Android Is Biting Into Apple

Google's (Nasdaq: GOOG  ) Android software-run tablets are eating their way into Apple's (Nasdaq: AAPL  ) rather dominant market share, according to market researcher Strategy Analytics. Apple's iPad, which has sold more than 14.8 million units worldwide since its launch in April, is increasingly facing stiff competition from Google's Android-enabled tablets like Samsung's Galaxy Tab and Dell's (Nasdaq: DELL  ) Streak.

Success breeds competition
The global tablet market is witnessing staggering growth, with no shortage of players piling in with offerings to rival the iPad.

Savvy consumers will know, for example, that two more names, the Motorola Xoom and Samsung Galaxy Tab 2, are up for release in the very near future. These aggressive product launches and others have created plenty of speculation that market leader Apple may face difficulties in maintaining its market dominance in the future. A growing body of evidence seems to confirm these suspicions.

The rise of the machines
Market share of Android-run tablets has increased by about ten times in the fourth quarter as compared to the preceding quarter, thus significantly narrowing down the lead of Apple's iPad. Android-enabled tablets have captured an impressive 22% of the total global tablet shipments in the fourth quarter of 2010, up from just 2.3% in the previous quarter.

Market share losses on this scale likely come down to two factors, only one of which has actually anything to do with Apple:

  1. There is some legitimate competition now.
  2. The competition is under-cutting Apple significantly on price.

The increased competition coming from relatively cheaper Android-enabled tablets manufactured by Samsung, Motorola Mobility (NYSE: MMI  ) , and Acer, ensure that price sensitive consumers at least consider new entrants to the market. Of course, it's impossible to forget that despite the arrival of several new players to the game, Apple's performance on its own has been nothing short of stunning.

Unstoppable
The iPad has seen shipments rise by 74% in the fourth quarter with Apple shipping 7.3 million iPad tablets in the fourth quarter, up from 4.2 million units in the previous quarter. Plus, we're likely to be just weeks away from an iPad 2.0, which could change all the rules. Compare this to shipments of Android-enabled tablets which barely broke the 2 million mark in the fourth quarter. Clearly, when working off of such a relatively small base, growth on the scale that Android is seeing is relatively easy, but Apple should closely monitor the situation, regardless.

Fortunately for Apple, the company has first mover's advantage for the time being in the tablet market, as well as an enviable distribution network supported by all the big retailers, as well as Apple's own stores. In contrast, Google doesn't have a single store of its own. According to industry experts, iPad volumes will continue to rise, but its market share will inevitably decline as more and more competition floods the market. The real question is: Will the early bird ultimately get the worm?

The fate of smartphones
A great example of this not happening has just taken place between these two companies in another hot consumer category: smartphones. According to research firm Canalys, Android became the world's best-selling operating system for smartphones last quarter, outdoing Nokia (NYSE: NOK  ) Oyj and Apple's platforms. Given the tremendous early success that Apple had, and the subsequent success that Android has enjoyed on its own, isn't it reasonable to believe that Android's success in the smartphone category is likely to spill over into the tablet market as well? It is predicted that Android-enabled tablets will further erode Apple's dominance in the first half of 2011, bringing down its market share to less than 50% of the global tablet market in the next two years. That's serious food for thought.

The Foolish bottom line
The expanding tablet market is indisputably a good opportunity for retail investors provided they have a stake in at least one of the eventual winners in the field. I hate to play coy here, but my sense is that market pioneer and leader Apple and the emerging Google play through Android are good bets in the foreseeable future, regardless. This market is almost too attractive to ignore.

Aditi Baid doesn't own shares of any of the companies mentioned in the article. Google is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor choice. The Fool has written puts on Apple. The Fool owns shares of Apple, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 11, 2011, at 2:13 PM, deemery wrote:

    BOGUS! What sales figures to actual consumers exist to support the claims in this article? What data exists to justify 'undercutting price' claims? A lot of the tablets I've seen actually advertised as shipping to consumers cost as much or more than iPads.

    Now in 2011 it might well be the case that Android based tablets challenge the iPad.

    I expect better from Motely Fool articles than this kind of unsubstantiated FUD.

  • Report this Comment On February 11, 2011, at 2:40 PM, Davewrite wrote:

    Strategy Analytics numbers have been disproved already. That got their stats before Samsung announced that that their numbers were to retailers only and that sales to consumers weren't great.

    As for coming tablets:

    the big names:

    Xoom : $799 vs 499 entry iPad. Xoom requires contract to activate Wifi.

    Rim Playbook: requires tether to Blackberry phone to work properly. No native email, contact etc apps except through tether. QNX was originally a plug-in OS which means bad battery life. That's why it's still not on Rim's phones. Estimated half iPad's battery life.

    Dell Streak 7: totally sucky low rez narrow viewing angle 800x480 screen. WSJ says it's got a 2 hr battery life playing video vs 10 hr iPad.

    HP touchpad: no apps. No ecosystem. No dateline. No price.

    None of the main tablets are beating the iPad in price (low prices require contracts). IPad 2 is coming.

  • Report this Comment On February 12, 2011, at 12:49 AM, ScottmFool wrote:

    DaveWrite says:

    > Xoom : $799 vs 499 entry iPad.

    > Xoom requires contract to activate Wifi.

    This is a distorted comparison. The estimated pricing is between 699-799 for the 32GB Xoom and a 32GB iPad is 729.

    And keep in mind that the Xoom supports a microSD card, bumping it up to 64GB storage. The 64GB ipad is 829.

    Verified on Apple's website: http://store.apple.com/us/browse/home/shop_ipad/family/ipad?...

    And that doesn't include the multitude of other features the Xoom has that the iPad doesn't.

    IMHO, not having a Wifi-only option is a big mistake, and on that point criticism has merit.

    But the distortion on pricing is borderline lying.

  • Report this Comment On February 14, 2011, at 10:24 AM, Brent2223 wrote:

    I think this is exactly what Apple wants. 1st gen iPad was bare bones intentionally. Get it to market and see what people complain about, let the competition think they can address and steal market, but the 2nd gen iPad will address these concerns and probably do it better than the competition. For instance, no camera on 1st gen? That's a conscious decision to hold back functionality to create a buzz for the 2nd gen. Apple has plenty of ammunition in its back pocket, everyone knows to expect great improvements between 1st and 2nd gen Apple products.

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