It has become painfully clear that smartphones are where the growth is in the handset market. Evidence of this is seemingly everywhere:

• IDC reports the converged mobile device market (translation: smartphones) grew nearly 30 percent year over year in 2009, and will continue to gain momentum this year.
• Qualcomm's CEO Paul Jacobs sees the smartphone market splitting into a high-end segment and a low-end one--a trend that is rapidly eroding the market for feature phones.
• And a survey last year by the Yankee Group found that around 43 percent of U.S. consumers plan to go "smart" with their next mobile device.

But do these signs mean there is room in the smartphone market for new vendors? Recent news out of Palm and Garmin indicate the smartphone playground isn't necessarily the profit panacea one would expect. Specifically, Palm said it now expects full-year revenue to be "well below" its previous estimate of between $1.6 billion and $1.8 billion, while Garmin said it has so far been "disappointed" with sales of its nuvifone products. Those stumbles could give Dell, Acer, LG and other hopefuls pause as they ramp up their own smartphone efforts.

"Instead of, 'If you build it, they will come,' it's turned into, 'If you build it, will they come?" noted IDC's smartphone analyst Ramon Llamas.

However, both Garmin and Palm faced challenges unique to them, Llamas said. Palm's marketing efforts so far have targeted the "Valentine's Day" crowd instead of more traditional smartphone early adopters (meaning, young men), Llamas explained, while Garmin suffered from a scarcity of promotion and an ecosystem that relied too heavily on interest in mapping and directions.

CCS Insight analyst John Jackson largely agreed. "We knew that Palm would launch the Pre into the teeth of new flagship products (or revs of products in Apple's case) from Apple, RIM, HTC and others," he said. "The same is true for Garmin, compounded by the issue of Google (and now Nokia) basically undermining the navigation proposition with freeware. Without a portfolio, a limited number of stock-keeping units (one in Garmin's case and basically two in Palm's case) are that much more likely to get lost in the mix. Apple is the exception, but that success story is well known at this point."

However, Garmin and Palm's troubles don't necessarily foreshadow across-the-board failures by others hoping to break into a smartphone market dominated by Nokia, Research In Motion, HTC and Apple. Llamas said emerging vendors must foster an ecosystem and promote their devices as on-the-cusp innovations rather than also-rans--tough goals, but doable. The availability of Android, Symbian and Windows can give manufacturers a step up.

"In a sense, the 'smartphone' market is just the new phone market," contended Jackson. "It's huge, but that hardly means you can stroll on in and make money. The traditional mobile phone market has always been tough sledding for new entrants. The availability of Android and other open/open source software platforms doesn't fundamentally change this. Vendors need scale and a degree of differentiation if they are to have any shot at achieving decent margins over time."

That said, though, I think it's clear that the newest batch of smartphone aspirants--which stretches from Dell, Acer and LG to Aava Mobile, Else Mobile, modu, Anydata, General Mobile, ZTE, Saygus and a host of others--face a steep road in their bid to separate themselves from the likes of BlackBerry and iPhone. After all, failed efforts like the Sendo X, the Sierra Wireless Voq and the Neonode N2 show just how difficult it is out there. --Mike