Analysts: iPhone driving smartphone sales

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When the iPhone went on sale in the U.S. last June, many observers predicted that it would ignite sales in the broader smartphone market. After nine months on sale here, and its more recent rollout in parts of Europe, it is now clear that the iPhone has done just that, analysts at the Smartphone Summit in Las Vegas said on Monday.

In the U.S., the number of people with smartphones doubled last year to about 14.6 million, said Mark Donovan, an analyst at M:Metrics. Following years of sluggish sales, smartphone sales are growing much faster than the overall rate for mobile phones, he said.

The iPhone, with its novel Web browsing experience and user interface, has helped drive excitement for the sector despite its relatively small sales. While more than 188 million Symbian phones have sold since the software's inception, Apple had sold 3.7 million phones by the end of 2007.

The buzz around the iPhone extends even to places where it isn't officially available, said Jonathan Goldberg, senior analyst at Deutsche Bank Equity Research. On a recent trip to Asia he saw the phones for sale at a 40 percent premium -- in a market where Apple hasn't begun selling the phones or done any advertising.

Ironically, some analysts said they weren't sure the iPhone should even be considered a smartphone. "The presence of a smart operating system on a phone doesn't inherently make it a smartphone," said Bill Hughes, an analyst at In-Stat. He defines a smartphone as a device for which third parties can make applications that users can download and run in native mode. Even once applications come out based on the iPhone software development kit, it's unclear if they'll do more than existing Java applications, which run on simple feature phones, he said.

The buzz around the iPhone is loudest in North America and Asia, while the reception in Europe has been more muted. "In EMEA, the volumes there are probably below what Apple would have wanted," said Pete Cunningham, senior analyst at Canalys. "It boils down to the fact that people in Europe aren't used to paying for their phones. Apple will need to look at their business model if they want to gain more traction moving forward."

In addition, users in Europe might be waiting for a 3G version of the phone before buying, said Goldberg.

Still, the iPhone is driving more interest in smartphones, as evidenced by how it dominated the discussion at the Smartphone Summit analyst panel. Despite its much larger customer base, Symbian, which is the platinum sponsor of the event, was barely mentioned by the panelists. The Smartphone Summit is a conference that typically runs the day before the CTIA mobile phone conference starts.

Few analysts, if any, would have predicted several years ago that a discussion about smartphones would center so heavily on a device from Apple.

"A few years ago we might have thought we'd see consolidation [in the smartphone market], but what we're seeing is continued, increased competition," Donovan said.

After Symbian, BlackBerry and Windows Mobile dominated the smartphone market for years, both the iPhone and Google, with its Android mobile operating system, have joined the fray. The new entrants promise to keep reshaping the future of the smartphone market.

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