Research In Motion Ltd. continues to cede ground to its competitors in the battle for smartphone supremacy in the United States.

RIM’s share of the United States smartphone market has fallen nearly 60% over the past 12 months, to just 9% in the third quarter of 2011, down from 24% in the same period in 2010, according to new data from market research firm Canalys .

“RIM’s market share has fallen below 10% for the first time, and the current outlook for it in the U.S. is certainly bleak,” said Canalys senior analyst Tim Shepherd.

“While Apple can for now get away with not have a 4G smartphone, no other vendor in the U.S. can. RIM must deliver a competitive high-end 4G smartphone in early 2012.”

In February 2010, the Waterloo, Ont.-based commanded 42.1% of U.S. smartphone subscribers with its ubiquitous BlackBerrys, according to data from comScore Inc . However, by the end of March 2011, it controlled just 27.1% of the market

Although RIM appears to be struggling to keep pace with rivals Apple Inc. and devices running Google Inc.’s Android software in the U.S., the company continues to see robust growth in other international markets.

According to Canalys data, RIM’s presence in Europe, the Middle East and Asia grew 59% over the same period last year, and 56% in the Asia-Pacific region, driven primarily by the popularity of its BlackBerry Messenger (BBM) instant messaging technology.

“But undoubtedly RIM needs to deliver new, fresh, exciting products to the market and increase its innovation and execution if it is going to have any chance of reasserting its position in North America,” Mr. Shepherd said.

“It badly needs to deliver on its potential with its new BBX platform.”

HTC Corp. was the top smartphone maker in the U.S. in the third quarter, shipping 5.7 million smartphones for an approximately 25% share of the market.

Samsung Group Ltd. shipped 27.3 million smartphones globally in the third quarter, making the company the top smartphone maker in Asia-Pacific, Estern Europe and Latin America, a former RIM stronghold.

Globally, Canalys data showed the worldwide market for smartphones grew 49% year-over-year to 120.4 million units in the third quarter.

By resurrecting its most popular brand with the unveiling of the Droid RAZR smartphone on Tuesday, Motorola Mobility Inc. is hoping to revive its market share.

At an event in New York City, the 83-year-old Illinois phone maker unveiled its latest mobile device based on Google Inc.’s Android software: version 2.3.5 or “Gingerbread.” Measuring just 7.1mm thick, company chief executive Sanjay Jha called it the world’s thinnest mobile phone; the same title claimed by the original Razr V3 more than six years ago.

“Our question was, what does it take to make the best smartphone on the planet?” said Mr. Jha during his presentation.

“Not only is [the Droid Razr] a marvel of modern engineering, it is beautiful.”

Also boasting a large 4.3 inch QHD display, up to 9 hours of video playback time, diamond cut aluminum accents and compatibility with advanced LTE (long-term evolution or 4G) wireless networks, Motorola has set the bar high for its latest smartphone.

Motorola continues to bet on Android, which isn’t surprising considering Google shelled out US$12.5-billion to acquire the company over the summer (the deal has not yet been approved by regulators in the U.S.).

“Motorola is looking to capture, or recapture some of that association for this groundbreaking, thin device with a physical look and feel unlike any other device and that is unique,” said Charles Golvin, principal analyst with Forrester Research Inc. “But [the Droid Razr] is not groundbreaking in the same way that the original Razr was groundbreaking.”

When the flip-phone Razr hit store shelves in late 2004, the reaction from competitors was similar to when Apple Inc. disrupted the market when it launched the iPhone three years later.

“That was a unique device for its time and all [Motorola’s] competitors rushed to try and make something similar,” Mr. Golvin said.

More than 130 million people bought a Razr during the four years the device was available, making it one of the most popular consumer products in history. Initial sales managed to rival Apple’s iPod, with 50 million units sold by July 2006.

While the new device will be called the Droid Razr in the United States, it will be known to the rest of the world simply as the Razr when it launches next month. U.S. customers can pre-order the Razr for US$299 starting next week, though the company did not provide a Canadian release date or price.

Despite the radically different state of the mobile market today compared to 2004, Motorola appears to be positioning the Razr against smartphone market leader Apple just as it pitted the original Razr against Nokia Corp. nearly seven years ago.

Also on Tuesday, the company introduced its answer to the iCloud remote-access service Apple Inc. launched last week. Called ‘MotoCast’, the app comes pre-loaded on the Droid Razr, giving users the ability to instantly access files stored on other personal devices such as a tablet or home computer.

“While we know that everyone will be in the cloud at some point, today only about 15% of people store content in the cloud,” Mr. Jha said

“The rest of us store our content on our own devices.”

The Motorola ‘Motoactv’ also debuted at the event; a watch-like fitness-tracking music player intended to rival Apple’s iPod in the portable MP3 market.

Motorola market share has fallen steadily since it was the world’s top handset maker in 2003, standing as of mid-August at number eight with just 2.4% of the global market, according to Gartner Inc.

Yet the Razr managed to rejuvenate Motorola’s position once before. And having remade its most successful device for the smartphone era, Motorola is hoping it can do it again.

Google Inc.’s power play for Motorola Mobility Inc. is in large measure designed to fortify itself legally as it expands its Android mobile universe.

But by targeting one handset maker to acquire, some analysts are raising questions over whether the Mountain View, California Web search giant has undermined the very model that has seen Android plant itself into multiple companies’ devices.

“How does [Google] manage the business model?” asked Wells Fargo Securities analyst Jason Maynard on Monday’s conference call announcing the deal. “What are the things you’re going to do to make sure Android is still at the very least on an equal playing field?”

If the deal is approved, he suggested “software issues” will “invariably” arise with rival handset makers of Motorola which also rely on Google’s Android system to power their smartphones, like HTC Corp., Samsung and Sony-Ericsson — whom combined far exceed Motorola device sales.

“The move raises concerns for the wider Android ecosystem as the acquisition means that Google will become a hardware vendor,” Nick Dillon, analyst at market research firm Ovum PLC. “Google will move from the position of partner, to that of competitor, potentially placing significant strain on the ecosystem.”

Through a strategy of partnering with weaker smartphone manufacturers with less market share and making its software free to developers, Google’s mobile operating system has experienced torrid growth against major opponents Apple Inc., Research in Motion Ltd. and Microsoft Corp. From a humble start a few years ago, Android has mushroomed to occupy 43% of global smartphone market, according to Gartner.

Growth could be challenged however if relationships sour, and manufacturers are convinced into supporting rival operating systems, like Microsoft’s Windows Phone 7, Mr. Dillon said.

“If, for example, Google provides preferential access to the Android code to its own hardware division, this would place other vendors at a disadvantage and may lead them to question their commitment to the platform, potentially pushing some towards others,” the Ovum analyst said.

Larry Page, Google’s co-founder and chief executive, said he doesn’t foresee any such strain with Google’s handset partners.

“We’ve had tremendous success on Android because of our ability to manage and run that ecosystem with a number of different partners in the past and I expect we’ll continue to do that,” he said.

Andy Rubin, the company’s senior vice-president of mobile, said Monday the company’s “lead device strategy”, where Google partners with one specific manufacturer annually to collaborate and develop a new device which is released ahead of the holiday selling season, will remain unaffected.

“We don’t expect that to change at all,” he said. “The acquisition will be run as a separate business and they will be part of that bidding process — part of that lead development process. And obviously Android remains open to other partners to use as [it] is today.”

The deal, which will give Google some 14,600 patents, comes weeks after Google lost out on a bid for the portfolio of Nortel Networks Corp. The former Canadian telecom giant sold off a stable of 6,000 related to mobile, software and network technologies in late July to a consortium consisting of Apple, RIM and others outbid Google.

Android, Google Inc.’s open-source software for mobile phones, is still the fastest growing mobile operating system, expanding in line with device makers running the Google software (which are also experiencing a major boost).

With the latest results in from all major device makers, Samsung and HTC handsets, which both run Android software, are the largest gainers. The news provides no relief to Canadian company Research In Motion (RIM), the maker of BlackBerry that just cut 2,000 jobs after seeing its stock price cut in half and an onslaught of bad news, missed earnings and tougher competition.

So while RIM seeks to b olster its innovation pipeline through acquisitions , sales of Android phones are taking off with more than 400 devices from 39 manufacturers running their software.

Android smartphone shipments jumped 379%, with the operating system now making up almost half of the smartphone market , according to Canalys, an IT research firm.

Samsung saw growth across all its markets in Q2 2011 with its number of units shipped up to about 76 million, from 70 million in 1Q2011, said Mark Sue, an analyst at RBC Capital Markets.

“Strong smartphone sales were led by the Galaxy S and Galaxy S II driving higher average selling prices. Samsung’s strong medium and high-end device line-up drove growth in developed markets,” Mr. Sue said.

Taiwanese manufacturer HTC also experienced a major jump, shipping 12.1 million units in Q2 2011, up 124% from a year before and 25% quarter-over-quarter ,led by strength in the sales of popular devices such as the Thunderbolt and Incredible, said the report.

“The fall device lineup is shaping up to be one of the most competitive in recent history,” Mr. Sue said, “anticipated launches include a refreshed iPhone, Nokia’s debut Windows Phone device, new LTE offerings and expanding low and mid range smartphones.”

The only companies that enjoy Apple Inc’s success as much as Apple does are likely the ones that manufacture the component parts that make products such as the iPhone and iPad tick.

Broadcom Corp. , a company that manufactures chips and internal components for broadband and wireless technologies, is one such beneficiary.

Harlan Sur, analyst with JPMorgan, is very bullish on Broadcom’s prospects in the second half of the year and beyond thanks to iPhone and iPad shipments that continue to surprise on the upside.

“We believe that Broadcom’s partnership with Apple remains strong and positions Broadcom to win additional connectivity sockets in future iPhone and iPad refreshes,” he said in a report.

Mr. Sur figures Broadcom has about US$5 worth of content in iPhones and US$6 of content in iPads.

With fellow JPMorgan analyst Mark Moskowitz upping his 2011 iPhone forecast by about 4 million units (to 175 million units) and iPad forecast by 3.4 million (to 30.8 million units), this could produce an additional US$22-million to US$24-million in connectivity revenues for Broadcom in the second quarter compared with prior expectations.

And, given expectations for the third quarter, revenues could grow by another US$50-million to US$55-million in the third quarter.

Overall, Mr. Sur forecasts Broadcom shipments to Apple to total more than US$750-million in 2011, up more than 50% year-over-year.

“Given this dominant position at Apple, we believe Broadcom will be one of the major beneficiaries as Apple continues to expand its footprint in smartphones, tablets and notebooks,” he said. “In addition to Apple, we believe Samsung, HTC and Sony Ericsson smartphone rollouts will contribute to higher connectivity shipments in the second half of this year for Broadcom.”

Blink and you might find the smartphone market just changed in an instant. With the number of smartphones shipped worldwide expected to hit one billion by mid-decade as more and more people swap out their old feature phones for more advanced devices, an ever-expanding cadre of competitors are vying for a piece of the market. As a result, investors can often be at a loss to know where the value lies from one quarter to the next.

Financial Post technology reporter Jameson Berkow takes an action shot of the fast moving industry to see where some of the top players stand.

Apple

Given the option of any smartphone stock, Apple Inc. is often the experts’ personal choice.

“If I were going to bet anywhere with my own personal money it would be Apple for sure,” said Kris Thompson, senior technology research analyst with National Bank Financial.

He has pretty good reason for his hands-down selection. The value of Apple’s shares have grown in excess of 170% since the first iPhone landed in the summer of 2007, no doubt bolstered by the launch of the market redefining iPad tablet last year.

More recently, the fruit of Apple’s success has lost some flavour, with its share price down 4% in June and 8% from its record high of US$363.13 on Feb. 16, its worst first-half performance since the global financial crisis of 2008. Yet the slide has not sullied market optimism.

Mike Abramsky of RBC Capital Markets, pointing to widespread expectations of a less expensive iPhone to launch in September, believes Apple stands on the verge of doubling its already substantial worldwide smartphone market opportunity.

Asked whether being at the top of the smartphone totem pole is cause for limited upside potential, Mr. Thompson said, “for sure it worries me, but I would be more worried about the other vendors.”

HTC

With all the shine on Apple, it can be easy to overlook a design manufacturer like HTC Corp. But investors ignore the Taiwanese company at their own peril.

Chiefly known as the first adopter of Google Inc.’s Android platform in 2008, the company that bills itself as being “quietly brilliant” has enjoyed massive growth ever since.

Its share price on Taipei’s Stock Exchange has grown more than 15% this year and in April, the company’s valuation surpassed that of Finnish phone giant Nokia Corp. to reach US$33.8-billion as of April 8.

“HTC is clearly one of the winners [in the smartphone sector],” said Colin Gillis, senior technology analyst with BGC Partners in New York. “They make kickass handsets and just look at the news out there, they are making record revenues every single month.”

Having lost its exclusive rights to the Android platform in mid-2009, Mr. Thompson at National Bank says HTC has since done a good job of differentiating itself from other Android vendors.

“They have their own graphical user interface and people seem to like that,” he said.

Motorola

Having only been spun off from the former Motorola Inc. in January, Motorola Mobility Holdings Inc. is technically the youngest of the major smartphone players. So far, the infant mobile Motorola has bet its success on Android and has done fairly well as a result, though its share price has nonetheless remained mostly flat.

The issue, according to Richard Tse of Cormark Securities, is the Illinois-based company has failed to distinguish itself in the increasingly crowded field.

“The mindset of those companies [Apple Inc., Google Inc., HTC Corp. etc.] are new and a bit different from the old school mindsets of the Motorolas of the world,” the technology analyst said.

Motorola once enjoyed massive success with the ‘Razr’, though eventually the ultra-slim feature phone lost its lustre; leading some to fear the same for its Android line.

“Motorola is having a resurgence, but they had a resurgence with the Razr as well and then it fell off,” said Mr. Gillis at BGC. “So [the current resurgence] is fleeting because they really don’t have a lot of brand power.”

One possible sign of an imminent downfall: Short interest in Motorola’s shares has more than tripled in the past six months.

Nokia

Initially, market watchers were unhappy with the billion-dollar deal Nokia Corp. inked with Microsoft Corp. in February to use the global software kingpin’s Windows Phone 7 platform on all its future smartphone products.

But the floundering Finnish phone maker had to do something — its Symbian platform was just not catching on — and time to reflect on the choice has recently begun to spawn some renewed optimism in the company.

“Picking WP7 over Android I think was a pretty smart move,” said Mr. Gillis. “It is still going to be hard to differentiate, but sometimes it is not just about differentiation, it is also about distribution and Nokia has a good channel for that.”

Nokia’s potential to capitalize on that advantage is precisely why market research firm IDC is convinced WP7 will be second only to the ubiquitous Android in terms of global smartphone platform popularity by 2015.

RIM

No longer does the smartphone market begin and end with the RIM BlackBerry. That unpleasant reality has sent shares of Waterloo, Ont.-based Research In Motion Ltd. into a tailspin which has carved out more than half of the BlackBerry maker’s market value in the last three months with analysts expressing little hope the company will ever earn that market cap back.

“In this market you are either a high end white tablecloth restaurant or you are a fast food place,” said Mr. Gillis in an effort to summarize RIM’s woes.

What he means is the BlackBerry line of smartphones are priced at a mid-range relative to their rivals — making it difficult for RIM to distinguish itself — as well as its BlackBerry PlayBook tablet straddling the line between the consumer and enterprise markets.

Yet the Canadian tech darling does recognize the need to refresh its aging platform, argues Mr. Tse of Cormark, with long standing plans to transition all its devices to a QNX platform.

“I think there is a lot of potential there,” he said. As RIM rushes to bring QNX devices to market, its earnings multiple remaining below 5x could be a bargain for anyone optimistic about the company’s chances of a turnaround.

“If you think this is just a bump in the road for RIM, which it could very well be, [RIMM] is still a decent value,” said Mr. Gillis. Nonetheless, he maintains a Sell rating on RIM.

Margin pressure to squeeze short-term sector growth

Apple might enjoy access to a much larger market should it decide to launch a less expensive iPhone in September, but its profit margins will likely take a hit as a result. It is a growing concern not just for the world’s largest technology company, but indeed, for the entire smartphone sector.

“The smartphone market at the moment is just getting flooded with competition,” said Mr. Thompson at National Bank. “Gross margins are going to come under very major pressure next year and it is going to be all vendors who will suffer.”

For those investors unwilling to take the risk on smartphone stocks, he recommends the enterprise software market as a safer alternative.

jberkow@nationalpost.com

HTC Corp. , the Taiwanese smartphone maker branded as being quietly brilliant, quietly surpassed the market capitalization of Finnish phone giant Nokia Corp. this week.

Valued at approximately US$33.8-billion as of market close on Wednesday, that figure exceeded the US$33.4-billion capitalization of Nokia at the time, making HTC the third-largest phone maker on Earth behind only Samsung Electronics Corp. and Apple Inc.. Although HTC’s market cap has dipped slightly below that of Nokia since, it will probably not remain at that level for long.

After all, the two companies have been moving in utterly opposing directions for years.

Virtually unknown to the investment world just three years ago, HTC became the first beneficiary of Google Inc.’s open source Android software. Launching the first Android-powered smartphone — the HTC Dream — in October 2008, HTC would enjoy exclusivity with Android for 18 highly lucrative months.

The value of its shares have tripled since late 2007 as the company has become a household name among technology investors. Driven largely by the success of its latest Android device — the ThunderBolt — HTC posted record quarterly profit on Friday.

Nokia, meanwhile, has witnessed the value of its shares tumble for years as the Finnish phone giant has continued to lose ground in the rapidly expanding smartphone market to Apple Inc.’s iPhone and companies building Android-based smartphones. Those companies include Samsung, Motorola Mobility Holdings Inc., and HTC in particular.

In early 2007 — before there was any smartphone market to speak of and feature phones were still the mobile device of choice among most consumers — Nokia’s market capitalization was more than US$160-billion. Since the rise of iPhone and Android, that value has diminished by about two thirds.

Recognizing that its own smartphone platform — Symbian — was failing to rival competing operating systems, Nokia inked a billion-dollar deal with Microsoft Corp. in February to use its Windows Phone 7 platform in all future Nokia smartphones. Initial reaction to the the deal among investors was pessimistic to say the least.

It might not have been such a bad bet though: WP7 is projected to become the second-most popular smartphone platform globally by 2015. Encouraging, though likely not enough on its own for Nokia to keep HTC at bay.

Android has been on the march for much longer than WP7 and shows no signs of slowing its advance. The Google platform is expected to dominate the international smartphone market by the end of next year.

Besides, in addition to its expansive stable of Android products, HTC makes WP7 phones as well.

jberkow@nationalpost.com

The introduction of Apple’s iPad2 has raised the risk of a bubble burst in an oversupplied tablet market as soon as the second half of 2011, JPMorgan warned on Wednesday.

Improvements in the second generation of the popular device stand to make it tougher for the first generation of competitive offerings to play catch-up, meaning actual shipments could fall well short of plans, analyst Mark Moskowitz told clients.

His outlook for 2011 implies that supply could outpace demand for tablets by 17.2 million units, or 35.9%, “which is not good.” JPMorgan estimates that Apple and other tablet makers and hopefuls plan to build 81 million tablets in 2011, with shipments forecast at 47.9 million.

New entrants to the tablet party include names like Acer, ASUS, HTC, Lenovo, LG, Motorola and Research In Motion. Apple is expected to continue to dominate with iPad shipments of roughly 29 million in 2011, representing approximately 60% of the 48 million unit tablet market.

The bubble risk is higher for component suppliers than for the tablet makers themselves, Mr. Moskowitz noted.

“Based on our research inputs, tablet makers eager to emulate Apple’s meteoric start are trying to secure components with inflated build plans,” he said. “The problem is that we do not think a blend of quality and price from the iPad wannabes will attract the incremental purchaser.”

So while tablet shipments could fall short of expectations and produce an oversupply of semiconductors, this should have a limited impact on revenues in the sector, JPMorgan’s Christopher Danely said in a research note.

He pointed out that the 48 million unit tablet market is marginal in relation to the overall PC market that should see about 375 million shipments in 2011 and the handset market at roughly 1.5 billion.

The tablet wars are heating up – and for good reason.

Global revenue for the emerging mobile computing category is expected to rise from US$11-billion in 2010 to nearly US$70-billion in 2014, according to RBC Capital Markets analyst Mike Abramsky.

After Apple’s anticipated continued leadership, he sees Research In Motion, Samsung, Motorola, HTC and HP as strong contenders. He also thinks Microsoft may face challenges, as might many less-differentiated “Not Another Android Tablet” vendors, some of whom may exit the market.

In 2011, more than 50 tablet offers are expected to be introduced as the competition looks to catch up with Apple’s iPad.

While the launch of the iPad 2 may have disappointed some, improvements both inside and out should sustain or add to the company’s market leadership in tablets, according to JPMorgan analyst Mark Moskowitz.

He is particularly impressed by the fact that the arrival of a second-generation iPad comes as the competition is rolling out or prototyping their first-generation tablets. As a result, the analyst thinks his assumption of Apple’s market revenue share may be conservative at 68%.

“iPad 2 raises the bar higher for the wannabes,” Mr. Moskowitz told clients.

His colleague Rod Hall thinks RIM may see less impact from the new iPad than Motorola since the BlackBerry maker plans to competitively price its PlayBook tablet.

As for HP’s accusation that RIM imitated its TouchPad and webOS when creating the PlayBook, Mr. Hall believes HP is referring to the use of some gestures on the tablets. However, the analyst noted that use of gestures to control a mobile device was created and made popular by Apple’s iPhone.

“We do not see any negative immediate threats from HP that could hurt the PlayBook’s popularity,” he said in a research note.