Shares of Research In Motion tumbled today after the firm missed earnings estimates.
I'm here today with senior analyst Joe Beaulieu to take a close look at that company and also get an overview of the handset market.
Joe, thanks for joining me today.
Beaulieu: Well, they said it shipped 500,000 units since it came out, but they were coy about providing sell-through numbers. My concern is that they sold half a million of them, but a lot of them are just sitting on shelves at Best Buy and at the cell phone stores.
Glaser: So if they having trouble growing into the high-end, who is being successful there? Is Android really going to be the premier operating system in the high-end, or is it really going to be Apple with the iPhone?
Beaulieu: I think there's room for both Apple and for the Android operating system. I think that the carriers certainly like there being competition between Apple and Android, and I think they also want more competitors, and that's why I think that RIM still has a fighting chance if they can get their act together and while Nokia still has a chance if their partnership with Microsoft starts to bear fruit at the end of the year.
Glaser: So certainly there could be a wildcard here. Windows Phone has not necessarily taken off in a big way yet, but when Nokia starts shipping those devices, do you expect there to be a big consumer uptake, or do you think that's going to be really an uphill battle for them?
Beaulieu: I think it's really going to be a marketing issue. I think that Nokia, they can make fabulous hardware. They just haven't had a decent OS. By all accounts, Windows Phone 7 is a solid OS, but there just haven't been any premier handsets for it to run on.
So, I think that if they can convince consumers that this is something that they want to try, I think it certainly could gain traction, and as I said before, the carriers want there to be as much competition in the market as possible. I think there's room for three or four players, which gives you a couple of slots after Android and iOS.
Glaser: Now there's been a lot of talk about the app ecosystem being so important for locking consumers into different handsets; people who have Apple are going to continue to buy Apple, people who have Android are going to continue to buy Android.
Do you think that's going to continue or do you think people are going to be willing to jump from platform to platform and really these market shares could move pretty aggressively in the coming years?
Beaulieu: I think that the mobile operating systems do provide some barriers to entry and also some switching costs on consumers. What could be a game-changer, and this is only at the beginning phases, if you start to see more applications running via HTML 5, and I don't know if you saw earlier this week, Facebook announced that they are working with a bunch of developers to come up with a set of applications that run in the browser, rather than are standalone applications, and that could definitely change the game a little bit, but I think that's a very early transition.
Glaser: Now, another company like RIM that people were concerned about was Palm. It eventually got bought by HP. Do you see HP doing anything with that webOS product from Palm, or have they basically killed the phones in that market?
Beaulieu: They've announced a tablet that--I don't recall the exact release date--but they do have a tablet in the pipeline. It's going to be priced similarly to the iPad, and they also want to support webOS on the desktop. I think that's a long shot at this point. webOS just doesn't have the developer base.
Glaser: So you don't see Palm being a major player or the Palm devices being a major player in the handset market looking forward?
Beaulieu: No.
Glaser: Then just taking a step back to look at the financials of this, certainly Google is giving away Android for free, Apple is making quite a bit of money in selling the iPhones. Who are the big financial winners amongst this change in market shares in the handset market?
Beaulieu: Well, Apple is clearly a financial winner because they make money off the handsets. They make money off the applications.
Google is more of a hybrid model; they give away the OS for free, they have their own applications store. But they're really looking to monetize consumers in a variety of ways, including serving up ads and it's their interest to not have just the high-end dominated by the iPhone.
Glaser: Joe thanks so much for giving us the updates today.
Beaulieu: Thanks.
Glaser: For Morningstar, I'm Jeremy Glaser.
