Although device manufacturers such as Sony Ericsson and Motorola have been struggling in terms of revenue, Apple announced strong financial results for its fiscal quarter that ended Dec. 27.

Apple's relative success was somewhat of a surprise, given the recession and the recent announcement that CEO Steve Jobs would take a six-month leave from the company to deal with health issues, which recurred after his 2004 treatment for pancreatic cancer. Chief operating officer Tim Cook has taken the reigns of the company while Mr. Jobs recovers.

"The values of our company are extremely well-entrenched - we believe we were put on the face of this earth to make great products," Mr. Cook said during a conference call this week from Apple's Cupertino, CA, headquarters. "Regardless of who is in what job, those values are so embedded in this company that Apple will do extremely well.

"There is an extraordinary breadth and depth of talent [in Apple's management team]," he said. "They're all wicked smart."

On the earnings call, Apple chief financial officer Peter Oppenheimer would not give specifics about Mr. Jobs' condition, but said that Mr. Cook is in charge until the founder/CEO can come back to work.

"Steve is the CEO of Apple and plans to remain involved in strategic decisions," Mr. Oppenheimer said during the conference call. "Tim is in charge of day-to-day operations."

Apple posted record revenue of $10.17 billion and record net quarterly profit of $1.61 billion.

These results compare to revenue of $9.6 billion and net quarterly profit of $1.58 billion in the year-ago quarter.

Gross margin was 34.7 percent, equal to the year-ago quarter.

International sales accounted for 46 percent of the quarter's revenue.

Apple sold a record 22,727,000 iPods during the quarter, representing 3 percent unit growth over the year-ago quarter.

Quarterly iPhone units sold were 4,363,000, representing 88 percent unit growth over the year-ago quarter. However, iPhone sales were down from the previous quarter.

"Even in these economically challenging times, we are incredibly pleased to report our best quarterly revenue and earnings in Apple history -- surpassing $10 billion in quarterly revenue for the first time ever," Mr. Jobs said in a written statement.

While the holidays sales numbers were quite good, Apple tempered expectations for the first quarter of this year.

"The fear is the economy may slow down the adoption of smartphones, because of higher monthly fees on contracts," Mr. Cook said.

During fiscal 2007, Apple began selling the iPhone and Apple TV.

In July 2008, the company began selling iPhone 3G, the second-generation iPhone, and significantly expanded distribution by establishing carrier relationships in more than 70 countries.

Unit sales of iPhone 3G have been significantly greater than sales of the first-generation iPhone.

During the first quarter of iPhone 3G availability, which ended Sept. 27, 2008, 6.9 million units were sold, exceeding the 6.1 million first-generation iPhone units sold in the prior five quarters combined.

Unit sales of iPhone 3G continued to be significant in the quarter that ended Dec. 27, 2008, with 4.4 million iPhones sold, although that did represent a decrease from the previous quarter.

"Our outstanding results generated over $3.6 billion in cash during the quarter," Mr. Oppenheimer said.

"Looking ahead to the second fiscal quarter of 2009, we expect revenue in the range of about $7.6 billion to $8 billion and we expect diluted earnings per share in the range of about $.90 to $1," he said.

One other mobile device manufacturer -- LG -- posted a strong quarter.

LG's Mobile Communication Co. reached a company high of $3.3 billion in sales, 34.6 percent higher than a year earlier.

Handset sales accounted for $3 billion, up 40.3 percent year-on-year and 16.5 percent quarter-on-quarter.

Shipments of handsets recorded 8 percent growth year-on-year to 25.7 million, which resulted in a record 100.7 million units being sold in 2008 versus 80.5 million units in 2007.

Apple to oranges
Despite the recession, brands should not turn away from mobile, per analysts. They should focus particularly on smartphones, which continue to increase their penetration.

While manufacturers' fourth-quarter numbers were not stellar in general, they can be attributed to the economic downturn and should be a blip on the radar.

"Overall I think Apple's earnings was good in terms of revenue and profitability," said Ryan Reith, senior research analyst and worldwide mobile phone tracker for IDC, Framingham, MA.

"However, when looking strictly at the iPhone, they were down significantly compared to last quarter, CY Q3 08," he said. "Shipments went from 6.9 million to 4.4 million, which given the holiday season in CY Q4 08 one would think Apple might ship more handsets than they actually did.

"They did make a good point in the earnings call, and it was that they have no plans anytime soon of chasing market share, but rather they are out to create the best mobile phone experience in the market, and right now they feel as if they have done so.

"It is a bit tough to compare them to the likes of Nokia, Sony Ericsson, LG and even Motorola, because those manufacturers play on all levels of this industry -- low-, mid- and high-end -- whereas Apple only completes in the high-end segment."

Apple's biggest rival in the U.S. market may be Research In Motion, maker of the BlackBerry.

"Apple did make a note in the Q3 08 earnings that the 6.9 million units they shipped were better than RIM," Mr. Reith said. "I can tell you that RIM had a better Q4 08 than Apple by far, although I can't actually disclose the units."

What about HTC, the manufacturer of the much-ballyhooed T-Mobile G1 with Google?

"I think the G1 has been relatively successful to date," Mr. Reith said.

"However, the tough part is that it is still one device, one region, one operator. HTC and Android will both be successful moving forward and I believe will be in direct competition with RIM and Apple."

One thing that is not in question? Smartphones are here to stay and continue to gain traction both nationally and worldwide.

"In terms of consumer preference, I think we are seeing more and more consumers shifting their handsets to smartphones more than ever," Mr. Reith said. "There are a few reasons for this: first, the subsidized prices offered by operators are coming down significantly."

Apple's iPhone 3G launched at $199 forthe 8GB model, while the G1 was released at $179.

"The reason for this is because operators are increasing their subsidy to the manufacturer because they realize that most of these devices require a data plan, and operators rely more heavily on data revenues than they do on device sales," Mr. Reith said.

"If an operator has to eat an initial $200 on the subsidy to the manufacturer, that is OK, seeing as they will make that up in the first four months from the consumer with a data plan, assuming a $50-a-month data plan attached to the smartphone sale," he said.

"This is a trend we can expect to see for some time to come, and we think pricing wars will heat up even more as the OS space begins offering more and more consumer-focused app storefronts on the device."

It is a well-known fact that smartphones are better venues for advertisers and marketers.

"The sales of smartphones should relate to direct success and revenue for mobile marketing, as manufacturers will be looking for ways to couple services with their devices as a workaround to the operator revenues," Mr. Reith said.

One example he gave is the rise of 15-second, pre-roll video advertising clips before consumers watch 30 minutes of programming. NBC, Fox and ABC have all launched such initiatives.

"This will continue to grow, and applications will grow as well and begin to make the device truly a personal computing device," Mr. Reith said.

What is a marketer to do?
This harsh economic climate has forced phone makers to take stock. Some device manufacturers are reeling and have been forced to cut jobs.

"If we look at Apple's Q4 numbers, their iPhone numbers are actually down, but they are still very strong numbers overall," said Roger Entner, New York-based senior vice president of telecom research and insight for Nielsen. "Everybody is going to be suffering in the fourth quarter, but some are suffering more than others.

"The ones that are suffering more are Sony Ericcson and Motorola, while LG was one of the biggest winners in North America," he said. "LG has very closely aligned itself with Verizon Wireless, and they have really ridden on the success of Verizon.

"The device market share of LG on Verizon and the network upgrades are clearly in LG's favor."

Sony Ericsson, meanwhile, is really struggling. It has yet to come up with a viable smartphone to compete with iPhone or BlackBerry.

"Sony Ericsson was successful with their Walkmen phones, which at the time were perceived as top-end devices, but suddenly the iPhone comes out, and even though Walkmen phones are very nice devices, they pale in the presence of the iPhone," Mr. Entner said.

Motorola is in the same boat.

"Motorola has a really stale product portfolio," Mr. Entner said. "There hasn't been something interesting -- something radically new -- that they've come up with in a long time.

"They have the same stuff they've had for an ungodly amount of time," he said.

Mr. Entner has a sunnier outlook for HTC, although he didn't exactly sing the praises of the G1. He says the marketing efforts of Google, HTC and T-Mobile have been lackluster.

"The level of success for the G1 Google phone has been modest," Mr. Entner said. "However, we have to remember that this is just the first device on the Android platform.

"I thought it was an ominous sign that we only saw a few weeks of modest advertising around the Google phone, compared to many weeks of really heavy advertising around the Apple iPhone," he said.

"We have to remember that Apple foot the bill for the iPhone -- for weeks and months Apple put as much television advertising on the air as Sprint or T-Mobile did for their entire portfolio, their entire TV advertising spend.

"There has been a massive difference in support."

Mr. Entner questions why there were no ads from Google in support of the G1. The TV ads that did appear were from T-Mobile.

"There was initial pent-up demand for the G1, but not a lot of support afterwards," Mr. Entner said. "For a while, you couldn't switch on the TV without being bombarded with an iPhone commercial, and it's still more supported on the TV than the Google phone.

"Advertising works," he said.

The analyst agrees that smartphones' market share continues to increase.

"We certainly see a shift to more powerful devices, which is really not surprising, because as markets mature and mobile devices increase in penetration, the demand for more powerful, more capable phones is increases," Mr. Entner said.

"We've seen that in Japan and Korea, partially in Europe, and we're seeing that in the U.S," he said.

Overall, he sees reasons to be optimistic, although he cautioned that that the segment is not out of the woods yet.

"In the long run, the increase in smartphone penetration is a very good sign for mobile marketers," Mr. Entner said. "In the short run, the economic crisis is overshadowing everything."

Mr. Entner's advice to brands? Stay the course and continue to invest in mobile.

"Advertisers should absolutely not abandon the mobile medium, because it's one of the media of the future," Mr. Entner said. "Nowhere else can you get the immediate interaction with potential customers as you have on mobile devices.

"At the same time, it's a medium that needs to do a lot of growing up," he said. "It's still in the beginning phases of being a true mass-medium."

There will be a time when mobile could approach television's reach, but that day will not come in 2009.

"TV measures viewers per minute, per half hour, per hour, but when you're measuring mobile data users per month, you know you're having a reach problem," Mr. Entner said. "The TV data is readily available -- you can check the most-viewed TV shows in USA Today.

"We have to get to the point where we have persistent, frequent use of the mobile Web," he said. "We've come a long, long way, there's no doubt about it, but for it to rival TV, we're still a long way off."