A $99 Smartphone Key for Handset Sales

What will it take for the handset market to keep expanding?

Today's New York Times poses the question "Can The Cell Phone Industry Keep Growing?" The story attempts to determine whether the cellular industry can advance despite sagging handset sales, industrywide layoffs and a dearth of new customers.

The story quotes analysts and pundits as believing the industry's salad days may be over. Despite a few protests and shoulder shrugs to the contrary, sales projections for 2009 are stagnant at best and might not pick up again after the current recession.

(Photo gallery: Smart Phones )

What the industry knows and what everyone else must remember is that smartphones -- and all other top-of-the-line handsets -- make up a small slice of the U.S. cell-phone sales pie. Think in terms of 10% or so for smartphones vs. 90% for all other handsets. These number can be traced to one simple fact -- most cell-phone buyers prefer not to spend more than $99 on a new device.

Think about that. Most of what you read or hear or even desire about Apple iPhones (AAPL), BlackBerries (RIMM) and touch-screen models and technologies from Google (GOOG), Nokia (NOK), LG, Samsung, Motorola (MOT), SonyEricsson (ERIC) and the others is just a drop in the bucket when compared with what customers really buy.

(Motorola is looking to find its sales niche in the midprice range, as TSC's Scott Moritz recently reported). Of course, when someone walks into an AT&T (T), Verizon (VZ), T-Mobile (DT) or Sprint (S) store, he or she will head directly for the shiny new smartphone with all the hot new features.

But after they get to study and hold it in their hands, reality nearly always takes over. Inevitably, the follow-up question mentions other more modestly priced models. According to sales records, those cheaper models are what they wind up buying.

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