High End Smart Phone Market Has Peaked

Despite comments made by Tim Cook during Apple’s Q3 FY13 conference call on the condition of the market for high end smart phones, we think the market has clearly peaked.

On Saturday, July 27, 2013 Barrons published a post authored by Tiernan Ray to its Technology Trader blog titled What the Street Missed in Apple’s Earnings. On the topic of average price across Apple’s product line of iPhone 4s and 5, Ray reports “But the average price declined 4% from the prior-year quarter, and fell from the fiscal second-quarter level, as many buyers sought out the cheaper iPhone 4 and 4S, versus the more expensive iPhone 5”.

We think the price drop on the iPhone 4 is much greater than 4%. We received an iPhone 4 at absolutely no charge from our wireless carrier, Verizon, during this quarter. With Verizon giving the phone away (and, in all likelihood, AT&T matching their offer) we can help but conclude the market is saturated, at least at the low end of the range.

Looking over to the Windows Phone 8 side of the equation we can’t help but reach the same conclusion. Once again, we paid our wireless carrier, Verizon, $200.00 for our HTC 8X. The phone is promoted today at a street price of $49.95 on the Verizon Wireless website.

So we think it should be absolutely clear the market for high end smartphones has been topped. What does this market condition indicate about Google’s intended $500 Million fall advertising campaign for their new Motorola phone? In our opinion, we think these conditions point to a poorly timed product release, which will likely fail.

Further, all of the predictions about wearable devices — watches, glasses, etc. all amount to the tech equivalents of the Ford Edsel, or Coke’s “New Coke” fiasco. It is simply far too early to tell where the market will head next for consumer level computing devices.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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