Stellar Year, but can Apple's iPhone Sustain Growth?

After being on the market for slightly over 200 days, Apple's iPhone managed to take second place in the U.S smartphone market behind Research in Motion's venerable Blackberry, and ahead of Motorola offerings, but some experts contend the growth may short lived unless the firm's business model changes.

What it must demonstrate now is that it can build a sustainable business in the converged device space, expanding its coverage and product portfolio, said analyst Pete Cunningham of Canalys research.

Apple will have to prove that the exclusive partnerships it has with carriers in different regions of the world will not limit sales, Cunningham explained.

In addition, Apple will need a broad, continually refreshed portfolio in order to compete against established vendors, which are developing their own innovative interfaces to compete with the iPhone's touch screen.

Experience shows that a vendor with only one smart phone design, no matter how good that design is, will soon struggle, Cunningham said. A broad, continually refreshed portfolio is needed to retain and grow share in this dynamic market. This race is a marathon, but you pretty much have to sprint every lap.

The iPhone garnered 28 percent of the U.S. converged-device market in the fourth quarter of 2007, according to research firm Canalys. Research In Motion, with 41 percent, had the largest share of the market. Windows Mobile phones had 21 percent share of devices sold in the quarter, falling into third place behind Apple. Palm was a distant fourth place with 9 percent of the market.

Internationally, Nokia remains the leader with 52.9 percent of the market with RIM a distant second at 11.4 percent for the quarter. Apple took third place with 6.5 percent of the market, just barely ahead of struggling Motorola.

The Cupertino Calif.-based electronics maker revamped its lineup of iPhones yesterday, adding a phone with double the memory. The iPhone now comes in a new 16GB model for $499, joining the 8GB model for $399.

Consumers are left waiting for the rumored 3G capable iPhone, which by some accounts should hit shelves by late summer.

Overall smart phones grew 222 percent in the during the quarter, according to Canalys.