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As many iPhone users will reluctantly admit, trying to send or receive data over AT&T’s (NYSE: T ) network during peak usage hours can be a real headache. Partly, this is a problem of Apple’s (Nasdaq: AAPL ) own making. After all, it was the company’s decision to launch the iPhone exclusively with AT&T Wireless. Given the popularity the iPhone has enjoyed, it’s no wonder the AT&T network is struggling to keep up.
Now that the latest generation of smartphones powered by Google’s (Nasdaq: GOOG ) Android operating system is set to hit the market, that problem may become a bigger headache for Apple. Google has taken a horizontal strategy, and smartphones of all shapes and sizes will be making use of the Android OS. Most importantly, these phones will be available across all four major U.S. carriers.
That’s good news for beleaguered Verizon (NYSE: VZ ) , which has been making a big marketing push with the “iDon’t”-themed advertisements. That company’s Android offering, the Motorola (NYSE: MOT ) Droid, appears set to launch on Nov. 6. Some analysts have also reported that Google will be releasing a self-branded phone by year’s end -- proof that the search giant will not leave its fate entirely to third-party manufacturers.
These new entrants will be competing in a smartphone market that is flush with growth. Smartphone sales grew by 27% in the second quarter of 2009, despite mobile phone sales worldwide dropping by 6.1% compared to the same quarter a year ago. Nokia (NYSE: NOK ) owns the largest portion of smartphone market share, mainly because of its numerous product offerings and international strength. Apple has been slowly but surely chopping into that market share by increasing movement of the iPhone overseas. Its European market share increased to 13.6%, up from only 1.3% a year ago.
Nokia still maintains a healthy lead in global market share, but research from Deutsche Bank shows that Apple now claims 20% of the operating profit in mobile devices as of 2008, even though iPhone sales only amounted to a little over 1% of the market. BlackBerry maker Research In Motion (Nasdaq: RIMM ) also enjoyed 15% of the profit.
Clearly, high-end smartphones can generate a great deal of profit. With Android 2.0 devices coming to market, Google will soon be partaking in that windfall. By limiting its killer product to AT&T, Apple allowed an opening for the competition -- an opening that Google seems well-prepared to exploit. I’d say that’s a threat.
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