How Long Will Apple's iPhone Reign Last?

Apple sold a record 37 million iPhones in the fourth quarter -- 17 million more than it had ever sold in any other quarter. By last December, 44.5% of all smartphone buyers in the United States were choosing iPhones, up from 25.1% last October. 

Is this popularity a good thing? Maybe, maybe not.

"All of a sudden, every teenage girl has an iPhone," said Mr. T. Michael Walkley, an analyst at Canaccord Genuity. "The real danger is that Apple becomes so mainstream that there is a breakaway by consumers to something new," reports the New York Times.

Indeed, those in the market for a device other than the iPhone have plenty of alternatives. Apple's rivals, which include Samsung, Huawei, ZTE, and others using the Google Android operating system "are making smartphones for much less, and the iPhone is becoming ubiquitous, threatening its cachet."

Many competitors displayed their new models at the Mobile World Congress in Barcelona, a phone trade show, to highlight their smartphones' unique features. One standout debut was Nokia's 808 PureView smartphone that boasts a 41-megapixel/1080p camera.

Competitors are also working to keep prices below that of Apple's iPhone. Apple was not present at the trade show.

Given the competition, Mr. Walkley is cautious about Apple's ability to retain its position as the lead supplier of smart phones over the next 5-10 years. Mark Newman, the director of mobile research at Informa Telecoms and Media, adds "Apple is focused on defending the high end of the market... Competitors, such as the Galaxy from Samsung, are starting to catch up. I think it is inevitable that the margin pressure increases."

But before supposing that Apple's days are numbered, consider that the company has billions of dollars earmarked for continuing innovation and marketing. The company has yet to see any major branch of the brand go on the decline. 

Business section: Investing ideas
Interested in exploring the smart phone market? Below, we've listed 10 of the biggest players in the industry.

Do you think the iPhone reign will last? (Click here to access free, interactive tools to analyze these ideas.)

1. Apple (Nasdaq: AAPL  ) : Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $487.08B

2. Microsoft (Nasdaq: MSFT  ) : Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $264.14B

3. Google (Nasdaq: GOOG  ) : Is the world's most popular search engine. Market cap at $198.3B

4. AT&T: Provides telecommunication services to consumers, businesses, and other service providers worldwide. Market cap at $179.83B

5. Vodafone Group: Provides mobile communications in Europe, Africa, the Asia Pacific, the Middle East, and the United States. Market cap at $143.74B

6. Verizon Communications: Provides communication services. Market cap at $107.98B

7. QUALCOMM (Nasdaq: QCOM  ) : Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap at $107.3B

8. Siemens: Operates in the industry, energy, and health care sectors worldwide. Market cap at $91.93B

9. NTT DOCOMO: Provides wireless telecommunications services, packet communications services, and satellite mobile communications services in Japan. Market cap at $74.34B

10. Nokia (NYSE: NOK  ) : Provides Internet and digital mapping and navigation services worldwide. Market cap at $22.22B

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


List compiled by Eben Esterhuizen, CFA. Kapitall's Rebecca Lipman and Eben Esterhuizen does not own any of the shares mentioned above.

The Motley Fool owns shares of QUALCOMM, Apple, Microsoft, and Google. Motley Fool newsletter services have recommended buying shares of Vodafone Group, Microsoft, Google, Nokia, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. 

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.


Read/Post Comments (2) | Recommend This Article (1)

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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 28, 2012, at 2:30 PM, xmmj wrote:

    So many clichéd but fallacious arguments here.

    1- "The real danger is that Apple becomes so mainstream that there is a breakaway by consumers to something new,"

    This makes the assumption that choice is made solely on non-consequential style/fad reasoning. Granted this has something to do with it, but not all. In some cases it is not a prevailing motivation.

    The real reason people go for the iPhone is because it continues to offer the best technology. The customer satisfaction ratings are about 97%, and the innovation never ceases. This is why many Android users are switching to iPhones, but very few are going the other way.

    2-

    "Competitors are also working to keep prices below that of Apple's iPhone"

    The older models of iPhone are discounted so you can get a 3G for free.

  • Report this Comment On February 29, 2012, at 9:37 AM, Melci wrote:

    If that argument was true then why has the iPod for more than a decade now continued to obliterate all competition in the media plate and mini tablet markets?

    Perhaps, just perhaps, the iPod and the iPhone and the iPad all share the same advantages - those of ease of use, far richer media and content ecosystems, vastly more 3rd party hardware peripherals, cases and accessories, no malware, far more quality apps, far more top tier games, much better support through Apple Stores, etc etc.

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