Apple Is No. 2, and That's Okay

In a world of falling prices on Android tablets -- and a lack of a springtime iPad rollout -- it wasn't a surprise to see Apple's (NASDAQ: AAPL  ) once-dominant share of this market come undone.

Apple disappointed the market two weeks ago when it announced that it cleared just 14.6 million iPads during its latest quarter. It sold 17 million of the devices during the same fiscal third quarter a year earlier.

Is the tablet craze toast, or is Apple becoming a smaller player?

IDC confirms that Google's (NASDAQ: GOOGL  ) Android has taken the lead here as the platform of choice with new tablet buyers, just as it did in the smartphone market a couple of years ago.

The data may seem grim for the class act of Cupertino. That's OK, Apple fans. You don't have to bail, Apple investors.

IDC shows that worldwide tablet shipments soared nearly 60% during this year's second quarter, despite Apple's 14% slide. The cruel math of Apple's absolute decline in a rapidly expanding pie is that its share of the market has fallen to 32% from 60% a year earlier.

There's nothing wrong with grabbing the silver medal and nearly a third of the market, especially when Microsoft (NASDAQ: MSFT  ) is way behind with the bronze at a mere 4%.

Investors should take comfort in knowing that Apple is not only a relevant player, but one that serves the higher end of the market where buyers have the means to spend more in the iOS ecosystem.

If you don't think a third of the market is enough, size up the smartphone world.

IDC put out a fresh study today showing that iPhone's share of the market has fallen from 17% to 13% during the same quarter. Google's Android is once again the share-chomping beast, going from 69% of the market to a resounding 79% chunk. Again we have Microsoft at a distant third with 4%.

Gaining market share doesn't come cheap. In Google's case you have to give away your product as open source, something that Apple is unlikely to ever do. In Microsoft's case you have to commit to send Nokia billions to back your fledgling platform, and even with the success of Nokia's Windows-fueled Lumia phones we're talking about Mr. Softy's sliver of the market inching up from 3.1% to 3.7% over the past year.

Apple is in a good place.

It may not seem that way now -- especially if Apple's share continues to slide -- but keep in mind that the market actually applauded Apple's iPhone performance in its latest quarter. Selling 31.2 million iPhones was the lone bright spot in Apple's fiscal third quarter, even if turns out to be just 13% of the 236.4 million smartphones that IDC claims shipped during the period.

There is money to be made as the distant silver medalist, as long as you're serving the right 32% of tablet buyers and 13% of smartphone buyers. It's the segment that spends money. It's the sliver that developers want to reach.

There will naturally come a point where it's bad to be in second place, especially if Microsoft miraculously gains ground or Apple keeps sliding. However, with new iPhone and iPad rollouts expected later this year, it won't be long before Apple is once again gaining share in growing markets.

Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.


Read/Post Comments (10) | Recommend This Article (6)

Comments from our Foolish Readers

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  • Report this Comment On August 07, 2013, at 7:54 PM, spakklal wrote:

    I don't think you can trust IDC with their numbers. Samsung or other android manufacturers do not give out the number of smartphones or tablets sold in the quarter except Apple.

    Anyway most of the Android smartphones or tablets sold are mostly low priced.

    We should measure Apple's progress with IOS devices with their own past records. There is no point comparing with companies who do not compete as much in the high end market.

    Apple has not soiled itself with the commodity smartphone market, but has chosen to own the high end of the market and let Android vendors fight for the commodity business. Apple owns the high value customers, which is obvious if you look at spending after purchase of apps and services. Apple's strategy of growing their base of loyal high value customers is working.

  • Report this Comment On August 07, 2013, at 8:11 PM, spakklal wrote:

    I don't think you can trust IDC with their numbers. Samsung or other android manufacturers do not give out the number of smartphones or tablets sold in the quarter except Apple.

    Anyway most of the Android smartphones or tablets sold are mostly low priced.

    We should measure Apple's progress with IOS devices with their own past records. There is no point comparing with companies who do not compete as much in the high end market.

    Apple has not soiled itself with the commodity smartphone market, but has chosen to own the high end of the market and let Android vendors fight for the commodity business. Apple owns the high value customers, which is obvious if you look at spending after purchase of apps and services. Apple's strategy of growing their base of loyal high value customers is working.

  • Report this Comment On August 07, 2013, at 8:45 PM, MARKETSURFER wrote:

    Sometimes being No. 2 or No. 3 is great if by doing so you can maintain healthy profitability. Remember

    Dell and Hewlett-Packard with the PCs ?? They are not sitting very pretty now. Toyota will most likely find out the same thing in the automotive world.

    Oftentimes blindly trying to be first in sales revenue and unit sales and trying to maintain that position comes at a steep price over time, even to the point of bankruptcy.

  • Report this Comment On August 07, 2013, at 9:14 PM, bobythenoby wrote:

    There are many companies that compete with Apple for the high-end market. Just because they don't charge as much as Apple does not make them any-less of a part of that market.

  • Report this Comment On August 07, 2013, at 9:17 PM, witf wrote:

    Quality over quantity.

  • Report this Comment On August 07, 2013, at 10:36 PM, kellyii20 wrote:

    Who has the most cash? AAPL that's who...

  • Report this Comment On August 08, 2013, at 12:16 AM, techy46 wrote:

    Apple's number 2 in making consumer electronic toys for fools in US. Samsung's number 1 in making consumer electronic toys for fools globally. Neither com[any holds another position in real technology.

  • Report this Comment On August 08, 2013, at 3:45 AM, applefan1 wrote:

    What real technology? Microsoft? You mean a KICKSTAND? CLICK.

  • Report this Comment On August 08, 2013, at 9:35 AM, eldernorm wrote:

    "it wasn't a surprise to see Apple's (NASDAQ: AAPL ) once-dominant share of this market come undone.

    Once you say the word "market share" and shipped product, you show your total lack of understanding of the real market.

    Apple tells you how many items it SOLD. Samsung tells you how many items it shipped ..... to somewhere..... to cheap china where things get sold at just above cost.... to be given away as BOGO free.

    Apple is getting the most profit from world wide sales in computers, tablets, smart phones, and mp3 players. THE MoST Profit / cash / mula.

    Plus there is this new player in the market that suddenly appeared (?) called "other". I guess "Other mgf" must be doing well to suddenly ship millions of tablets that have no name and are not being used on the internet. "Other".... really???

  • Report this Comment On August 08, 2013, at 10:11 AM, adlerc wrote:

    I'm relatively new to investing and to Motley Fool, but I thought the company's profitability was more important for investment purposes, not their market share. Am I wrong?

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