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Smartphones: Can You Spell G-L-U-T?

Device-makers are ramping up volumes for the second half of 2009, and while that’s good news for consumers it’s not necessarily a good thing for the industry. That’s the conclusion of a research note today from analyst Ashok Kumar, of Collins Stewart (as reported by Tech Trader Daily, on Barron’s).

Noting that Motorola Inc. (MOT) and Palm Inc. (PALM) are dramatically increasing their production of smartphones in a market dominated by Nokia (NOK), Research in Motion (RIMM) and Apple (AAPL), Kumar wrote, “Unless the market is stronger than we anticipate and/or incumbents lose share, there is a looming supply/demand imbalance.”

In other words: Glut Ahead.

Among them, RIM, Apple and Nokia control 72 percent of the smartphone market, with Nokia as the clear leader with 41 percent. Kumar asserts that, at least for the duration of the recession, the smartphone market is “a zero-sum game” – meaning that Moto and Palm, which has seen a nice bump from its Pre device, must capture market share to avoid having a lot of unsold devices on their hands.


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