Pre Off to a Solid Start, but Blackberry Still Dominates

Just over a week after the Palm Pre hit stores around the United States, it's pretty clear that the company has a hit on its hands, albeit one that hasn't generated quite as much interest and excitement as rival Apple's iPhone. But the iPhone isn't even the biggest player in the US smart phone market—not by a long shot. Research in Motion's (RIM's) understated and decidedly less sensational BlackBerry continues to dominate the market. And its share of the market is growing even in the face of new devices from Palm, Apple, and other companies.

According to numbers released by Palm, the company's wireless carriers sold some 100,000 Pres in the device's first week on the market and are on track to sell more than half a million units in the current quarter. Thirty-five percent of first-week Pre sales were to customers new to Sprint, currently the exclusive wireless carrier for the device. (Like the iPhone, the Pre will likely by hugely beneficial to its otherwise struggling wireless carrier.)

The Pre had barely jumped out of the starting gates before Apple announced its third-generation iPhone, the iPhone 3G S. That device will go on sale next week, offering better performance and a video-capable camera. But most existing iPhone 3G users won't be able to affordably upgrade to the new iPhone 3G S until next year because of the subsidized nature of wireless carrier contracts. Still, we can expect Apple to tout first week sales loudly if it outsells the Pre, as is expected.

With all the excitement and hype around the iPhone these days, one might assume that Apple is dominating the smart phone market. But that's not the case. The iPhone does control 19.5 percent of the US smart phone market, but that figure is down from the 30 percent market share it enjoyed in the third quarter of 2008. Today, RIM's BlackBerry controls the market with over 55 percent market share. And that figure is up, dramatically, from the 40.4 percent it owned in Q3 2008. (I wonder why we didn't see a slide about those numbers during last week's heavily publicized, iPhone-heavy Apple conference.)

RIM is riding BlackBerry success in a way that is starkly different from Apple: quietly. The company just announced the BlackBerry Tour, yet another new model that you've probably never heard of. But BlackBerry is successful even in the face of relentless Apple hype and marketing for very pragmatic reasons: price, choice, and availability. Customers can find at least one BlackBerry device at virtually any wireless carrier, unlike with the iPhone, because Apple draws up exclusive contracts with single vendors in most markets. And RIM's devices are often much less expensive than Apple's. (Verizon even offers a "buy one, get one free" offer with the BlackBerry.) Even AT&T—Apple's exclusive iPhone carrier in the United States—has as many BlackBerry users as iPhone users.

Worldwide, the picture changes quite a bit, but not for Apple. Outside the United States, Nokia controls 41 percent of the worldwide smart phone market, compared with 20 percent for RIM. But Apple's share is just half of RIM's and is still behind that of Windows Mobile.

For users and potential customers of smart phones, this is all academic. What really matters is that choice and capabilities are expanding while, hopefully, over time, prices will fall to match. And we can thank Palm for advancing this future, even if our next smart phone isn't a Pre.

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