Apple Should Be Nervous About This

Despite Apple's (NASDAQ: AAPL  ) increase in shipments year-over-year, the mobile world is increasingly becoming Android-centric. Apple's best efforts may have increased the amount of iPhones in the world, but its OS market share has dropped and Google's (NASDAQ: GOOGL  ) Android has only grown.

Moving ahead, while falling behind
The latest smartphone OS data from IDC shows that Apple shipped 37.4 million iPhones in Q1 2013, an increase of 6.6% from last year. Meanwhile, Android shipments grew by 79.5%. Despite Apple's modest increase in iPhone shipments, the company lost about 6% of its market share from Q1 2012 to Q1 2013, while Android gained about 16%.

Apple and its investors should be nervous about this. There's no debating the company makes great products and has been one of the most innovative technology companies of the past two decades, but at some point these numbers will come back to bite Apple.

It's not that other competitors are pushing Apple out of its spot. Nokia shipped more than 20 million Windows Phones since it launched the OS on its devices, but Windows just now took the No. 3 spot away from BlackBerry. Meanwhile, BlackBerry shipped over 1 million BB10 OS devices in the past quarter. Both of the increases in OS market share for Windows Phone and the amount of shipments for BlackBerry are good news for those companies, but it's not really impacting the Cupertino company. What's hurting Apple is that despite making great phones that people buy, Android is still moving further ahead.

Market share matters
Investors know that market share isn't the only consideration in assessing how well your company is doing. Revenue, profit margins, dividends, free cash flow and a host of other financials paint a fuller picture when they're all added together. But market share is a great metric for showing what customers want.

You've probably read a lot about Apple's need to update its operating system, and with the IDC's latest numbers this appears more imperative than ever. Android has amassed a global smartphone OS market share of 75% in the first quarter, and Apple's was 17.3%. It's worth noting that Android has many OEMs that boast the OS, so it's not just a one-man shop like Apple is. But that argument doesn't add up when you consider Apple's iPad dominated the tablet market with 60% market share at the beginning of 2012, and still had 40% this past quarter. That shows me the company is able to have a take-no-prisoners approach to a market, but that it's simply not able to do that with the iPhone right now.

One of the only ways to reverse this trend is for Apple to bring out a completely new iOS. Apple has some of the most amazing hardware, but to really make gains against Android, the iPhone maker is going to need to revamp its software in such a way that mobile users want to make a switch. This may be obvious, but until Apple does something about it, I don't see how it can make significant gains against Google's green machine. Premium hardware and solid -- but aging -- software isn't enough to take on Samsung and a host of other Android-touting companies. A change to the iOS needs to be made, and it needs to be made soon.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, 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 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 (9) | Recommend This Article (7)

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 May 16, 2013, at 9:15 PM, techy46 wrote:

    Screw Google!

  • Report this Comment On May 16, 2013, at 9:25 PM, dwilh51183 wrote:

    AAPL INVESTORS HAVE NOTHING TO WORRY ABOUT THE NEW IPHONE PRO WILL BE OFF THE WALL COOL AND 55 MILLION AAPL LOVERS WILL UPGRADE IN 1 QTR IN USA ALONE. TIM COOK SHOULD BE FIRED FOR TAKING SO LONG TO DEVELOP A CHEAP IPHONE FOR UNDER DEVELOPED NATIONS WHY IS IT THAT SAMSUCK CAN PUT OUT 20 DIFFERENT PLASTIC GARBAGE PHONES AND AAPL CANT EVEN PRODUCE 1? TIM COOK SHOULD BE ASHAMED OF LETTING ALL HIS SHAREHOLDERS DOWN ESPECIALLY THE LAST FEW DAYS .WITH 58 BILLION DOLLARS TO USE FOR STOCK BUYBACKS...WHAT IS HE WAITING FOR?

  • Report this Comment On May 16, 2013, at 9:38 PM, larryw101 wrote:

    Hey Motley Fool, give it a break.

    You've been bashing Apple any chance you get.

    I'm done with this slanted journalism.

    This use to be a decent site. But not anymore.

  • Report this Comment On May 16, 2013, at 10:41 PM, nlosborne wrote:

    The article mentions Apple has some of the best hardware... But that is simply not true. iPhone lags behind almost every other smartphone manufacturer's flagship phone in almost every category. And it isn't just lagging, it is almost beyond comparison.

  • Report this Comment On May 16, 2013, at 11:06 PM, dogmatica wrote:

    Aloha,

    I think a more plausible reason why Apple retained a 40% market share for the iPad, in comparison with the iPhone's declining market share, is timing. When both the iPhone and iPads were introduced, during that first year or two, their market share stats were ridiculous, 90%+! The iPad hasn't been around nearly as long as the iPhone, and that is why the iPad's figure is where it is. Apple is doing just fine, a little slow in introducing a 5" screen and a high-quality lower-cost iPhone, but that's about it. They sell more high-end, profit-making electronic devices than anyone; they have the highest retention and loyalty rates; they consistently perform well in durability and quality tests; and, by golly, users just like them!

  • Report this Comment On May 17, 2013, at 12:04 AM, JHawkinTexas wrote:

    How about when Sammy dumps Android for their own OS? Have you noticed Sammy doesn't say anything about Android in their advertising. Should Google be worried about their largest and most profitable Android OEM leaving the stable? Nah. Sammy is well known for being loyal and a team player with companies they steal...I, I mean collaborate with. ;>)

    Why doesn't MotleyFool write a serious analysis piece about that eventually?

  • Report this Comment On May 17, 2013, at 3:18 AM, mdidillon wrote:

    Well iOS 7 is coming and is actually a redesign...

  • Report this Comment On May 17, 2013, at 7:35 AM, jdmeck wrote:

    As long as Apple keeps selling more, that's all that matters. They don't need to be the king.

  • Report this Comment On May 17, 2013, at 7:37 AM, jdmeck wrote:

    nlosborne - What world do you live in?

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