As Hewlett-Packard walks away, a consolidation of the market is overdue. The question now is who will take the lead as the electronics makers lose their dominance. Tony Glover writes
A Hewlett-Packard's decision to walk away from the smartphone market is being seen by some industry watchers as the start of a new era of consolidation in the industry.
After paying about US$1.2 billion (Dh4.4bn) for the US-based Palm in order to acquire the handheld device maker's software platform, HP has thrown in the towel.
The move is regarded by analysts and industry watchers as an indication that traditional phone makers such as Nokia and relative newcomer Apple are being overtaken by software developers such as Google.
"HP will have taken a hard look at whether it could compete with Google, Apple, Microsoft and RIM [Research In Motion], and decided against it," says Tony Cripps, an analyst at the research company Ovum.
"It was always going to struggle to create a vibrant ecosystem of consumers, developers and original equipment manufacturers to compete with Apple, Google and Microsoft without huge investment."
The big question now facing the smartphone sector is which players will take the lead as the industry experiences a seismic shift from being dominated by electronics manufacturers such as Nokia and Apple.
The search giant Google's smartphone software platform Android now dominates the smartphone market with an estimated share of more than 50 per cent.
"Google has had astronomical growth in the smartphone market in the last few years," says Charles Golvin, an analyst at the research company Forrester.
"Google is only one of the beneficiaries of the success of its Android smartphone operating system. Manufacturers of Android-powered phones such as Samsung, Motorola, LG and HTC have also benefited with enhanced market share."
Android has therefore now not only eclipsed Nokia but also pushed ahead of Apple, maker of the internationally popular iPhone smartphone.
Google's strategy in providing only software rather than hardware for smartphones is reminiscent of the way in which Microsoft came to dominate the PC market with its Windows operating system almost three decades ago.
"The main reason Android has been able to surpass iPhone is that it has more manufacturers and carriers," says Mr Golvin.
"Having different phone models by different manufacturers is what fuels Google's growth in the smartphone market."
The way in which the smartphone industry is increasingly dominated by software developers also poses particular problems for Nokia, the former leading mobile phone maker.
"There is no question Nokia is going through challenging times," says Mr Golvin. "It has gradually been losing share in the smartphone market."
The transition period from Nokia's own Symbian software platform to Microsoft Windows is a huge hurdle, he says, as Nokia has yet to release its first Windows software-driven phone.
"The majority of phones now being sold are in the entry category and sold to first-time smartphone users," he says. "Nokia needs not only to produce good phones based on Windows, but also cater for the low end as well as the high end of the smartphone category."
Despite its close partnership with Nokia, the software giant Microsoft lags all its smartphone sector rivals following HP's retreat.
"Microsoft has a great operating system but [has] neither the developers nor the devices as yet," says Mr Cripps.
Microsoft's long-term rival Apple has also been accused of ignoring the growth potential offered by the low end of the smartphone market, a result of pricing its smartphones too high.
Apple does, however, possess a highly popular software platform that is enabling a mushrooming offering of services as software developers come up with applications for a diverse range - from football to stockbroking.
The Canadian smartphone maker RIM is also viewed as lagging in terms of developing new applications fast enough.
"This is a problem that RIM also shares as its perceived application offering is less strong than Apple and Google," says Mr Cripps. "For example, when BlackBerry PlayBook launched, people were saying 'where are the applications'?"
As the smartphone hardware manufacturing industry moves to locations such as China where labour costs are low, western manufacturers such as Apple and RIM may continue to lag a software developer such as Google.
Even before Apple has had a chance to unveil its next smartphone, the iPhone 5, Chinese counterfeiters are reported to have released a cloned version of the new handset.
Just a few years ago, manufacturers such as RIM and Nokia dominated the high end of the mobile phone market, what has now become the smartphone market.
The popularity of Apple's iPhone and the subsequent success of Google's Android system is not only shaking up the smartphone sector but also raising a question mark over some former leading players' long-term survival.
"It is very much a case of hardware makers consolidating around a limited number of high-quality software platforms," says Mr Cripps. "What you end up with is a small number of players, three is the usual number, that come to dominate any sector."