Monday, August 20, 2012

‘Smart’phones or just a ‘dumb’ call?

Michael Dell is betting big on smartphones to make up for the lack of any ‘killer app’. Is this a two-years-too-late strategy?

On a fine Tuesday afternoon in Tokyo, a year back, Michael Dell made public his intentions to enter the smartphones market. The world was taken aback. Not because this sounded like a far-fetched dream for Dell, who had been facing some tough quarters in the laptop market of late, but because this announcement came some good quarters too late, for speculations about Dell’s intentions to acquire Palm had been doing the rounds for quite some time then. Cut to the present, his wish to get into the smartphones arena has turned out to be real; getting hold of Palm didn’t. [Hewlett-Packard, the number one vendor in the PC market acquired Palm for $1.2 billion on April 28, 2010.]

Truth is that even 13-months after Dell first announced its entry into the mobile category (a period during which it has already launched a pair of smartphones – one with Google’s Linux-based Android OS – the Dell Mini 3i smartphone, which was launched in the Chinese market in November 2009 and another – the Dell Aero smartphone, which will soon hit US market through AT&T), many in the industry still doubt its future. The whisper in the woods at present however is that Dell is planning to launch five new smartphone models within the next 12 months, which include four Android OS-based and one Windows Phone 7 OS-based smartphones. Ron Garriques, President of Dell Global Consumer Group says, “Our entry into the smart phone category is a logical extension of Dell’s consumer product evolution over the past two years.”

To hit back hard at critics, Dell is also exploring strategic tie-ups to move into newer geographies, the latest being announced on April 14, 2010, with telecom provider Telefonica. The strategic implication of this deal is that, while it will improve Dell’s chances at newer hardware and services, on the other it will give Dell’s smartphones access to the Latin American and European markets. Dell is also looking at strengthening its presence across emerging Asian economies like China & India. So can smartphones do to this once-Lord-of-the-PC-Ring, what the iPhone did to Apple (the iPhone is the highest selling product under the Apple unbrella today, acccounting for 40.33% of its revenues in Q1, 2010)?

From a category perspective, Dell may just have taken the right gambit. As per the Q1, 2010 report by IDC, the global smartphone market grew by twice as much as the overall mobile phone market on a year-on-year basis (56.7% vis-a-vis 21.7%). Better still, as compared to the previous year, the quarter gone by saw smartphones account for 18.8% of all mobile phones shipped during the quarter, as compared to 14.4% a year back. Also, all the other players have contributed in a fairly equal proportion to this growth. While Apple grew by 131.6%, other players like Motorola, HTC, Nokia and RIM also maintained high double-digit improvements in volumes (growth figures of 91.7%, 73.3%, 56.9% and 45.2% respectively). The report also highlighted how a total of 54 million smartphones were shipped in the first quarter of this year – an increase of 56.7% from the same quarter a year ago. These are statistics enough to prove a heated-up table, enough to justify Dell’s timing to call it a bluff, with smartphones market on a higher growth trajectory as compared to even the overall mobile phone market.