Mobile Hardware Market Heats Up

Third-quarter smartphone sales data may be signaling disruption in the mobile hardware market.
By Nathalie Pierrepont ,

NEW YORK (

TheStreet

) - Third-quarter smartphone sales data may be signaling disruption in the mobile hardware market.

Samsung's

Galaxy S III overtook

Apple's

undefined

iPhone 4S, which has dominated the market for the last two years, to become the world's best-selling smartphone model in the third quarter of 2012, said

Strategy Analytics

last week. The technology research firm estimated that Samsung sold 18 million S III models during the quarter, compared to 16.2 million iPhone 4S sales.

The news from Strategy Analytics was reminiscent of a discussion at the

Global Technology, Media and Telecommunications Convergence Summit

hosted by

SNR Denton

in Menlo Park, Calif. last month:

"Is Apple the undisputed winner in mobile hardware?," a moderator asked a panel addressing the latest trends in the rapidly-changing mobile marketplace. Three out of five panelists, comprised of notable investors and entrepreneurs, responded with a resounding no.

There is "a teetering house of cards when you look at the hardware sector because 90 percent of the industry profits come from Apple," said panelist and Co-Managing Partner of

Relay Ventures

, Kevin Talbot. "That means all other handset manufacturers, and I'm not talking about operating systems, just hardware, are 10 percent of the profits. And that's not sustainable."

Apple may be vying for the number one position of smartphone hardware providers, but it's a distant second in the operating system market. Android, which powers Samsung's Galaxy S III, has been leading that market since it was introduced in 2008.

About 136 million Google Android devices were sold in the third quarter of 2012, capturing 75% of the mobile operating system market, according to a report released by tech research firm

IDC

last week. During the same period, 26.9 million Apple iOS devices were sold, comprising 14.9% of the market.

The majority of the audience at the mobile hardware panel admitted to owning an iPhone, but Warren Packard, another panelist and founder and CEO of a sports viewing platform called

Thuuz

, pointed out that the 250 tech-savvy attendees - including senior executives from

Zynga

(ZNGA) - Get Report

,

American Express

(AXP) - Get Report

,

Sony

(SNE) - Get Report

,

Brocade Communications

(BRCD)

,

NBC Universal

and

Blackstone Group

(BX) - Get Report

- were not representative of the global mobile market. In fact, Packard said, two-thirds, if not more, of Thuuz's customers use

Google's

(GOOG) - Get Report

Android devices.

"People in Middle America, who love sports, but want a different experience, they're on Android," he said. "And as we get more international, we're seeing a lot more Android devices."

The panelists all seemed to agree that disruption in the mobile marketplace is par for the course. The explosion of mobile devices is "giving new entrants opportunity to come in and completely change the existing landscape," according to Jay Jamison, panelist and partner of

Blue Run Ventures

. "And I think it makes it a very exciting time to be an early stage investor and a very exciting time to watch what's happening in the marketplace."

"85 percent of the smart phones that are connected to a network today are running on operating systems that did not exist five years ago," said Talbot, as he walked through the short history of mobile. "The only thing that you can assume is that something is going to change -- Because that's been the pattern," he said.

As for smartphones, however, great things are expected from Apple's iPhone 5, which was

launched

in a blaze of publicity in September. Strategy Analytics, for example, predicts that the Galaxy S III's position as the world's best-selling smartphone is likely to be short-lived, thanks to Apple's latest smartphone.

Interested in more on Apple? See TheStreet Ratings' report card for

this stock

.

--

Written by Nathalie Pierrepont in New York

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