It's Time for Apple to Take the Competition Seriously

With the Samsung's Galaxy S4 launch last week, it's hard not think of how the new phone could hurt Apple's (NASDAQ: AAPL  ) iPhone sales. Previous versions of the Galaxy have been a strong competitor to the Cupertino company's flagship product. But recent comments from Apple's Phil Schiller suggest the company is having a hard time seeing the competition from the right perspective.

What did he say?
Schiller, Apple's senior VP of worldwide marketing, said the following statements to the Wall Street Journal last week:

  • "Android is often given as a free replacement for a feature phone and the experience isn't as good as an iPhone."
  • "When you take an Android device out of the box, you have to sign up to nine accounts with different vendors to get the experience iOS comes with ."

The same day he spoke with The Wall Street Journal, Schiller said this to Reuters about the amount of Android smartphones activated compared to Apple:

"At Apple we know that it's not just enough to have products pumped out in large numbers. You have to love and use them. There is a lot of data showing a big disparity there."

Schiller's comments came the day before Samsung launched its new phone, and while no one can fault him for believing in his company (he is Apple's marketing exec after all), the statements fall somewhat flat against the data on what consumers are actually using. In Q4 2012, Android smartphones made up almost 70% of smartphone market share by sales -- while iOS took about 21%, according to Gartner research . Android's market share increased more than 18% while iOS' share decreased about 3% year over year.

In the U.S., the Android platform accounts for more than 50% of OS market share as of January.

Source: comScore. 

This graph doesn't account for revenue market share, but it's a good indicator of which OS consumers are using on their smartphones. Obviously, the U.S. market isn't the only area Apple is focusing on, so let's take a look at how the company is doing compared to competitors in emerging markets.

The emerging markets game
China officially became the world's largest smartphone market this year , and it's still growing. Although demand for Apple products is strong in China, Samsung still comes out on top when it comes to smartphone market share in the country.

Source: Yanhap News. 

China is one of Apple's main priorities right now, and with China Mobile (NYSE: CML  ) in the process of building a new 4G network, Apple could soon release a China Mobile iPhone that could bring market share gains for Apple. But the company can't forget the other emerging markets around the world, where its competitors are already dominating.

In India, Apple currently holds the second spot in revenue market share -- with 15.6%. Meanwhile, Samsung has a staggering 38.8% in the country.

Source: CNN.

Apple has helped its iPhone sales in India by setting up installment plans for the phones, but it's clear from the graph that Apple has a long way to go in making a dent in India.

Innovation is key
For Apple, and for most tech companies, innovation is key to winning market share and bringing in profits. Nokia (NYSE: NOK  ) failed to tap into the changes in the smartphone market and saw Apple's iOS and Google's Android steal the smartphone show. The company that once had 30% of the mobile phone market share now holds just 3 %. Nokia is a prime example how tech companies, particularly mobile ones, can fall out of favor quickly if they miss out on tech trends.

On the same note, Microsoft (NASDAQ: MSFT  ) CEO Steve Ballmer admitted back in 2010 that the company missed the mobile cycle and has to play catch-up . Now, it's three years later and the company has released its latest version of Windows Phone and a new tablet line. But Microsoft is nowhere near being a mobile dominator in the smartphone or tablet market and is still fighting for mobile relevance.

Apple isn't at risk of falling into tech irrelevance, but Nokia and Microsoft's missteps should serve as a reminder to the iMaker that no company is impervious to changing trends and fierce competition. The mobile world moves incredibly fast, and Apple investors need to see that old spark of innovation that many hope the company still has. Whether it's the launch of an iTV, iWatch or new iPhone that leapfrogs the competition, Apple may need to show something new soon. Continuing a trend of amazing products can be difficult, but it's something consumers and Apple investors have become accustomed to. Sales and profits may flow in from iterations of Apple's current products, but new products may be the only thing that can boost Apple's momentum and calm investors' fears. 

For years, it seemed Apple didn't need to think about its competitors. The company was at the center of technology's largest revolution ever, and longtime shareholders have been handsomely rewarded with over 1,000% gains. But now there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (3) | Recommend This Article (2)

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  • Report this Comment On March 18, 2013, at 5:55 PM, marv08 wrote:

    This was the approx. 1000th article beating the same nonsense. Samsung sells phones in approx. 150 configurations (considering all carrier and country specific versions), starting for as little as $20. They blew through almost $13bn in 2012 to buy market share, and ended up with big numbers, but only approx. 1/3rd of Apple's smart phone profits.

    So, your suggestion is: Apple should do the same nonsense the competition does, just to report some market share numbers. They won't. No matter how many times you will ask for it.

    Schiller was, explicitly, talking about phone usage, not market share. And all figures from all sources back him up. Look at what you want: Internet usage, searches, app sales and revenue, media sales, book and magazine sales, ad impressions, access to streaming, integration in corporate networks, use on airliners, etc ad inf. Apple has an unproportionally high share in everything. Even Google gets more ad impressions from iOS devices than from Android devices.

    A lot of Android devices sold are cheap devices, in emerging markets they are often even used on 2G lines with no or very small data allowances. Yes, Apple may "only" have 15.6% in India, but these 15.6% create more revenue and profits than Samsung's 38.8%. No Samsung Galaxy model has ever outsold a concurrent iPhone over its lifetime. Heck, not even Galaxys and Notes combined have.

    Apple won't do a $60 smartphone, just as they will not do a $400 laptop. And they shouldn't. You are either high end, or you are Samsung. Can't be both.

  • Report this Comment On March 18, 2013, at 8:08 PM, SyDVooh wrote:

    Samsung, Blackberry, and Nokia new products aren't wowing the market. There is a reason: Everyone is waiting to see the next incarnation of iPhone before they buy. If AAPL wows it, then the others are dead.

  • Report this Comment On March 18, 2013, at 8:44 PM, jeffreber44 wrote:

    Imagine the market share Nokia is going to take now that they have top notch smartphones for sale.

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