iPhone Wins Bronze in Global Smartphone Race

"We need to stop thinking of the iPhone as a phone," said Phil Leigh, senior analyst with Inside Digital Media. "Voice is merely one application of many that it will use on the wireless Internet."

Rivals already are thinking along the same lines as they contemplate the impact the iPhone has had on a white-hot smartphone marketplace, Leigh noted.

The iPhone, which has attracted a whirlwind of media attention since it launched in the U.S. last June, captured a 28 percent share of the U.S.' converged device market -- the category includes smartphones and wireless handhelds -- during the fourth quarter, market research firm Canalys reported. Mobile units with Microsoft (Nasdaq: MSFT) technology had a 21 percent share.

Sharp Growth in Smart Segment

The launch of the iPhone helped to propel smart mobile device shipments by 53 percent for the year, compared with 2006, Canalys reported.

The converged device segment represented about 10 percent of worldwide mobile phone sales, with annual growth of 60 percent, the firm noted. Converged device sales grew year on year in every quarter of 2007, peaking at 72 percent in the fourth quarter.

Apple's 28 percent share for its iPhone trailed only Research In Motion's (Nasdaq: RIMM) BlackBerry, which had 41 percent in Q4, but was well ahead of third-place Palm (Nasdaq: PALM) , which had 9 percent of the U.S. market.

Globally, RIM's device shipments grew by 121 percent in the fourth quarter, solidifying its second position behind Nokia (NYSE: NOK) , which had nearly 53 percent of the worldwide market during the same period. Third-place Apple had a 6.5 percent global market share in the quarter.

However, Canalys noted Apple's new product pruned sales from RIM, Nokia, Palm and Motorola (NYSE: MOT) after its June launch in only a small percentage of the global marketplace.

"When you consider that it launched partway through the year, with limited operator and country coverage, and essentially just one product, Apple has shown very clearly that it can make a difference and has sent a wakeup call to the market leaders," said Pete Cunningham, Canalys senior analyst. "What it must demonstrate now is that it can build a sustainable business in the converged device space, expanding its coverage and product portfolio."

Apple Can't Rest

However, Apple can't stand still because rivals will be looking to one-up the iPhone, Cunningham noted. "Apple's innovation in its mobile phone user interface has prompted a lot of design activity among competitors. We saw the beginnings of that in 2007, but we will see a lot more in 2008 as other smartphone vendors try to catch up and then get back in front."

The iPhone's shortcut to success is consistent with Apple's approach to novice-friendly technology, said Ramon Llamas, an analyst with IDC.

"Coming in as a newcomer, Apple already had a lot of great things going for it," he told MacNewsWorld. "Apple is all about simplicity when it comes to hardware and software. Look at their Macs and iPods -- simplicity is built in their DNA. It was just a matter of pushing that to the iPhone line."

Apple also eyed the best features its rivals had to take them to another level, Llamas said. "They looked to Nokia, Motorola and semiconductor companies out there and, after that, took a look at BlackBerry, Palm and others. "Apple didn't get here on its own completely. It definitely had the advantage of seeing how things pan out in the market."

In the global market, Apple sold more than 2.3 million iPhones during Q4, behind Nokia' s 18.8 million and RIM's 4 million units.

Global Sales Just Beginning

The iPhone was not launched in Europe, the Middle East and Africa until the after the fourth quarter had begun. There, Apple trailed Nokia, RIM, HTC and Motorola.

The limits on the iPhone's potential outside the U.S. market are crucial to the product's bottom line, Llamas noted.

"I can't think of an upstart company in the mobile phone industry that was able to reach those numbers," he said.

Competitors are noting the success of the iPhone -- and borrowing from its technology, Llamas added. "Look for a lot of me-too devices out there."

Leigh agreed. "They look at it with fear and loathing because they recognize that it is a paradigm shift that has left them in the dust," he told MacNewsWorld.

That's because copycat products already are out on the market, Leigh said. "But none have gained more than a minute share of the market."