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It will probably remain that way for some time, but now isn't the time to sell Mr. Softy short. A new projection by tech watcher IDC is pretty ominous. The firm's forecast is for Microsoft's mobile operating system to overtake the iPhone in market share by 2016. Yes, that Microsoft. Yes, that Apple iOS.
Whoa -- Megan Landry alert
Microsoft seems like a comparative small fry at the moment.
The smartphone race appears to have just two sprinters on the track. Google (Nasdaq: GOOG ) is leading the way with its open-source Android operating system. Apple is there at a distant but comfortable second, with iOS cornering the high-end market.
But the other platforms are usually dismissed in passing. Research In Motion (Nasdaq: RIMM ) is fading as it prepares BBM 10 as a potential savior of its floundering BlackBerry business. Microsoft is even further behind than BlackBerry -- but IDC doesn't see it staying that way for long.
Let's take a look at the firm's market-share projections between now and 2016.
Source: IDC Worldwide Quarterly Mobile Phone Tracker.
You probably didn't see that coming. Can Windows Phone really eat into both Google and Apple's share?
Absolutely. The reason your TV has been flooded with ads for Nokia's (NYSE: NOK ) Lumia 900 smartphone is that cash-rich Microsoft isn't afraid to throw money around to get noticed. Microsoft reportedly agreed to pay Nokia billions to get the Finnish handset maker to abandon the struggling Symbian platform and promote Microsoft's updated mobile operating system.
Microsoft can afford to do that. Why go for a buyback when you can buy your way back? A struggling RIM can't keep up with that approach, so it's been resorting to layoffs and rolling the dice on BBM 10.
Apple's still on top
Apple fans will argue that market share is irrelevant. It doesn't matter that there may be three times as many Android smartphones shipping as iPhones this year. Because it's an open-source platform, it's not cashing in the way that Apple is on its own proprietary device, the thinking goes. The wireless-carrier subsidies on Android devices go to Samsung, Motorola, and the other handset manufacturers that have hopped on the popular operating system. Apple, on the other hand, receives the juicy iPhone subsidies. And if things go well, Nokia may make more money on Windows Phone than Microsoft itself.
The challenge for Apple is that losing market share can be a problem. Developers will want to make apps that support the more popular operating systems, and Microsoft has even made things easier for coders by giving them more generous terms than they get through Apple's App Store.
Then again, developers know they're getting plenty of bang for the iOS buck, since an App Store application will also work on iPad tablets and iPod digital-media players that don't factor into IDC's smartphone forecast.
Pie for supper
The good news for Apple is that it won't be making less money if its market share shrinks from 20.5% to 19% in four years as IDC expects. The pie itself is getting bigger. IDC sees the smartphone market growing at a 12.7% compounded annual growth rate between now and 2016. No, iPhone sales won't climb as quickly, hence the market-share decline, but its annual growth rate would still be a reasonable 10.9%.
The only shocker in the growth-rate data, then, is that the forecast calls for RIM to grow the shipment of its BlackBerry OS devices at an annualized rate of 12.1%. Does anyone really believe RIM will be growing faster than Apple in the future?
I didn't think so.
Either way, Microsoft needs to be respected here. The one-two punch of Windows 8 and the reinvigorated mobile operating system will make the world's largest software company a bigger player in tablets and smartphones in the future. Apple can continue to grow and reward its shareholders in this environment, but it can't take its eyes off the rearview mirror, because Mr. Softy is closing in.
The next trillion-dollar revolution will be in mobile, but the best investing play isn't necessarily Apple. If you want to cash in on the upcoming trend, a new report will get you up to speed. It's as free as this article, but it won't last forever, so check it out now.