Cellphone Makers Hope for a Blockbuster Summer

Cellphone Makers Hope for a Blockbuster Summer
By MATT RICHTEL
Copyright by The New York Times
Published: May 17, 2009
http://www.nytimes.com/2009/05/18/technology/18phone.html?th&emc=th


The hype machine started months ago. Opening weekends are upon us. High up in executive suites, the hope is that this summer’s new releases will cause lines to snake around the block.

Palm is counting on the Pre to help turn things around.

The cellphone industry looks a lot like the movie industry nowadays. Some highly anticipated phones — including the Palm Pre, an updated iPhone and new phones using the Android operating system from Google — have focused the industry’s efforts on the crucial months between Memorial Day and Labor Day.

In the past, “nobody gave a darn about mobile phones — they weren’t headline grabbers,” said Charles Wolf, a cellphone industry analyst with Needham & Company. “This summer will be really interesting. It could be potentially the most exciting time in this market.”

The season’s releases began last week, when T-Mobile announced the introduction of the Sidekick LX and AT& T unveiled the Samsung Jack, ballyhooing it as “another hit crossover smartphone in the tradition of the Blackjack and Blackjack II.”

But the season’s most compelling phone drama will start the first week in June, when Sprint will begin selling the Palm Pre, people briefed on the company’s plans said.

Palm, a once-iconic device maker that has fallen on hard times, has been hyping the Pre for months as an iPhone killer, but the company has given few peeks to analysts and reviewers. Analysts say the stakes are high for Sprint Nextel, which has exclusive rights to the phone in the United States, but even higher for Palm, which is based in Silicon Valley.

“This is make or break for Palm,” said Mr. Wolf, noting that Palm, also the maker of Treo and Centro phones, lost about $98 million in the last quarter, consistent with losses in other recent quarters. “It’s not make or break for Sprint, but clearly Sprint is in trouble, too, and needs a hit.”

Lynn Fox, a spokeswoman for Palm, played down the importance of the Pre itself, saying it was the first “in a long line” of devices that will use Palm’s new mobile operating system. “The Pre isn’t a bet-the-company device,” Ms. Fox said.

Because the smartphone market still has room to grow (according to Google, it is estimated that out of the four billion mobile devices in the world, only 100 million are smartphones), manufacturers hope there is room for more than one winner.

How is success measured for cellphones? A flop will sell fewer than 100,000 units, a hit at least one million, and a runaway success five times that or more, analysts say. In July 2007, the iPhone’s first month on the market, 80,000 people bought one. Apple went on to sell iPhones, including the 3G version, to more than five million Americans, according to comScore.

Big phone releases happen year-round, but there is a concentration in the summer. That way, phone carriers and manufacturers can take advantage of two crucial selling seasons: back to school and the holidays, said Mark Donovan, an analyst with comScore. As soon as June 8, just a few days after the expected release of the Pre, Apple may introduce a third version of its iPhone at the company’s annual conference for software developers. The phone could become available a month later, though analysts and Apple rumormongers say it might also come later in the summer.

Analysts generally agree that the phone will have an upgraded camera, a faster processor and better location services. Apple, of course, has less risk than other phone makers; its iPhone is already a blockbuster. That said, if the company fails to keep innovating, it risks losing its buzz. Jennifer Bowcock, an Apple spokeswoman, declined to comment on the company’s plans for a new phone.

Also in June, Samsung has said, it plans to release the i7500, its first phone based on the Android operating system, but it has not said when that phone will come to the United States. HTC recently released the Android-equipped Magic in Europe. And Motorola says it plans to start selling several Android phones this summer, phones the company is counting on, given its desperate need for a hit. Trickling into the market — though release dates are uncertain — are a host of phones using a new mobile operating system from Microsoft. Microsoft’s current mobile platform has not met expectations. The hope is that a new operating system, Windows Mobile 7, will reboot the franchise.

Mr. Wolf of Needham said that the concept of sexy phones equaling or superseding network quality as a selling point for consumers started in earnest in 2006. By then, carriers realized, most adults already had cellphone service and needed to be inspired to buy new phones or seduced into switching carriers.

An early example came in July 2006, when Verizon Communications introduced the LG Chocolate, which was preceded by a teaser advertising campaign that promoted a release date. In November 2007, Verizon began another big campaign, called “Next phones now,” that included the LG Voyager, LG Venus, Blackberry Pearl and Samsung Juke (not to be confused with the Jake, or the Jack).

Brenda Raney, a spokeswoman for Verizon, argued that blockbuster phones cannot exist without a great network. “Consumers know if you don’t have a good wireless experience, what good is the phone?”

Mr. Donovan of comScore disagreed. “No one’s out there saying the Palm Pre is going to be a hit because the call quality is magnificent,” he said. Consumers are increasingly focused on the latest devices, he said, and manufacturers have only a short time to draw consumers’ attention.

“Phones don’t stand the test of time,” Mr. Donovan said. “I look at my personal handset museum, and the coolest thing I had in my pocket eight years ago is laughable.” When it comes to phones, he added, “there are no ‘Citizen Kanes’ out there.”