No. 3 tech story of 2011: Seismic smartphone shift

The smartphone market witnessed a Hail Mary pass and a possible implosion

This is the ninth post for "My personal, hand-selected top 11 tech stories of 2011." You can read the first eight by clicking on the links at the bottom.


A lot happened to the major smartphone players this year, and that's not even counting all the patent lawsuits mentioned here.

Here's how the year went down for Apple, Google, Nokia and Research in Motion, in descending order of disastrousness.

Research in Motion: A profile in denial

In December 2010, Research in Motion reported a 58% increase in fiscal third-quarter earnings, fueled by record shipments of its flagship BlackBerry smartphone.

But the company was in trouble. It continued to lose smartphone market share to Google's Android, particularly in the U.S. And while global smartphone sales were expected to increase for at least the next several years, serious loss of market share is indicative of fundamental problems, and also can spiral into something much worse.

Like RIM's 2011. A sample:

RIM's bullish talk fails to sway Wall StreetRIM lowers quarterly guidanceRIM's share of U.S. smartphone market continues to dwindleActivist RIM investor stokes shareholder uprising How low can it go? RIM falls below book valueRIM's third quarter just as disastrous as expected

That pretty much summed up RIM's year (and I didn't even get into the PlayBook, since this post is about smartphones). Yet, unlike HP's Leo Apotheker and Nokia's Stephen Elop -- each of whom made dramatic strategic moves in 2011 to reverse their companies' declining fortunes -- RIM co-chief executives Jim Balsillie and Mike Lazaridis have done little other than to assure shareholders that RIM's big comeback is right around the corner with the release of its next smartphone or tablet or mobile operating system. Right around the corner! And fire that marketing guy!

Once the prestige smartphone manufacturer, RIM and the BlackBerry have been surpassed technologically by Apple's iPhones and smartphones powered by Google's Android OS. With far fewer resources than Apple, Google and Microsoft-Nokia, and an enterprise customer base eroding in the BYOD modern workplace, it's hard to see that corner showing up any time soon, if ever. This may have been the year when RIM's decline reached critical mass.

Nokia's marriage of convenience to Microsoft

You can't accuse Nokia CEO Stephen Elop of sitting around doing nothing on his burning platform. Whether he did the right thing remains to be seen.

At the beginning of the year Nokia, like RIM, was in decline, except Nokia didn't have an enterprise base to unsuccessfully defend. Worse, its Symbian mobile OS was old and inferior to Apple's iOS and Google's Android.

So Elop went the bold route, announcing in February a partnership with Microsoft in which Nokia would manufacture smartphones powered by Windows Phone 7, which itself had met with only modest success upon its release in the fall of 2010.

One cruel blogger called this a "marriage of mobile mediocrities."

But I he had a point. What could we possibly expect from a partnership between two companies that were on the losing side of the modern smartphone wars, Nokia's still sizable market share notwithstanding?

One thing was a long wait. It would be near the end of the year before we saw the first Nokia WP7 phone. In the meantime Nokia turned in some ugly, if predictable, quarterly reports, and Steve Ballmer wrote "mobile ecosystem" on his palm.

Everything rested on the WP7 phones. Finally, in mid-October, Nokia unveiled the Lumia 710 and the Lumia 800, Windows-powered smartphones designed to compete with the iPhone and Android devices, though initially not in the U.S.

We'll get some sales figures to track over the next few months, but don't expect Nokia's new line of Windows-powered phones to help it reclaim market share. The two reasons why are below.

Apple's year of triumph (and tragedy)

Steve Jobs died in October. His decline and death cast a pall on Apple all year, a year that saw record profits, record share price, significant new distribution deals and the release of several ground-breaking products.

Apple began the year with the iPhone holding a 25% share of the U.S. market, despite limiting itself by relying on just one carrier distributor -- AT&T.

That changed in February, when Verizon became only the second U.S. wireless carrier to sell the iPhone. By April, Apple was reporting a 113% increase in iPhone sales over the year-ago quarter, and it had surpassed RIM to trail only Android in the U.S. market.

Throughout the summer, rumors of the iPhone 5 would excite the tech world. Then, in early October, days after Sprint announced it would become third national carrier to sell the iPhone -- and one day before Steve Jobs died -- Apple unveiled the iPhone 5. Except it wasn't the iPhone 5, it was the iPhone 4S. While some may have been disappointed, Apple reported record early orders.

With a devoted fan base, thriving apps stores and high brand value, Apple is in an excellent position in the smartphone market entering 2012.

Android ascends to the top

Google's Android mobile operating system began the year in a three-way race with RIM's BlackBerry and Apple's iOS for U.S. market share.

By the second quarter, 52% of smartphones sold in the U.S. were Android-based, up from 33% a year earlier, while Android devices comprised 46% of smartphone sales globally.

Android's advantage is its ability to be tweaked by different manufacturers, allowing numerous flavors of the mobile OS to be produced. Apple might argue that Android's edge is Google's theft of its patents.

Whatever the reason, Android now sits atop the mobile OS market. It's going to be there awhile.

Top 11 tech stories of 2011 linksNo. 11: Netflix's public suicide art project No. 10: The cloud rises No. 9: Tales of tablet triumph, tragedy No. 8: Patent wars No. 7: The social 'bubble' No. 6: Meet the new boss No. 5: HP's meltdown No. 4: AT&T's $4 billion blink
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