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Stop Laughing At The Phablet — Samsung Was Right

As unlikely as it may seem, this is shaping up as a contest between Samsung and Microsoft, if only because Apple didn’t think it was a race worth running.Stop laughing at the phablet

Just when it looked as if consumer demand for smartphones was moving into the dreaded “mature” stage of slower sales, a bright spot has appeared on the horizon, and it’s a big one: at least five and a half inches diagonally, sometimes close to seven inches.

It’s the phablet — the jumbo-sized hybrid of smartphone and tablet that looked funny to a lot of people when they first saw it — and it is, at least for the moment, the device that is projected to grow fastest in the global smart phone market.

It turns out that a lot of people, especially people in Asia, would rather buy a single device than buy or tote two of them.

Juniper Research, a firm based in Great Britain that analyses the global mobile communications industry, issued a report this week that predicted that the phablet “could become a growth area” for smartphone vendors. It estimates shipments of more than 120 million units worldwide by 2018, growing from about 20 million units this year.

The report predicts that the bulk of sales worldwide will be divided between devices that run Google’s Android operating system and Microsoft’s Windows Phone.

Although both operating systems have been adopted by a number of manufacturers, each has a leading vendor, and Juniper expects them to stay in the lead.

For Android, it’s the Samsung Galaxy Note range that kicked off the phablet craze. For Microsoft, it’s the Nokia Lumia line, the comeback contender from the pioneering Finnish company whose phone division is now owned by Microsoft.

Currently, Samsung devices hold about a 30 percent market share of the global smartphone business overall, while the Nokia Lumia is not yet big enough to emerge from the “Other Brands” category in most estimates of global sales. We may get a clearer picture of its progress when Microsoft reports its quarterly results on Jan. 23.

The whole outlook could change in a hurry, though, if Apple gets over its aversion to the sheer bigness of the phablet. Juniper acknowledged that its scenario “could change dramatically” if Apple finally decides to get into the game.

In any case, the winners can be certain of taking a share of only the high end of the phablet market. Homegrown knockoffs of the leading brands are already available in the Asian markets, at up to 70 percent less.

This twist couldn’t come at a better time for an industry looking, with increasing concern, for the next big thing.

A report from TrendForce last week projected that shipments of smartphones would drop by a bit more than 5 percent in the first quarter of 2014, the first quarterly decline in shipments since 2011. “Inventory congestion” in the US is primarily to blame, according to the market research company.

That is, manufacturers simply shipped too many boxes in the last quarter of 2013, and there are plenty left over in retailers’ back rooms. And that is likely an indication that the smartphone market is now a product market like any other, with sales that are sensitive to the seasons. In short, it’s a “mature” market.

It should be noted that TrendForce projects a return to a pattern of growth in the next three quarters of 2014.

There are other signs out there that might look like harbingers of things to come, or just excuses for poor performance.

A slowing smartphone market was among the reasons cited by Best Buy (NYSE:BBY) for its disappointing holiday season, as revealed in its quarterly results Jan. 16.

Moreover, Samsung warned earlier this month that it will report lower operating profit for the last quarter of 2013. It estimated that profit will decline 18 percent from the previous quarter.

It will be the first time in more than two years that the company has reported a decrease in profit from the previous quarter.

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