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The Coffee Catastrophe that is to come


There is a stretch of Baker street where there is one Sony dealer and five coffee shops. The sixth shop is a McDonalds, only the Sony dealer won’t sell you coffee. High streets everywhere are like that. It’s not too far removed from Douglas Adams Shoe Event Horizon. Then the British Shoe Corporation folded and shoe retailing reached some kind of equilibrium.

The phone industry has pulled off the trick of reaching the equilibrium without the catastrophe that befell shoes and is to come to Starbucks and their ilk.

This time it’s not a retail balance but product mix. Despite Nokia trying to persuade us that there are fashion phone users (the 7000), Business (6000 or E) and multi-media (N-series), or Sony Ericsson saying that you want Music (Walkman), Photographs (Cybershot) or a special all-of-everything experience (Xperia), we know that there are really three types of phones. Cheap ones, mid range ones and smartphones. Traditional thinking was Smartphones would replace mid-range ones and cheap phones would gain the features of the mid range and the mid range would disappear.

It hasn’t happened.

Expansys HTC Touch Diamond advert

If you look at Gartner figures the market is flat. I know that’s not what the text says but like all analysts figures you have to read the numbers and think for yourself. Look at the table by operating system. 10% of the phones sold are Linux. You can’t really count those as being smartphones because they are devices like the Motorola V8. They might run Linux but there is no way a third party can develop for them. You can’t buy an SDK and write code for a V8 any more than you can for a Nokia Series 40 phone. Both restrict their development to Java. Take those out, and allow for the Blackberry being only open to those that RIM sanction and the growth in “smart” phones is pretty flat.

At the cheap end of the market different things are happening. Nokia made interesting comments in an announcement that it expects to lose market share. Nokia had walked away from deals because the profit wasn’t there. This is a coded signal to other manufactures not to drop their pants on price to the networks. If Nokia with the best platforming and lowest costs can’t afford to play no-one can.

Operators have spent the last few years saying “If you don’t hit the prices we want we’ll go somewhere else”. Now Nokia has said “fine, off you go”. It’s not just Nokia. Motorola has given up on Ajar and other majors also seem to be less keen on making $2 on a $30 handset, so the operators will have to go to the likes of ZTE, Compal and Pantech.

This all means the mid-range space keeps its ground. It doesn’t get squeezed from the top by smartphones or from the bottom by budget phones but remains established.

The problem with this equilibrium is that no-one has realised that we have reached it. Perhaps they are all drinking too much coffee to have noticed.

Cat Keynes publishes her thoughts on the mobile phone industry every Sunday at www.catkeynes.com you can read the column  the previous Friday by subscribing here.


HTC expects to sell up to half a million Android phones. This seems optimistic for a first phone on a new platform. All phones take a while to have the bugs knocked out of them and a new Smartphone will need more than most.

Some people have short memories and are acting as though Sony Ericsson is saying something new when at the Xperia X1 preview it was said that Xperia was not tied to Windows Mobile. Isn’t that what they said when Xperia was announced at Mobile World Congress? But then that report also says that Sony Ericsson is loss making (it isn’t) and is unable to type www.expansys.com to find a price: £584.97 inc VAT.

Rumours that Apple was looking to the Intel Atom processor for a future iPhone have been given a blow by a leak through LinkedIn. A leak which must delight ARM as the Atom Vs ARM battle hots up.

Unicom which re-sells fixed lines would like to do the same in mobile and is planning an MVNO which might be with Orange.


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