Combined with the economic downturn, the phone makers' difficulties in matching the excitement of the iPhone has raised speculation that some might not weather the storm, ultimately leaving phone buyers with fewer choices.
"In a prolonged recession, consumers are either getting the free phone or they will invest in the winning platform if they decide to invest at all and they won't consider the losers," said Greengart. That means that if consumers have the money to spend on a phone, they will buy the iPhone, which is the known market leader, rather than take a chance on one of the competitors.
Greengart paints a bleak picture for phone makers in the months come. Many economists predict that at the very least the first half of 2009 will be grim. That's the time frame during which Nokia's N97, as well as Android phones from manufacturers such as Motorola, are expected to arrive. In addition, if Apple sticks to its typical 12 month product cycle, it may release a new iPhone around June, Greengart said. Yet they'll all be selling to a market of consumers and businesses that are reluctant or unable to spend money. "Even in the best case scenarios I've been reading about, it doesn't sound like the first half of '09 is going to be a pleasant time to be launching products," he said.
Phone makers that experts say will be in particularly precarious positions include Motorola, Palm and Sony Ericsson, three companies that are already in trouble. Motorola's handset division is struggling badly. Its future depends entirely on whether or not it can produce a hot phone and convince the rest of the company to continue to divert money from other divisions to keep the handset group afloat, said Gold.
Sony Ericsson hasn't been able to make much of a dent in the higher end phone market in the U.S. "I wonder whether Sony Ericsson will have the stomach to plug away in this market rather than focus on Western Europe, their core market, where they're being badly beaten by Nokia," said Greengart. Sony Ericsson could pull out of the U.S., he said. Or, the joint venture could dissolve, with Sony continuing to make phones under its brand and Ericsson getting out of the business all together, he said.