“Demand for converged mobile devices has remained strong all year,” said IDC analyst Ramon Llamas. Driving that demand: Nokia (NOK), which maintained its position as the overall leader in the converged mobile device market, Research In Motion (RIMM), whose BlackBerry made some significant share gains internationally, and Apple (AAPL) and the iPhone, whose share of the smart-phone market rose to 17.1 percent from 16.6 percent in the previous quarter (see table below; click to enlarge).

“Apple reached its highest volume yet in a single quarter,” Llamas said. “The nearly global availability of the iPhone 3GS sparked another round of annual replacements for Apple loyalists, while the lower price on the iPhone 3G put the device well within reach of customers wary of the price. Although the iPhone has struggled within emerging markets, its arrival at China Unicom this year could foreshadow greater shipment volumes.”

[Image credit: AMUSEMENT]

Shares in the handset maker fell some 23 percent last week amid concerns about increased competition from Google’s (GOOG) Android operating system, which is being rolled out on a number of devices at a variety of carriers, including Palm partner Sprint (S).

This morning, analysts at Citigroup (C) cut their recommendations to sell from hold on Palm (PALM) while simultaneously raising their rating on Motorola (MOT) because of its “compelling” new Android handset, Droid.

“Motorola is launching of one of the most compelling offerings at [a] time when many investors have given up on the company’s handsets,” Citigroup analyst Jim Suva wrote in a research note.

“The revolution of product and application service offerings,” Suva added, “is going to start to crack open the enterprise door and could pose a risk for BlackBerry. Major shifts in promotion support creating a promotion commotion in the months ahead favor Motorola and post a challenge for RIMM and PALM.”

Over at CL King, analyst Lawrence Harris is similarly dubious of Palm’s prospects in the months ahead. Noting that Sprint executive David Owens said last week that the carrier plans to peddle a number of new Android devices from HTC next year, Harris sees unfavorable implications for Palm.

“Historically, Sprint has been Palm’s largest customer. Indeed, in the August quarter Sprint accounted for 85 percent of Palm’s revenues,” Harris wrote in a note to investors. “In FY09 (May) Sprint represented 43 percent of total Palm sales. Sprint has a U.S. exclusive on both the Pre and the Pixi through calendar year end. The Pixi will be launched at Sprint on November 15 for $99.99. The Pixi is fairly similar to the $149.99 Pre. Verizon has stated that it will begin offering the Pre in early CY10.”

Expounding on his analysis, Harris notes that “According to a report on Mobile Today, a U.K.-based publication, initial sales of the Pre through Telefonica’s O2 unit in the U.K. have been slow. If this report is correct, than the bulk of Palm’s sales over the next few months will probably continue to be generated through Sprint.”

That Sprint will soon add some slick new Android handsets to its lineup is worrisome, then, indeed. For Palm, it seems, driving conditions on the road to recovery are looking increasingly hazardous.

BoomTown’s week began onstage in front of thousands of chanting women. No, Kara wasn’t filling in for Oprah; she was doing something much cooler. She got snagged to moderate a panel entitled “Changing the World Through the Web” at Maria Shriver’s six-year-strong Women’s Conference. Kara’s panel included a group of VIPs from Facebook, Kiva, Blue State Digital–and the Twitterific Ashton Kutcher. With “Mission: Kutcher” accomplished, Kara followed up with the complicated world of MicroHoo and offered analysis on the still-pending search deal. Moral of the story: Commentators should give it time, and Carol Bartz should quit with the Jerry Yang jabs. BoomTown rounded out the week at TEDMED. The conference covered the scalpel’s edge of med tech. And yes, in case you were wondering, synthetic skin feels gross.

Digital Daily covered the real-time search war early in the week when Microsoft’s Bing search folks announced a nonexclusive deal with Twitter to feed on its data stream. The deal did put Bing out front for once, but no one knows if the new info source will turn into profits for either search group. In a post foreshadowing a grisly murder, John reported results from a ChangeWave research study that placed the iPhone within striking distance of overtaking the Blackberry from Research in Motion (RIMM) in the smart-phone market. Okay, maybe it wasn’t that grisly, but it’s Halloween. Digital Daily rounded out the week by adding the iPhone to the pantheon of cat, dragon, rat and rooster that occupies the rim of your Chinese restaurant placemat. Apple’s (AAPL) iPhone officially made it to China this week, though without its signature Wi-Fi, and at a much heftier price point.

Peter Kafka lives at the crossroads of media and tech, and that’s exactly where he was almost run down by the Windows 7 “Family Guy” episode. Microsoft (MSFT) apparently bailed out of the deal when it took a closer look at what was actually inside. From the “not so fast” files, Peter covered a report from Interpublic Group (IPG) noting that ad revenue isn’t quite as sunny as some have suggested. Grim economic times caught up to AllThingsD’s big brother late in the week when The Wall Street Journal closed its Boston bureau. The move resulted in nine job losses, despite significant resources being poured into the paper by parent News Corp. (NWS).

The leaves are changing color over at Personal Technology, and Walt sensed that chill in the air meant it was time for his annual fall computer-buying guide. Operating-system choice was a big discussion; but he also touched on the latest must-haves in the memory, graphics, processor and form-factor categories. With a cup of Earl Grey tea to fend off the autumn chill, Walt trudged out to Mossberg’s Mailbox this week and came back with a fistful of letters. He dutifully replied to a question about migrating Microsoft files to a Mac running windows, offered clarification on the Windows 7 upgrade process, and weighed in on the rumor of a pending Apple device below a laptop but above an iPhone.

Katie finished it all off with a deep dive on the two latest netbooks. The HP (HP) Mini 31 and the Nokia (NOK) Booklet 3G both offer high style compared with their competitors, and each boast much higher screen resolutions than previous models. Though she came down on the side of the Nokia, Katie remarked that neither option would disappoint.

Bundle up as you head out for tricking and treating, and learn from Weekend Update’s mistakes. Remember to check and make sure that scary face is actually a mask before you bring that new friend home.

Consensus seems to be that the Droid is the device that will get Motorola back into the game. Indeed, Technology Business Research’s Ken Hyers says the Droid is likely a “serious challenger to the iPhone.”

Over at RBC Capital Markets, Mark Sue says good things as well. “The Droids are coming and Motorola will be an important part of Verizon’s push for smartphone differentiation,” he wrote in a note to clients Wednesday. “In addition to compelling products, Motorola seems to have gotten back into the good graces of the North American carrier federation, which should aggressively push the new devices.”

Of course, these endorsements don’t necessarily mean that Motorola is poised to return to its past glory. And they certainly don’t guarantee the Christmas turnaround the company is clearly hoping for. After all, the smart-phone market is far more competitive now than it was when Motorola last dominated it back in 2004.

Said Morningstar analyst Joseph Beaulieu: “[I’m not sure the Droid] will be good enough to cut through the noise that you’re getting from Apple iPhone, HTC’s Hero, Research In Motion’s BlackBerry and even Palm’s Pre and upcoming Pixi.”

This according to a new survey from ChangeWave Research (see chart below; click to enlarge), which found that the iPhone now accounts for 30 percent of the smart-phone market. That’s almost double the share it held a year ago. Remarkable considering that the device is currently available from just a single carrier.

“Apple’s share keeps skyrocketing,” said ChangeWave research director Paul Carton. “Their last earnings report points that out. But these numbers show that their momentum is continuing. They’re firing on all cylinders.”

Indeed. Of consumers who plan to buy a smart phone in the next 90 days, 36 percent plan to purchase an iPhone. Meanwhile, 27 percent are considering a BlackBerry and eight percent a Palm (PALM) device.

Said Carton: “In the horserace among manufacturers, the release of the iPhone 3GS has led to a big jump in smart phone market share for Apple and has placed them within striking distance of Research In Motion–whose slew of models are still number one but have fallen to their lowest level in two years.”

[Image Credit: GadgetPhix]

Among the upgrades: A slimmer design, a 3.2-megapixel camera, sharper 360-by-480 display, 802.11b/g Wi-Fi support and an optical trackpad similar to that of the BlackBerry Curve 8520. The new handset is also outfitted with a 624MHz processor and 256 MB of flash memory.

Paired with BlackBerry OS 5.0, this should mean some decent performance gains. So an incremental update, but little more. Said RIM co-CEO Mike Lazaridis: “This is the Bold for those that wanted it just a little smaller, but still wanted the Bold look, feel, performance and materials.”

That’s the argument put forth by Piper Jaffray analyst Chris Larsen in a research note to investors Monday. Larsen feels that the cost to Apple (AAPL) of developing a CDMA version of the iPhone for Verizon’s (VZ) network and the subsidies the company might lose by ending its exclusivity deal with AT&T (T) would be a small price to pay for the spike in iPhone sales they would create.

“Although the iPhone is a strong player in the smartphone market, expanding its multi-vendor strategy could allow it to dominate the industry, as it does with the iPod,” Larsen writes. “The U.S. market is the world’s largest smartphone market, but we believe there is a land grab in the U.S. for smartphone share.”

Expanding his argument, Larson adds, “Apple’s exclusivity with AT&T has left the door open for strong competition from competitors, such as Research In Motion’s Blackberries, Palm’s webOS smartphones and Google’s Android operating system on multiple smartphones from OEMs such as Motorola, HTC, Samsung, LG, and others. Making the iPhone available to the other 150+ million subscribers (~2/3s of subscribers) not on AT&T’s network could result in iPod like adoption.”

Keeping the iPhone exclusive–while it might enable Apple to do more innovative things, as COO Tim Cook noted yesterday during the company’s quarterly earnings call–would also give those rival devices and platforms more time to catch up. If Apple really hopes to keep its lead in the U.S. market, it must do away with exclusivity deals, the same way it’s doing away with them abroad.

That’s bad news for AT&T. Because, as I’ve noted here before, a move to nonexclusivity in the U.S. would brutalize the carrier’s subscriber base. Analysts have long said that a material number of AT&T iPhone users would flock to Verizon’s superior network given the chance.

Larsen agrees. “A move to non-exclusivity in the U.S. could have a material impact on the U.S. wireless carriers,” he writes. “AT&T could lose meaningful smartphone share, while we think all the other carriers would gain share. We believe Verizon would be the largest beneficiary of non-exclusivity and the development of a CDMA iPhone.”

Continuing, Larson explains, “With 35% of AT&T’s iPhone sales coming from new customers, we feel it is reasonable to assume the company’s total iPhone sales could decline by 30% or more and that Verizon could pick up the bulk of this lost share (why switch to AT&T for iPhone if you haven’t left by now and the device is now available through your carrier; Verizon’s network quality could be a reason to switch from AT&T).”

This morning the Finnish mobile phone giant tapped Rick Simonson, currently its chief financial officer, as head of its handset division. And the company named Timo Ihamuotila, currently global head of sales, CFO.

While Simonson’s move from CFO to head of Nokia’s mobile phone business might seem a bit odd, analysts say it could be just what the company needs. “Simonson has been in the business for years,” Swedbank Securities analyst Jan Ihrfelt told Forbes. “He knows the company quite well, has the financial skills and the skills of a good communicator to make people in the company excited about new goals.”

And that’s clearly something Nokia (NOK) needs. For while the company is holding its ground in the broader mobile phone business, it’s losing it in smart phones, the fastest-growing segment of the market. As I noted yesterday, Nokia’s share of the smart-phone market slipped to 35 percent from 41 percent in its latest quarter, a grim reminder of just how poorly the company’s flagship smart phones are faring in their battle with iPhone maker Apple (AAPL) and BlackBerry manufacturer Research In Motion (RIMM).

Said Ihrfelt: “Nokia hasn’t been as quick as others in catching up with trends in the market and in bringing phones to consumers. One would expect a player the size of Nokia to have a product that competes with the iPhone, but that hasn’t been the case.”

Not yet, anyway. But that may soon change. A few weeks back, Nokia hired John Martin, former vice president of iPhone and Mac Internet Services at Apple to oversee development of new devices based on its Maemo platform.

In the consumer market, Apple (AAPL) scored 811 points out of a possible 1000, exceeding the industry average of 765. Its closest rival, LG–the only other company to beat that average, scored 776.

Apple’s performance in the enterprise market was equally impressive. The company scored 803 points out of a possible 1000. That was 79 points more than RIM, whose BlackBerry took second place with a score of 724 points, the industry average.

And what of Palm (PALM) devices and smart phones running Microsoft’s (MSFT) Windows Mobile OS? Neither had a particularly remarkable showing. Among consumer smart phone users, Palm devices scored 731, while WinMo devices from Samsung and HTC both scored 739. And among business users, Palm devices scored 688, while WinMo devices from Samsung and HTC scored 697 and 692, respectively. The study, it should be noted, was fielded between January and June 2009, so it does not account for Palm’s new Pre handset. (See charts below; click to enlarge.)

Clearly, the iPhone has gained a fair bit of traction in enterprise in a relatively short time. Who was it again who said the iPhone “doesn’t appeal to business because it doesn’t have a keyboard”?

[Image credits: MacDailyNews, J.D. Power and Associates ]

According to the CTIA, there are more than 246 million wireless data-capable devices at large in the U.S. today. Of these, 40 million are smart phones or PDAs, and more than 10 million are laptops. Little wonder that wireless data service revenue rose 31 percent to more than $19.4 billion in the first six months of 2009.

Revenue will no doubt continue that trend in the months ahead as wireless devices become more ubiquitous. Wireless carriers, then, would be wise to put some of their windfall toward building out their networks to cope with future demand lest they end up the butt of a joke in a rival’s advertisement.

Consider these remarks from Federal Communications Commission Chairman Julius Genachowski, spoken Wednesday at the CTIA wireless industry convention in San Diego: “We are fast entering a world where mass-market mobile devices consume thousands of megabytes each month. So we must ask: what happens when every mobile user has an iPhone, a Palm Pre, a BlackBerry Tour, or whatever the next device is? What happens when we quadruple the number of subscribers with mobile broadband on their laptops or netbooks? The short answer: We will need a lot more spectrum. The biggest threat to the future of mobile in America is the looming spectrum crisis.”

“Throughout this report we have focused on the main ‘branded’ smartphones like iPhone, Android, Pre, BlackBerry, and Treo,” the market researcher explained. “And yet there are many more smartphones in use today, manufactured by the likes of LG, Samsung, Motorola, and Nokia, running either the Windows Mobile or Symbian operating system. What’s going on with these smartphones? For one thing, many users can’t identify their operating system. While Android users know they have a phone on the Android platform, most Windows Mobile or Symbian users have no idea what operating system is running their phone.”

That’s bad news for Microsoft (MSFT) and Nokia (NOK) because not only do these “other” smart phones tend to perform the most poorly in customer satisfaction, most of their owners would like to abandon them for Apple’s (AAPL) iPhone, Research in Motion’s (RIMM) BlackBerry or the Palm (PALM) Pre.

“The ‘generic’ smartphone is unloved, unappreciated, and unlikely to encourage any devotion among its users,” CFI concludes. “Its main role appears to be as a stepping stone to a ‘branded’ smartphone….Our data indicates there is little future for the ‘generic’ smartphone. Or, to be exact, the first generation of ‘generic’ smartphones. The iPhone has clearly raised the bar, but given the performance of the initial versions of the Pre and Android, the gap is narrowing. It’s clear from our data that the Android and Pre are worthy competitors to the iPhone, and more recent versions of the BlackBerry pose a bigger threat.”

PREVIOUSLY:

• Windows Mobile 6.5 “an Amazing Engineering Feat,” All Right…
• Perhaps if They Think of Their Win Mobile Devices as Broken iPhones…
• Ballmer on iPhone: Mr. Mojo Risin’

Earnings slipped by four percent, with RIM (RIMM) making $475.6 million, or 83 cents per share. Excluding one-time items, however, RIM earned $1.03 per share on sales of $3.53 billion, compared with 86 cents per share on sales of $2.58 billion in the same period last year. The Street had expected the company to turn in a profit of $1 per share on sales of $3.62 billion, according to a consensus from Thomson Reuters. RIM also shipped slightly fewer devices than analysts had hoped. The company said it sold about 8.3 million BlackBerry devices during the quarter, adding about 3.8 million new subscribers. Analysts had expected the company to add about 4 million new subscribers on shipments between 8.5 million and 8.6 million.

Looking ahead, RIM gave a per-share earnings outlook of between $1 and $1.08 for its third quarter, compared with a $1.05-per-share average expected by analysts.

Suffice it to say, investors are not pleased. RIM’s shares are down about 10 percent in extended trading as I write this.

“The commission has endorsed the local sale of the iPhone and the launch of its service within the limits of the law,” said Lee Tae-hee, a spokesman of the Korea Communications Commission. “If Apple includes location based-related details as a form of an agreement to its strategic partners such as KT, Apple’s iPhone can give location-related services here.”

Great news for Apple (AAPL). The South Korean market is a robust one, and analysts say that with the right carrier partner, Cupertino could be looking at sales over the first year ranging from 500,000 to two million. That said, they note that competing with the likes of Samsung and LG on their home turf won’t be easy. Between them, they control about 70 percent of the South Korean handset market.

“There seem to be a lot of people waiting for iPhones to go on sale here but it will not be easy for Apple to crack the Korean market as Samsung and LG already dominate the market with competitive phones,” said Jae Lee, analyst at Daiwa Securities in Seoul. “It will be difficult for Apple to steal market share significantly from the Korean makers in the short term but the iPhone could still be a threat to Samsung and LG in the long term.”

When the iPhone finally does arrive at market in South Korea, it will likely be with KT (formerly known as Korea Telecom) as a carrier partner. As Dan Butterfield over at iPhonAsia notes, KT CFO Yeon-hak Kim suggested as much this past summer. “Apple iPhone will be in our smartphone line-up,” he said in August. “iPhone will help to expand the smartphone market and will contribute to increasing the ARPU (average revenue per user).”

KT officials are telling the Korea Times that they’re looking at a November launch date. “KT has been in talks with Apple to introduce iPhones,” said a KT official. “Sometime in November, the latest iPhone model dubbed as ‘iPhone 3GS’ and its previous model will be commercialized. KT and Apple will decide on the coverage of location-based services.”

“There’s room for three to five players in this space. We don’t have to beat each other to prosper.”

– Palm CEO Jon Rubinstein

Palm CEO Jon Rubinstein likes to say smart-phone makers “don’t have to beat each other to prosper,” but it’s beginning to look like they–or, rather, Palm–might have to. Because while the Pre may have put Palm (PALM) back in the game, it’s not clear how long it can keep it there. With competition in the emerging smart-phone market ratcheting up as we head into the holidays, some analysts are predicting that Palm’s quarterly sales may decline–sharply.

“[Palm’s] guidance of a sequential decline in revenues in the second quarter implies that Pre sales are not off to the races,” Needham & Co. analyst Charlie Wolf wrote in a research note today. “Although Palm did not say what Pre sales were in the quarter, they appear to have been around 600,000 units, about 100,000 above our estimate. Palm indicated that revenues could fall to $240 million to $270 million in the second quarter, a number that implies that Pre sales could fall to 500,000 units vs. our previous estimate of 750,000 units.”

Interesting that Wolf pegs Pre sales as being above his estimate, since Palm hasn’t yet broken that number out. Indeed, in a conference call with analysts yesterday the company was so quick to dodge questions about Pre sales that I assumed it’s not an impressive number. But if the company really did ship 600,000 units as Wolf contends, that would suggest it’s doing pretty well at market, though certainly not as well as the Apple (AAPL) iPhone or Research in Motion’s (RIMM) BlackBerry. Odd then, that Palm wouldn’t disclose a hard sales number.

“The Pre and its siblings running on Palm’s WebOS software platform appear to be a serious contender in the smartphone market,” Wolf concludes. “But it would be premature at this point to declare it a winner in view of the fact that the smartphone market will shortly be overrun with new phones from Motorola and others running on the Android platform as well as new BlackBerry models in time for the holiday selling season.”

Sure, there might be room for three to five players in the smart-phone space, as Rubinstein claims. But that space is currently occupied at least seven players–Apple, RIM, Nokia (NOK), Motorola (MOT), Samsung, Sony Ericsson and Palm. Which means somebody’s got to go. So while Palm might not have to beat anyone to prosper, it may have to, to survive.

“Based on our channel checks, the iPhone remains the best selling device at AT&T with both the new $200/$300 iPhone 3GS and $100 legacy iPhone selling very well,” Piper Jaffary analyst Gene Munster said in a research note today.

“In July, our checks had indicated store managers were strongly recommending the legacy iPhone,” Munster notes, “as we believe this was partially driven by store representatives hoping to make the sale with the 3GS stocked out combined with efforts to reduce existing inventory levels of the legacy iPhone. However, in August, our checks indicate store managers are increasingly recommending the 3GS, and we believe this is driven by improved availability of the 3GS at most AT&T stores.”

Munster summarizes: “Overall, the iPhone remains the best selling device and our August checks indicate the iPhone took share from BlackBerry, the Nokia E71x, and most other competitor products. Finally, in our checks at Best Buy, store managers indicated the iPhone was their best selling device with stores selling out of stock as soon as they received the Apple smartphones.”

A bullish assessment, with an even more bullish conclusion: Munster says he expects Apple (AAPL) to ship seven million iPhones in the quarter. If that’s truly the case, Apple should have no trouble beating Wall Street’s expectations for its current quarter despite the gloomy economy.

One last point worth noting here: Munster is not bullish on Apple’s event tomorrow. He describes it as a “non-event,” though he seems convinced Steve Jobs will host it. “We expect Steve Jobs to introduce a new iPod lineup with a new iPod touch, new nanos, and a new classic, with cameras in the new models,” he notes. “We expect the stock to trade off on a lack of surprising announcements.”