Of Cell Phones and Stun Guns

Carl Weinschenk

Consistently coming up with engaging and informative lead-ins to blogs can be a challenge if you write a lot. However, in this case-on a post about the growth of off-brand (or white label) smart phones-I got a lot of help from a couple of knuckleheads in Jersey.

The lesson these two Einsteins taught is pretty simple: If you are driving around with a cell phone in which one of the apps is a stun gun, take it out of the manufacturer's box so that the cops stopping you for a minor traffic infraction don't see it, start asking questions and end up arresting you. I know I'm careful not to fall into that trap.

The phone may or may not have been heading up to Tony Sopranos' house, which is relatively near Clifton, where the incident occurred. The killer phone is called the "Cheetah Stun-Dare to Touch Cell Phone Stun Gun," and was marked with the helpful warning that it poses an "extreem danger."

While white-box cell phones that cause injury presumably are rare, the number of off-brand phones is exploding, according to Gartner. In its third quarter market share report, the firm said that the number of cell phones in the "other" category rose to 33 percent from 16.1 percent during the year-ago quarter. The company identifies 10 vendors by name, so the "other" category is unlikely to include names that many people have heard.

The New Jersey stun gun caper was a bit unusual because much of the white-box manufacturing is aimed at end users in developing regions. It is a trend that won't slow. Said Gartner Research Vice President Caroline Milanesi of the growth of off-label products:

We firmly believe this phenomenon will not be short-lived as we still see a continued need for non-3G devices. Although we have seen acceleration in sales this quarter, we expect an even bigger volume in the fourth quarter of 2010.

This is a big deal. The growth of the "others" segment, Milanesi points out, dropped the share of the top five from 88 percent to 66.9 percent-more than 21 percent-between the third quarters of 2009 and 2010.

The numbers do merit scrutiny, however. Philip Elmer-DeWitt at Fortune compares cell phone numbers between Gartner and IDC. He notes that Gartner counts about 77 million more phones than IDC. The post, the comments and links discuss the differences between how the two leading firms account for their numbers. This is a hugely important topic, since the overall landscape is set by what the two firms, and perhaps a couple of others, say.

More specifically, the IDC versus Gartner debate provides some useful information on the growth of the white-box cell market, though it's not apples-to-apples, as least as far as the numbers included in the release. IDC counts 30.5 percent and 27.2 percent in the "other" category for the third quarters of 2010 and 2009, respectively, but only counts five manufacturers compared to Gartner's ten, however.

Finally, it is important to note that not all non-top-five or top-ten phones are white-label. The availability of Android and the general downward trend in pricing makes it easier for non-white-label low-profile phones to emerge. Green World Investor puts it this way:

these small handset makers could penetrate global markets as well. Micromax which is the most successful amongst the host of small, nimble Indian companies has already starting marketing its phones in the Middle East. With low cost $100 Android phones it could lead major prices wars in the West as well.

The bottom line-besides being aware of what your cell phone box says-is that the days of dominance by a small cadre of vendors could be waning.

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