Cell Phones Get Accessorized

Move over, iPod: Mobile phones are getting their own raft of add-on gadgets, from headsets and speakers to printers and projectors

by Olga Kharif

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Walk into a consumer electronics store and note the accessories for the iPod. Surrounding the digital music player are any number of cases, speakers, docking stations, and specialty handbags. In contrast, extras for the mobile phone typically are limited to a handful of chargers, carrying cases, and a headset or two.

Not for long. Cell-phone manufacturers Nokia (NOK), Samsung, and Sony Ericsson and longtime iPod accessories makers including Philips are quickly rolling out an array of cell-phone speakers, boom boxes, speakerphones, printers, projectors, and fancy car kits. Though many of these add-ons are currently hard to find in the U.S., they'll start showing up in novelty stores like Sharper Image (SHRP) in a matter of weeks and on shelves of wireless service providers and retail chains like Best Buy (BBY) by the yearend holiday shopping season.

Not Just for Talking

Why the wireless accessories advent? For one, new laws in states like New Jersey that prohibit driving while holding a cell phone are driving up demand for Bluetooth headsets and car kits that facilitate hands-free talking.

Adoption of music phones is also stimulating sales of music-related accessories. Music-enabled phones, such as the LG Chocolate, Sony Ericsson Walkman, and Samsung UpStage, accounted for 32% of new phones sold in the fourth quarter of 2006, up from 16% in the first quarter, according to market researcher NPD Group (see BusinessWeek.com, 10/13/06, "Sony Walkman Wants the Spotlight Back"). As consumers get used to listening to music and radio on handsets, manufacturers reckon they'll want speakers and all the other gadgets that go along with music players.

The iPhone Is Coming, The iPhone Is Coming!

Possibly the biggest boost could come from Apple's iPhone, due to be released in June. Just as Apple (AAPL) made it easy for developers to create accessories for its iPod, the company is expected to do the same for would-be makers of gear for the hotly anticipated music-playing cell phone, which will be sold in conjunction with AT&T/Cingular, says Richard Doherty, director of the Envisioneering Group. Not only is Apple expected to launch its own accessories line, but it's already working with third-party developers like Philips' Digital Lifestyle Outfitters.

The market for iPod-related products has ballooned into a $2-billion-a-year business within the past five years. Makers of cell-phone accessories hope for similar growth. Today, an average iPod owner spends up to $100 on extra gear (see BusinessWeek.com, 7/19/06, "iPod Accessories Gone Wild"), compared with $2 to $30 for an average cell-phone user. "There's a lot of room for the market to grow," says Jan Dawson, an analyst with consultancy Ovum, which puts U.S. sales of cell-phone accessories, most of them chargers and cases, at $1.1 billion annually.

Accessories maker Parrot figures that while only one in six cell-phone sales now results in an accessory purchase, by 2011 the number will rise to one in three. "That means that it's going to be a tug of war for accessories," says Edward Valdez, U.S. president of Parrot, which will release its cell-phone boom box in June.