple’s iPhone in the U.S. and beyond however: amid months of rumors and educated guesses, Fortune today has confirmed that Verizon will have a CDMA iPhone to sell in 2011. As I mentioned earlier this month, if Apple can sell a handset to just 10 percent of the overall 543 million customers on CDMA networks from Verizon and others, it stands to earn $ 32.4 billion in additional revenues. That may not make Apple the biggest seller of smartphones on the planet, but it’s sure to keep it the richest.

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