Can smartphones reverse handset declines?

The BlackBerry Curve also surpassed the iPhone 3G in smartphone rankings, driven by Verizon’s aggressive ‘buy-one-get-one’ promotions in the quarter, according to the NDP Group. RIM’s consumer smartphone market share increased 15% to nearly 50% of the smartphone market in the quarter, while Apple and Palm’s share both declined 10%. Following the Curve and iPhone in NDP’s rankings came the BlackBerry Storm, Pearl and the T-Mobile G1.

“We had the Curve at number two for the previous two quarters and the handset certainly benefited from Verizon’s buy-one-get-one promotion, which served to lift other BlackBerrys,” said Ross Rubin, director of industry analysis at the NDP Group. “The Curve embodies the traditional BlackBerry form factor that RIM has become well-known for. It being available on all four carriers gives it a distribution advantage over the iPhone and the Storm, which was the Verizon exclusive.”

WINNERS, LOSERS IN Q1

The other end of the spectrum, low-end basic devices, is seeing success as well. Juniper’s Kitson sees the market as polarizing between two extremes – high-end, high cost smartphones and low-cost entry level devices. The result is that handset makers like Sony Ericsson (NYSE: SNE) and Motorola (NYSE: MOT), which typically saw the most success in the mid-tier market, are hurting more than their peers. Sony Ericsson had a 36% drop in sales in Q1, shipping only 14.5 billion devices, down 35% year-over-year and 40% from the previous quarter. Motorola, meanwhile, squeezed past Sony Ericsson in the handset rankings, shipping 14.7 million handsets for the quarter.

“[Sony Ericsson’s] bread and butter has been high-end feature phones, and they have ridden those devices for quite some time,” Llamas added. “Walkman and CyberShot are nothing new, but the company continues to belt them out year after year. They are not in that low-cost handset game that companies are in. From a market share perspective, they are losing out on that.”

From a revenue perspective, it’s inexpensive to put together low-cost handsets too, Llamas said, but it might not be something Sony Ericsson wants to play in from a strategic point of view considering the additional manufacturing concerns. Companies like Nokia can switch from high-end to low-end quickly, but Sony Ericsson cannot, he added.

That being said, even market-leader Nokia saw its shipment volumes fell below 100 million for the first time in two years, as its average selling price fell as well. Since announcing its first-quarter earnings, the company has cut more jobs and narrowed its services focus, relying more on third parties. Korean vendors Samsung and LGactually fared the best in the first quarter, finishing with 17.8% and 8.8% market share, respectively.