Apple Can't Let Google Win

Google's (Nasdaq: GOOG  ) Android continues to gain market share in the mobile race. Gartner is out with a fresh report on global mobile trends, and the industry tracker reveals that Android smartphones are running away with the gold.

That in and of itself isn't really a surprise. Google's open-source platform has given the smartphone niche wings. Handset manufacturers can make more cost-effective devices. Wireless carriers have cheap phones that they can use to reel in activations with meaty data plans.

However, do you realize how wide the gap is growing between Google and the Android-nots? Let's take a look at Gartner's market-share numbers for smartphones over the past year.

  Q2 2012 Q2 2011
Android 64.1% 43.4%
iOS 18.8% 18.2%
Symbian 5.9% 22.1%
Research In Motion (Nasdaq: RIMM  ) 5.2% 11.7%
Bada 2.7% 1.6%
Microsoft (Nasdaq: MSFT  ) 2.7% 1.6%
Others 0.6% 1%

Source: Gartner.

We're living in a world of Androids
Android and Apple's (Nasdaq: AAPL  ) iOS have seen their combined market share of grow from 61.6% to 82.9% over the past year, but it's essentially Android that's doing all of the heavy lifting.

Symbian -- the operating system that Nokia (NYSE: NOK  ) championed until recently -- and Research In Motion continue to fade into obscurity, though they have yet to be passed by the advancing baby steps of Samsung's Bada and Microsoft.

Then again, anyone who's been reading about the legal fisticuffs flying between Samsung and Apple knows that Samsung isn't just about Bada. Samsung actually sells more handsets than Apple does through its pole-position leadership when it comes to Android.

Gartner has Samsung's Galaxy line of Android smartphones selling 45.6 million units this past quarter. Apple reported last month that it sold just 26 million iPhones during the same period.

iPhone 5, don't fail me now
Apple fans will rightfully counter that it's their company raking in the lion's share of the profitability in the booming smartphone market. Google's decision to make Android freely available merely opens up the opportunities for indirect monetization through app marketplaces and mobile search.

However, that argument misses the point. Every person who decides to choose an Android -- and we're now talking about nearly two-thirds of the smartphone buyers out there -- isn't buying an iPhone. That's an opportunity cost that Apple would love to get back.

Maybe the iPhone 5, reportedly coming out next month, will change that. Gartner and many analysts have argued that Apple iPhone 4S sales have slowed as consumers know that the world's most valuable tech company is due for a substantial update. Why buy an iPhone 4S now when the better iPhone 5 will be out in a few weeks, or when history suggests that Apple will discount the 4S when the new handset comes out?

This is clearly a big part of what fueled a rare quarterly miss at Apple this past quarter, and it's also the same reason Apple's stock shrugged off the disappointing quarter in anticipation that the class act of Cupertino will raise the bar yet again with the upcoming iPhone 5.

Apple can't afford to blow this. The iPhone has become Apple's top product, accounting for 46% of Apple's revenue mix in its latest quarter.

Silver in sales, but gold in profitability
Apple doesn't need to catch up to Google. There's clearly more than enough money to be made with a fifth of the smartphone market, given the company's margins.

However, we can't forget that Symbian had a bigger chunk of the global smartphone market a year ago than Apple does today. We can't forget that RIM's BlackBerry has grown from a market darling to a popular death-pool candidate in a handful of years.

Apple is smart enough to sidestep those pitfalls. Fans will argue that it's Apple's success that has made Android so successful. However, Apple can't get too cocky. It needs to get hungry.

The next two quarters need to be Apple's moment to grab some serious market share.

Apple jacks
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The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, and Google and creating bull call spread positions in Apple and Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (4)

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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 August 14, 2012, at 9:34 PM, techy46 wrote:

    So Nokia, Symbian plus Windows, has 8.6% share. Let's see where we are in Aug, 2013.

  • Report this Comment On August 14, 2012, at 10:25 PM, Thompr97 wrote:

    Rick,

    Android is not a platform, at least not in the sense that iOS is, or even in the sense that Microsoft Windows has always been (which is the most common analogy used for Android these days, just because of the number of hardware vendors). In many cases, two Android devices share basically nothing in common but the name attached to the core OS, which is covered by custom skins, versions, market places, etc. As a matter of fact, from a user perspective (which is often what matters when choosing your next handset) Samsung tablets seem a lot more like iPads than they do Kindle Fires. This is distinctly different from the old computer OS wars, in which Microsoft Windows and all of its compatible software behaved the same across all hardware vendors. It is an important quality in order to refer to this as a "platform".

    In other words, I don't really see how adding up all of the so-called "Android" devices results in a number that has any meaning. If you add up all of the apples (I mean the actual fruit) that is sold on any given day, I'm pretty sure that the number is smaller than all of the "citrus" fruits put together, which at least share the citrus characteristic but not much else. So shall we say that apples have a poor market share and are getting defeated by the citrus camp?

    Wake me up when the "Android platform" is really a "platform" instead of a word that is shared loosely by 3000 largely incompatible devices.

    Thompson

  • Report this Comment On August 15, 2012, at 4:28 AM, oriorda wrote:

    "happypoordays" here trots out his normal unsubstantiated diatribe against Apple. He sounds very much to me like the RIM fanatic who has been pumping that benighted company over on SeekingAlpha for 2 years as the company headed inexorably south, only here at the Fool he's figured out RIM is truly headed for the knacker's yard so he's jumping on the Samsung carthorse instead with which to beat up Apple. The argument didn't hold water with RIM, and it's leaking like a sieve in respect of Samsung.

    There is no metric worth speaking about that puts Samsung as leading Apple.

    Apple's iPad has kicked every pretender into touch on the tablet front. The latest reveal is that Samsung's previous Galaxy tablet claims have been exaggerated by 90%. Hello!

    In terms of smartphones, Samsung is certainly jamming big numbers of myriad Android devices into the channel, but the questions are: (1) are they selling or is this stuffing? (2) are they making any money? if the Galaxy tablet is anything to go by, it wouldn't surprise anyone to find they are stuffing like men possessed.

    Samsung are certainly NOT taking ANY market from Apple which continues to grow fast and profitably, and retain its customers as it does so.

    The opening para of the article is well wide of making sense: Google isn't running away with the gold. Google gives away Android for free, hoping to use the software to capture ads for its business. There's no gold in free.

    Google is an advertising company, getting 95%+ of its revenue and profit from ads. As a matter of fact, iOS users generate MORE money for Google than does the entire Android base.... a pragmatist would argue on this basis it would pay them to give up Android and build great stuff for iOS!

  • Report this Comment On August 15, 2012, at 5:29 AM, ebinary wrote:

    Thompson,

    I don't think you understand what a software platform is.

    A platform isn't about the final presentation or layout of icons, its about a set of APIs and kernel for software development and deployment. Most android applications are developed once and run on the whole suite of android versions, possibly with slight modifications to support features of the latest versions.

    THAT'S what makes Android a platform, and a powerful one at that. Its about the available software.

    Any 8 year old can learn how to navigate a phone's presentation layer in an hour. Samsung vs HTC vs LG - this thin layer of varnish doesn't change the platform.

    Additionally, any inclined programmer can write his first Android app in a day, using any machine and any OS (unlike iOS which requires a Mac for development).

  • Report this Comment On August 15, 2012, at 10:51 AM, Melci wrote:

    Symbian once had the same unit sales marketshare as Android.  

    It was a meaningless metric then and is a meaningles metric now if it doesn't lead to usage share and revenue share.

    It is Apple iOS users that generate 90% of the mobile e-commerce revenue in the world, 84% of the mobile games revenue, 600% the developer revenue of Android, 64% of the mobile web browser share, 97.3% of the business tablet activations, 73.9% of the business smartphone activations etc etc etc.

    It is Apple's iOS that is running away with the gold in all the metrics that matter.

  • Report this Comment On August 15, 2012, at 3:46 PM, AdamChew wrote:

    It's time to examine whether market analysis companies numbers are relevant since they are only guesses.

    Whatever basis they have for arriving at those guesses cannot be quantify. No companies except Apple announce what they have sold and the rest just kept mum on their sales numbers. So whatever guesses companies like Gartner arrived at are only educated guesses but guesses nevertheless.

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