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Calling all megapixels
Camera phones approach digital-camera-level quality. What will it mean to carriers, makers, and you?
April 7, 2004: 1:57 PM EDT
By Eric Hellweg, CNN/Money contributing columnist

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SAN FRANCISCO (CNN/Money) - A few columns ago, I predicted that MP3-player-equipped cell phones would one day overwhelm the market for stand-alone MP3 players.

While I stand by my vision, I'm ready to predict that souped-up cell phones will soon stake a serious claim in the market for another stand-alone consumer electronics device: the digital camera.

Already, camera phones have been a savior for phone manufacturers, boosting sales via what the industry calls "product refresh." According to In-Stat/MDR, 132 million camera-enhanced cell phones will be sold worldwide this year, up from 49.6 million last year. Research firm IDC predicts that this year's U.S. camera-phone sales will be more than triple last year's.

Right now, the overwhelming majority of these units are shipping with cameras that aren't exactly professional quality. They are VGA (video graphics array) quality, taking pictures at a resolution of 640x480, or 0.3 megapixels. That's starting to change as more phones come to market with 1-, 2-, or even 3-megapixel cameras attached, close to or even better than the quality of most digital cameras.

"Once you get to 2 megapixels, you're at the level where a printed photo reaches film quality," says Kevin Burden, an analyst with IDC.

Improvements are on the way

Last month, Nokia announced its first 1-megapixel phone, the 7610, which will arrive in the United States sometime in the second quarter. Sony Ericsson is expected to have its 1.3-megapixel phone available in Europe by the end of this year, and just this week Samsung announced a 3.1-megapixel phone for the Korean market.

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These new cameras are great news for phone manufacturers, because they mean higher margins. The new Nokia phone will retail for $616 in the United States (and Nokia could use some good news after having its stock hammered yesterday).

Once the prices come down (which they always do in technology), consumers will likely glom on to these phones. In-Stat/MDR predicts that 1- and 2-megapixel camera-phone sales will more than double VGA phone sales worldwide by 2007.

For carriers, however, the higher-quality camera phones aren't as much of a slam dunk, at least not yet.

Many people these days are finding ways to directly sync their existing camera phones to their PCs, and instead of sending photos through the carrier networks to other phones, they zap them via cables to their PCs, where they can manipulate the images and e-mail them to friends. People with PDA-enhanced camera phones find this easier, since the phones come with cables for syncing to the computer.

Bringing in the carriers

To capitalize further on the camera-phone trend, carriers must iron out the incompatibility issues between their disparate networks (to allow a Sprint customer to send camera-phone pics to a non-Sprint customer, for example) and build out their high-speed networks so sending a picture doesn't take forever.

"I think [the incompatibility] is more of a political thing than technical," says Neil Strothers, an analyst with In-Stat. "The GSM folks -- AT&T Wireless, T-Mobile, Cingular -- they could probably have something worked out by midyear, others maybe a little later. The carriers and the users are frustrated that they can't share photos; the immediacy is gone. It's something that has to be worked out."

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I believe it will be worked out -- the revenue possibilities are too great for carriers to continue their forced balkanization, which is not an uncommon reaction by technology vendors in a new territory.

And when these kinks are eliminated and the prices for 1- and 2-megapixel phones come down, I think some consumers will consider purchasing a high-end camera phone in lieu of buying both a phone and a digital camera. Why buy two devices when you can get both functions in one?

Call it Hellweg's Law: In the world of handheld consumer electronics, the device that induces the least pocket clutter always wins.


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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.