Phablets are a very hotly growing market. Phablets are those huge phones (greater than 4" screen size) that some people carry around. From almost nothing in 2012, over the last 3 years the market has exploded.
The original creator of this market data, Kulbinder Garcha of Credit Suisse, thinks this demonstrates cannibalization of tablet sales by phablets. And this is thought to be a bad thing for
But there is another way to look at this. By introducing and promoting phablets (iPhone 6+ and Galaxy S6,) Apple and Samsung are growing the total users of mobile media and mobile apps. As the chart shows, growth in tablet sales has been small compared to what happened when phablets came along. So people who didn't buy a tablet, and maybe (probably?) wouldn't, are buying phablets. The mobile market is growing faster with phablets than had they not been introduced, and even if tablet sales shrink Apple and Samsung will see revenues continue growing.
Who wins as phablet sales grow? Those who have popular phablet products in the market, and newer versions in the works.
As this chart shows, the companies who dominate smartphone sales are those who make Android-based products (#1 is Samsung) and Apple.
Unfortunately for Microsoft enthusiasts, and investors, Microsoft's Windows10 product is focused first on laptop (PC) users, second on hybrid (products used as both a laptop and tablet), third tablets (primarily the slow-selling Microsoft Surface) and in a far, far trailing position smartphones.
As data from IDC shows, Surface sales are inconsequential. So the big loser from phablet cannibalization of tablets will be Microsoft. Given its relatively small user base, and the heavy losses Microsoft has taken on Surface, there is little revenue or cash flow to support an intense competitive effort in a shrinking market. Apple and Samsung will market hard to grow as many sales as possible, and likely will make the tablet products more affordable (interpreted - expect lower prices in the future.) Thus one should anticipate Microsoft's very small tablet share would decline as tablet sales shrink.
This is the problem created when any business misses a major trend.
Microsoft missed the trend to mobile. They didn't prepare for it in any of their major products, and they let new products, like music player Zune and Lumia phones, languish. By the time Microsoft reacted Apple and Samsung had enormous leads. Microsoft is still trying to play catch-up with its "core" Windows product.
But worse, because it is so far behind, Microsoft's leaders are unable to forecast where the market will be in 3 years. Consequently they develop products for today's market, like tablets (and their hybrid products,) which we now see will be obsolete as the market shifts to new products (like phablets.)
Because Apple and Samsung already have the new products (phablets) they are prepared to cannibalize the old product sales (tablets) in order to grow the overall marketplace. But Microsoft has so few smartphone sales, and such inconsequentially small phablet sales, that the market shift will do little to drive new Microsoft revenues. By betting heavily on defending its core PC business, and extending Windows 10 primarily into tablets and hybrid machines, Microsoft will most likely find itself writing off future Surface products as its tiny smartphone market share erodes to nothing.
So this trend to phablets further dwindles the odds of a Microsoft comeback as a major personal technology competitor. Windows 10 may be coming, but its relevance looks increasingly like that of new Blackberry models. There is little reason to care about Microsoft mobile products, because the products are years late and poorly positioned for leading edge customers.
Further, developers will already be onto new competitive platforms long before the outdated Microsoft products make it to market. Without share Microsoft won't capture developers, without developers Microsoft won't have a robust app market, without apps Microsoft won't capture customers, without customers Microsoft can't build share --- and that's the terrible whirlpool Microsoft is captured within.
Lesson for everyone - be sure your business keeps its eyes on trends, and does not wait to react. Waiting can turn out to be deadly.
[Update 3/30/15 - IDC reports Google's Chrome OS captured 3.5% of PC market share in 2014. To Windows fans this is an immaterial number. However, it mirrors the share Windows has in Smartphones.]
I’m an expert in business growth and overcoming organizational obstacles to success. Invite me to speak at your next conference or management meeting on how to grow your organization. Learn more at www.AdamHartung.com, or connect with me on LinkedIn, Facebook and Twitter. Links:
Why Windows10 really doesn't matter
The week Microsoft lost relevancy
Microsoft's "last stand" to keep developers - why it will be a Custer-like outcome
