Will iOS Ever Catch Up?

Like clockwork, the latest figures on the state of the smartphone market from researcher Gartner are out. The theme continues to be that Android is the king of the smartphone hill.

The third-quarter data shows that Google (Nasdaq: GOOG  ) continues to explode, thanks to its open nature and its army of OEM vendors, including Samsung, HTC, and Motorola Mobility (NYSE: MMI  ) . Apple (Nasdaq: AAPL  ) showed a little bit of shrinkage, and Symbian got crushed. Research In Motion (Nasdaq: RIMM  ) and Microsoft (Nasdaq: MSFT  ) continue to lag uninspiringly, while Samsung's proprietary Bada doubled its small share.

Source: Gartner press release.

Android now claims more than half of worldwide smartphone sales and now has more than triple that of iOS. A year ago, Android's slice was 25.3% compared with iOS's 16.6%. This past year has dramatically expanded Android's lead in the race.

The numbers mostly line up with the stats separately released by Nielsen earlier in the year, which also pegged Android's market share near half. What this latest batch doesn't play nicely with is Gartner's own premonition that Windows Phone 7 will overtake iOS as soon as 2015. Microsoft's share was nearly sliced in half over the past year, falling from 2.7% in Q3 2010 to just 1.5%.

When it comes to vendor ranking, Nokia (NYSE: NOK  ) is still the top dog, with 23.9% of worldwide mobile-device sales. Samsung follows up with 17.8%, and Apple sells only 3.9% of devices. Nokia lost the most ground, falling from 28.2% last year. Overall unit sales from all vendors grew by 5.6% to 440.5 million in the third quarter.

What Apple lacks in market share, it more than compensates in profits. According to figures from Canaccord Genuity analyst T. Michael Walkley, Apple's share of profits in the sector is estimated at 52%, despite its roughly 4% market share. On top of that, it's almost guaranteed that Apple's average selling price (ASP) for iPhones will jump and expand margins further.

Last year, Apple's iPhone ASP was $650 at a time when its retail prices were $599 and $699 for 16 GB and 32 GB flavors, respectively. This year's model has seen its retail prices jump to $649, $749, and $850 with the addition of a 64 GB model, and they're flying off shelves, leading me to estimate ASPs approaching $750.

Android's Ice Cream Sandwich looks pretty delectable and should give Android OEMs plenty of ammo in the war, while RIM's rapid decline needs no introduction.

At this rate, it seems like iOS may never catch up in the market-share game. At least it's still winning the profit-share game.

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Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Microsoft and creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.


Read/Post Comments (12) | Recommend This Article (1)

Comments from our Foolish Readers

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 November 15, 2011, at 9:16 PM, H3D wrote:

    Is there a race?

    Android is a freebie, presumably nobody would pay for it, given away by Google to protect its access to your personal habits and it's advertising revenue.

    IOS is the OS responsible for the premium smartphone lineup that takes 52% of the profits from the mobile phone industry.

    Would Apple want to swap for Google's phone situation?

    Would Google want to swap for Apple's.

    The concept of a race implies that the runners up would prefer to be in the position of the leader.

    If Google is in the lead then I see no race, because I'm pretty sure Apple has no wish to give iOS away.

  • Report this Comment On November 15, 2011, at 9:38 PM, Oldfool103 wrote:

    I think all of the phones in the Android Army are likely to keep that market share, although I don't know if the ice cream sandwich will sell enough of any one full featured Android based tablet to make a dent in Apple's lead there. Then there are all of those different brands of Android mp3s to balance off against the Touch. So, yeah, Samsung has a telephone lead in the past quarter and Apple is likely to overtake that this quarter, and hopefully they will keep pushing the other towards excellence. And when the i5 shows up, likely with LTE, that will make for an interesting 2012. As far as Apple's performance, I am very happy with where it is going. (And I hope that Googles driverless car gets to market before the government takes away my driver's license.

  • Report this Comment On November 15, 2011, at 9:50 PM, FreeRange1 wrote:

    Why does this article quote statistics that are irrelevant, like Apple's share of total cellphone market? Apple is the clear leader in smartphones as the single BEST selling smartphone in the category, and the lion's share of profits (over 50% for ALL mobile phones)! Further, they dominate the high end category while Android dominates the low end of cheap devices. One needs to also take into account the TOTAL iOS installed base to fully understand Apple's dominance and momentum as the only company really making money in the market, not pennies, or now profit at all.

  • Report this Comment On November 15, 2011, at 9:51 PM, FreeRange1 wrote:

    sorry about last sentence, should read.... or no profit at all.

  • Report this Comment On November 15, 2011, at 10:11 PM, TomFrog wrote:

    What's clear is that Android's gains are coming from users of dumb ("feature") phones, rather than at the expense of Apple. Go look at asymco.com for some excellent analysis of this.

  • Report this Comment On November 15, 2011, at 10:13 PM, makelvin wrote:

    Frankly, Apple is in the ideal position right now. With only about 4% of the overall phone market while capturing more than 50% of the market's profit, they can never be accused of mobile phone OS monopoly and be investigated by the Anti-Trust like what happened with Microsoft.

    Actually right now, Apple might be in a very unique position where they can capture majority of the market profit without actually capture majority of the market share. I think it would be even more interesting if Apple can one day capture over 90% of the profit while only have about 10% of the market share. They will effectively be the first monopoly in market profit share without ever been accused of been a monopoly in the market. Apple might be the first company to achieve that status. Interesting time indeed.

  • Report this Comment On November 15, 2011, at 10:23 PM, demodave wrote:

    This article is completely directionless, citing only individual snippets of fact (which may actually be correct, depending on how one asks the question), but with no sense of what it is trying to say (beyond providing a sensationalistic headline).

    The author compares "cell phones", "smart phones", "mobile devices", and "OS's". Is an iPod a "phone"? No, but it does use iOS, so it helps the iOS claim "market share", but not necessarily in the cell phone or smart phone arena. Is an iPad a mobile device? (I would argue that it is.) Is it a "phone"? (Well, no, maybe not really ... I ... dunno.) Does it run iOS? Hell, yeah!

    I think iOS is doing just fine, both on numbers of units sold and (obviously) on profits.

    I think our author is not doing so well, though.

    The context of "lost market share" is a non-cyclical change in business environments that cannot be overlooked: Apple's iPhone 4, with it's GSM and CDMA releases, and Apple's iPhone 4S have broken the superficially simple launch schedule that is realistically attributable to no-one *inside* Apple. (And Apple knew this and "warned" about it in its own guidance, which it proceeded to beat by 13%). I think Apple nailed the release (a "One Phone" to sell to all comers) and will benefit not from price point, but from reduced total manufacturing cost throughout the supply chain.

    Oh, and it will sell a *lot* of them, which will change the quarter-over-quarter smart phone dynamics *significantly*.

  • Report this Comment On November 15, 2011, at 10:23 PM, cbglobal wrote:

    I don't see how quoting only US market share figures is useful in a global market.

    Between 1984 and 2010 Fiat's car market share in the US was zero. Did not seem to hurt them any. All the US makers went broke or almost broke selling in the US.

    This does apply to smartphones. Panasonic stopped selling phones in the US in 2005. They are more profitable as a result of not wasting time, effort and money selling phones in the US at a low profit.

  • Report this Comment On November 15, 2011, at 10:29 PM, cbglobal wrote:

    PS... You say Symbian is dead, but on a global basis Nokia sold the same number of smartphones as Apple did in 3Q.

    This further shows why quoting only US market share is useless.

    Note that the new Nokia Windows phones are first being sold in Europe and Asia. They are focusing on profitable markets. The cut throat profitless US market can wait.

  • Report this Comment On November 16, 2011, at 1:25 AM, deemery wrote:

    There's a reasonable position (consensus?) that Apple's -previous quarter- was substantially prejudiced by the impending iPhone 4S release. One quarter does not a trend make....

  • Report this Comment On November 16, 2011, at 5:37 AM, MichaelDSimms wrote:

    Only shows that Apple is charging it's customers (suckers) way too much. If the customers (suckers) are ok with that, I guess everyone is happy. Including AAPL shareholders.

  • Report this Comment On November 16, 2011, at 10:42 AM, infektu wrote:

    Great way of reading the numbers!

    The reality:

    RIM went from 13% to 11%, iOS from 19% to 15%, WP from 9% to 1.5%.

    The "interpretation" we read here?

    "Research In Motion (Nasdaq: RIMM ) and Microsoft (Nasdaq: MSFT ) continue to lag uninspiringly."

    However, "Apple showed a little bit of shrinkage" :-)

    Even if RIM is in the same range with Apple they magically get "relegated" to the minor league together with MSFT, compared to which they have 10x the share.

    Oh, and "and Symbian got crushed." ... what a crush, at 17% they are a healthy 2% above iOS !

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