SAN JOSE, Calif. Apple and software are in the driver's seat in the mobile market but platform fragmentation may be ahead, according to analysts from Barclay's Capital who shared their observations from the Mobile World Congress in Barcelona this week.
On the hardware side, the mobile chip and systems business is still strong, but average selling prices are on the decline. And despite reports of mobile data congesting carrier networks, no big upticks in capital expenditures are on the horizon, they added.
1) Apple, software in the driver's seat
"Software is the area for handset differentiation, and Apple remains the standard," said Jeff Kvaal, communications equipment analyst at Barclays. "Hardware is less relevant than it once was, and it's harder to light up the show with a nifty new form factor," he added.
The announcement of Windows Mobile 7 was "the most interesting element of the show this year," Kvaal said. It's user interface, borrowing ideas from the Microsoft Zune MP3 media player "appears compelling and closes a strategic hole for them, but vendor response was not wholesale positive because it's not free like Android and does not allow vendors to tailor the interface," he said.
Indeed market watcher Forward Concepts predicts Google Android will rise from just 3.4 percent of the smartphone software market to 20 percent by 2014. But other open source alternatives are on the way.
Just before MWC, Symbian released its first open source version. At the event, Intel and Nokia announced they will merge their Moblin and Maemo Linux environments.
Apple will try to maintain its edge by announcing this summer a new form factor for its iPhone using an upgraded version of its mobile software "I think they will try to change the game on everybody--it bothers them that everyone stole their form factor," said Ben Reitzes, a Barclay's analysts following Apple.
2) Fragmentation dead ahead
"I worry the Android and maybe even the Microsoft platforms will be split" as phones emerge using different processors and screen sizes, said Kvaal. "Trying to get Facebook on Android requires 50 different iterations of the same software.
"A lot of handset vendors are worried about fragmentation in Android--keeping apps running against all those form factors," he said. In addition the relatively high burden Android puts on a host processor leaves some vendors "worried they can't reach the mid- and low tiers of smartphone market," he added.
The fact it can control both the hardware and software is another reason analysts such as Kvaal are bullish on Apple.