The Ten Businesses The Smartphone Has Destroyed

Global smartphone sales rose by nearly 100% in the third quarter of 2010 compared with the same period last year. That allowed Apple (NASDAQ: AAPL) and Research In Motion (NASDAQ: RIMM)  to pick up market share while large handset companies like Nokia, Samsung and LG, which do not have strong smartphone products, lost ground. The success of the iPhone and smartphones powered by Google’s Android operating systems have allowed these 3G and WiFi powered devices to leapfrog over products like the netbook as “PC replacements.” iPhone has a huge advantage over netbooks because of the App Store, which has more than 250,000 software applications that enables users to customize their devices to their individual needs.

The first major smartphone was the BlackBerry. It was introduced in 2002, but was built for business use. The iPhone, which was first available in 2007,  created a huge consumer demand for smartphones.

The smartphone has begun to replace a number of other consumer electronics devices.  As AT&T (NYSE: T) and Verizon Wireless build their cellular business, landline customers cancel traditional phone lines. They don’t need them anymore in a world with 3G wireless devices.

The power of the smartphone as the primary device used for news, entertainment, and communication will only increase. New 4G networks will allow subscribers to connect to the internet with handsets which will download data at speeds similar to those supplied by a home cable modem. Smartphone processors become more powerful each year and the devices get more storage capacity

This is 24/7 Wall St.’s list of the devices that the smartphone has begun to replace, and in some cases, that process is so far  along that the older products have almost disappeared.

The following are the ten products which smartphones are killing.

1. PDAs
Personal digital assistants, the device that transformed personal organization in the 1990’s, are almost obsolete.  The product was a stepping stone towards the superior smartphone.  The Palm Pilot, which was the leading PDA, was successful because it possessed a number of features that are now included in most smartphones. Creator Palm’s performance in the face of the expanding smartphone market helps further illustrate the decline of the PDA.  The company lost about half of its North American market share between 2008 and 2009, while smartphone sales increased 13.9% from the year before.  As a result, Palm launched its latest smartphone in June 2009, the Pre.

2. Flip Video Cameras
Cisco Systems’s line of Flip video cameras has been modestly popular over the past few years, bringing in about $75 million between February and May 2010, according to Cisco. However, the multifunctional smartphone may soon push Flip out of the picture.  Both the iPhone 4 and the Droid X feature 720p video capabilities, the same as Flip cameras.  Flip cameras do, however, have a small advantage over smartphones because of their higher video frame capture rate.  This slight edge in technological ability isolates Flip cameras as products which only appeal to a small percentage of consumers whose video recording needs cannot be met by a smartphone; a niche market that may not be able to sustain the business.

3. MP3 Players
Companies that make MP3 players have sold fewer and fewer units ever since smartphones began to provide the service. This marks the first time since the inception of the Walkman that portable music players will exist with more than a singular function.  According to  Deloitte, 42% of smartphone users have reduced or stopped using their portable digital music players because of their phones’ music-playing capabilities.  Even the iPod, the biggest selling MP3 player of all time, had its lowest since 2006 in the most recent quarter.

Read More: Global Smartphone Sales Nearly Double In Q3, A Bonanza For Carriers.

4. Digital Cameras
As handset phone cameras improve in quality, the demand for separate, low-end digital cameras may begin to decrease.  Many phones already have 5-megapixel camera capabilities. Market intelligence company iSuppli predicts that the average for phones will rise to 5.7 megapixels by 2013.  Digital still cameras, however, averaged 7.6 megapixels in 2008 and may reach 13.9 in 2013.  According to Pam Tufegdzic, consumer electronics analyst at iSuppli, “handsets soon may begin to cannibalize the low-end of the DSC (digital still camera) market as they incorporate higher megapixels and flash capabilities.”  This scenario does not seem too far off, as the recently released Nokia N8 smartphone features a 12-megapixel camera.

5. Handheld Video Games
For 2010, factory unit shipments of game-capable mobile phones are expected to reach 1.27 billion, according to iSuppli.  This will be an increase of 11.4% from the year before.  Handheld video game devices, however, are expected to decline 2.5% over the same period, shipping just 38.9 million factory units.  The reason is more consumers are using their phones for portable gaming.  In 2009, the percentage of portable gaming revenue generated by the iPhone grew from 5% to 19%, according to Flurry Analytics.  Apple CEO Steve Jobs has said the company has sold more than 1.5 billion iPhone/iPod Touch OS games.  Currently, six of the top ten highest-grossing apps are games, such as “Angry Birds” and “Tap Zoo.”  There are now reports that a Sony PlayStation smartphone is in the works.

6. GPS
The increase in smartphones with GPS capabilities poses a huge threat to standalone GPS devices.  According to iSuppli, by the end of 2011 about 80% of phones will include GPS technology.  According to the company, the number of navigation-capable smartphones being used by 2014 will be greater than the number of standalone devices.  As a result, very few people will seek out GPS-specific devices such as those made by TomTom and Garmin.

7. PCs
There are plenty of studies which insist that smartphones will begin to replace the PC as the common vehicle for accessing the Internet.  Analyst firm Informa Telecoms & Media projects that smartphone traffic will increase 700% over the next five years.  IT research firm Gartner predicts that smartphone sales will outpace PC sales by 2012, if not earlier.  Google CEO Eric Schmidt, whose company’s mobile business has doubled over the last year, has expressed this sentiment as well.  As smartphones continue to feature more memory, storage capability, and stronger processing power, consumers will increasingly rely on them for Internet use instead of their clunky PCs.

8. Regular Cell Phones
Just as smartphones are making other single-function devices more and more obsolete, they are pushing regular, “featureless” cell phones out of the competitive marketplace.  According to iSuppli, smartphone manufacturers Research in Motion and Apple claimed the fifth and sixth spots for top phone brands in the first quarter of 2010.  Both companies exclusively produce smartphones.  Nokia, however, saw its cell phone market share drop to 28.2% from 36.7%, underscoring its focus on non-smart phones.  According to Gartner, third quarter sales of smartphones nearly doubled.

Read More: How Long Before We Can Replace Oil?

9. Watches
As more people have become equipped with mobile phones, fewer people have found a need to wear wrist watches.  From 2001 to 2006, the amount that Americans spent on watches dropped 17%, according to Experian Simmons Research.  This trend will most likely increase, as Tamara Sender of research group Mintel notes, “Many consumers have grown up with technology and are just as likely to associate the notion of checking the time with a mobile handset as with a watch and as they grow older this mindset will accompany them.”  It should be noted that many luxury watch brands, such Rolex, have remained popular.  This, however, is due to the fact that these watches are worn for fashion, not function.

10. Remote Controls
Although it is hard to imagine there being a successful replacement for the television remote, smartphones are beginning to do just that.  Smartphones now offer apps that act as remote controls for television models made by Mitsubishi, Samsung, and Sonos.  Additionally, as Internet and television content become more and more intertwined, smartphone remotes seem an increasingly appropriate instrument of control.  The iPhone can currently be used for Apple TV boxes, and Google offers its own controls for its television services.  According to technology research firm Forrester Research, the number of homes with televisions that are connected to the Internet is expected to reach 43 million by 2015.

Douglas A. McIntyre and Charles Stockdale

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