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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:
- There is some legitimate competition now.
- 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.
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.