All good things must come to an end, and it's happening in the smartphone segment. In the last two weeks, major smartphone makers including Samsung, HTC, BlackBerry and Nokia-Siemens Networks reported less than stellar handheld sales, leading many analysts to question if there's headroom left in this segment.
The worries hold a valuable lesson for resellers on the perils of becoming too dependent on one product or market segment for success. While riding the wave of a best-seller is good for driving sales, revenue diversity is a far more effective risk management strategy.
Since the introduction of the Apple iPhone in 2007, smartphone sales have been stratospheric. By some estimates, more than 1.5bn smartphones are in circulation worldwide.
The ability of smartphones to drive sales and profits has been like clockwork - each release came with faster connections, higher processing speeds and bigger displays to attract customers to stores.
While Apple and Samsung dominate sales, the market has become flooded with major and minor manufacturers, including LG, Lenovo and Google. Even HP, which bought Palm in 2010, is considering re-entering, with a new device.
Yet the smartphone goose is getting cooked.
The market is commoditised. Consumers and businesses cannot afford to buy the latest and greatest device every nine months. While there's enough appeal to create desire for a new smartphone, there is less need to upgrade when last-generation devices function well and have the benefit of having been paid for already.
Competition is increasing. The entry of new suppliers and models at variable price points means customers have more choices, which leads to pricing pressure. Remember, Apple charged premiums for the iPhone because it had virtually no competition.
Today, it has to be far more flexible to compete.
Shifting dynamics in the carrier market are having an impact. Carriers are less willing to subsidise device purchases and refuse to abandon the two-year contract model, which keeps subscribers locked into their purchases longer than the technological refresh cycle.
While it's hard to argue that any one of these companies is solely dependent on smartphones, sales and revenue have driven their fortunes for many years. The success created expectations for high performance and high returns.
Now that smartphone sales are showing signs of slowing, these companies are scrambling to find the next big thing.
Look no further than Apple. For much of the last two years, Apple's stock defied gravity as sales of iPhones and iPads reached into the tens of millions per quarter.]
Apple continues to post impressive sales and revenue numbers, but investors and analysts are pulling back, worried there are few tricks in the post-Steve Jobs era.
The analyst and investor communities are looking for the next big thing from each of these companies to replicate the success of smartphone sales.
Given that there's no new killer device, it's harder to get the market excited about future prospects.
The lesson for the channel is clear; a bestselling product is good, but not the end game. Sustained success requires diversity of products and revenue streams to ensure sales softness in any one area doesn't derail financial performance or deflate overall value.
Larry Walsh is president and chief executive of Channelnomics
As part of our special editorial partnership, CRN is republishing this article from Channelnomics
Telco also announced series of initiatives to drive digital growth in the UK
Nana Baffour opens up on Getronics' mammoth acquisition of Pomeroy
Analyst predicts SaaS will remain the dominant segment in the market as it grows 17 per cent in 2019
NSS Labs claims vendors are refusing to have their products tested effectively and are trying to restrict its access