Smartphones: In Apps We Trust

It's no secret that Apple's (AAPL - commentary - Cramer's Take) iPhone 3G and Research In Motion's (RIMM - commentary - Cramer's Take) new BlackBerry Storm are doing quite well this holiday season. The iPhone changed the entire smartphone category while the BlackBerry already had a strong and dedicated customer base.

However, HTC's (formerly High Tech Computer of Taiwan) new G1 based on Google's (GOOG - commentary - Cramer's Take) Android platform has attracted a lot of press and the company has reportedly increased production targets. In addition, Nokia (NOK - commentary - Cramer's Take) recently announced its first touch-based device, the N97, with availability expected to be in second-quarter 2009.

They will be dozens of other entries into this arena but the question investors want to know is who will win? From my perspective, it's an easy answer: Apple, but not for the reasons you might expect. I think the iPhone is great and its competitors are telling you the exact same by copying it.

Sure, the competition will add some bells and whistles to claim they are better, but that's not going to matter very much in the long run. What will make the difference is applications. This is essentially a rerun of the early days of the personal computer and video game industries.

Generally speaking, software developers are not charities and, like many creative individuals, they enjoy being compensated for their talent and efforts. As a result, those with good ideas for an application tend to target the largest possible platform to make the most money possible. It's why software was developed for IBM (IBM - commentary - Cramer's Take) PCs long before it was available on Wang PCs, TRS-80s or Xerox (XRX - commentary - Cramer's Take) PCs. It's why Sony's (SNE - commentary - Cramer's Take) Playstation was a huge hit for years, Sega bit the dust and Nintendo (NTDOY - commentary - Cramer's Take) wandered alone in the desert until it stumbled upon the Wii.

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At the time of publication, The Telecom Connection model portfolio was long AAPL and RIMM.

Bob Faulkner has been in the investment business for 18 years with an exclusive focus on technology stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Faulkner appreciates your feedback; click here to send him an email.

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