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In smartphone world, it’s a two-horse race as BlackBerry falls further behind

Apple iPhone 5c phones are pictured at the Apple retail store on Fifth Avenue in New York.

ADREES LATIF/REUTERS

For all its meteoric growth, evidence is mounting that the smartphone industry has only been kind to two manufacturers – and especially cruel to one.

A new report from Canaccord Genuity, released Thursday, shows that Apple Inc. and Samsung Electronics Co. Ltd., the two most successful handheld-device makers, together collect the entirety of the industry's profits. Their many competitors, meanwhile, are losing money.

The two technology giants control the vast majority of smartphone sales, and are cashing in as a wave of consumers in the developing world begin to replace their traditional cellphones for smartphones. Those new customers appear interested only in phones running on Apple's iOS operating system or Google's Android – the software that powers the majority of Samsung phones, and those built by dozens of other manufacturers.

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That shift has taken its toll most severely on BlackBerry Ltd., the Waterloo, Ont., company that effectively invented smartphones and for years held a commanding lead. In a separate report, Canaccord analyst Mike Walkley said that, as a result of the company's uncertain future, sales of BlackBerry 7 phones – the company's older models – have plummeted.

"Given BlackBerry's announced exit of the consumer smartphone market and increasing competition from ever-more-capable low-cost Android smartphones in emerging markets, our surveys indicated rapid BB7 share losses," Mr. Walkley said. "In fact, we believe consumer BlackBerry sales are down more than 50 per cent" in recent months against a year earlier.

Meanwhile, sales of BlackBerry 10 devices, the company's new models launched early this year, have never taken off. That's not only due to limited consumer interest, but also extreme caution from many enterprise buyers, who are waiting to see whether the BlackBerry smartphone brand will even exist before they make a purchase.

The Canaccord report's findings are largely in line with those of International Data Corp. (IDC), whose third-quarter smartphone industry survey, released earlier this week, estimated that global BlackBerry sales have plunged to 4.5 million in the third quarter from 7.7 million a year earlier. During the same period, the company's global market share also sank to 1.7 per cent from 4.1 per cent last year.

Shipments of phones running on Google and Apple operating systems, however, saw gains of 51 and 26 per cent, respectively, during the quarter, according to IDC. Android phones accounted for 81 per cent of shipments, while Apple phones held 12.9 per cent.

If there is room for a third player in the smartphone industry, the report indicates Microsoft has overtaken BlackBerry for that spot. The Windows Phone company saw sales increase 156 per cent from last year, albeit from a relatively tiny user base. Over all, roughly twice as many Windows-based phones as BlackBerrys were shipped in the quarter.

Manufacturers of phones running on all other platforms almost disappeared from the market entirely, according to IDC, as shipments of those phones declined more than 80 per cent.

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The latest BlackBerry shipment numbers come during the week that new BlackBerry executive chairman and interim chief executive officer John Chen took over the company, following a very public but ultimately abandoned sale process and deep cost- and job-cutting efforts.

The extreme uncertainty hovering over the company is also causing some of BlackBerry's corporate customers to look elsewhere. A defence industry online news site this week reported that the U.S. Defence Department, which has deployed close to half a million BlackBerrys to employees, is looking to "multiple vendors" to support its mobile communications needs, while Bloomberg News reported Thursday that pharmaceutical multinational Pfizer Inc. told employees who use BlackBerry devices to switch to rival phone makers at the end of their contracts, citing the company's "volatile" situation.

"You've seen a lot of enterprise customers reassess" their device management," said Raymond James analyst Steven Li. "I wouldn't be surprised if they'll lose enterprise customers [to other device management service providers].

"There is going to be a lot of that going on."

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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