PHILADELPHIA — The 14 million iPhones that Apple sold in its latest quarter are more than a bright flare on one of Silicon Valley’s greatest stars. The iconic Apple smartphone also represents the leading edge of a wireless revolution that is finally delivering on the decade-old promise of a mobile Internet.
Analysts say smartphones’ huge success — various phones based on Google’s Android operating system are expected to outpace iPhone sales for the year — is driven by a mix of pull and push.
The pull comes from the tens of millions of cell phone users who want to own the coolest new gadgets and are finding new uses for video-on-the-go and for apps — short for “applications,” and the second new word the smartphone revolution has popularized, after “smartphone” itself.
The push comes from wireless companies that, despite a lousy economy and otherwise reluctant consumers, have found that they can dramatically boost their revenues by upgrading customers to the newest, data-hungry devices. They sell well despite prices of $200 or more.
For consumers who have money in the bank, and perhaps even for some who don’t, the lure of the newest new thing remains powerful, according to industry watchers such as Ed Finegold, chief analytics officer at Validas, a Texas company that analyzes cell phone statements to help consumers, businesses and governments control costs.
“There’s such a strong lifestyle aspect — such strong social cachet — to a smartphone,” Finegold said. “It’s the must-have toy for adults, and it makes a social statement.”
While consumers are lured by dazzle, carriers and handset makers are driven by dollars, analysts say.
Apple reported all-time records in revenue and profits for the most recent quarter, driven largely by a 91 percent jump in sales of the new iPhone 4 compared with sales of earlier models in the same quarter in 2009.
Apple has discovered what the carriers and traditional handset makers already knew: The cell phone market is driven not just by cool new devices, but by the leading carriers’ contract and marketing strategies. And both are geared toward encouraging consumers to see phones as nearing obsolescence within two years — a faster life cycle than that of any other major product, even in the rapidly changing field of consumer electronics.
“What’s the life span of a wireless device — 12 months, 18 months?” Finegold said. “Most people upgrade their phones even before their contracts come up.”
As new smartphones come onto the market, the revenue opportunities are enormous, Finegold said. “You can take a $50- or $60-a-month customer and turn them into a $90- or $100-a-month customer,” he said.
Thanks largely to the iPhone, AT&T has lately led the way toward the smart-phone revolution, said Jeff Kagan, an Atlanta telecommunications analyst. “Fifty-three percent of every phone they sell is a smartphone,” he said. “Verizon is at 36 or 37 percent.”
