The iPhone Eats Android Dust

Grab your smelling salts, because this will be a shocker to some of you: American consumers bought more Google (Nasdaq: GOOG  ) Android phones than Apple (Nasdaq: AAPL  ) iPhones last quarter.

According to market research firm NPD Research, Androids made up 28% of all smartphone sales to American consumers in the first quarter of 2010, when Verizon (NYSE: VZ  ) was busy pushing Motorola (NYSE: MOT  ) Droid phones and the Nexus One was but a newborn baby in this market.

Both Apple and Google still lag behind Research In Motion (Nasdaq: RIMM  ) and its BlackBerry platform, though the Android faction seems destined to overtake the BlackBerry addicts in a quarter or two. But keep in mind that these figures don't include corporate sales, where the BlackBerry still reigns supreme.

Perhaps Apple's loyal fans have caught on to the fact that there's an updated iPhone coming this summer, as one has every summer since the first-generation phone was introduced in 2007. That could put some short-term hurt on sales right before that much-anticipated release.

But mostly, the Android software is just now hitting its stride. The Droid was a powerful force in the period that NPD's report covers, but it has since been followed by oodles of new Android releases -- some of which are sell-out stars and look like real contenders to the smartphone throne that Apple likes to claim for itself. And there are many more Androids to come over the summer and well into the holiday shopping season, and ... well, from here on out, really.

Now, the iPhone is still doing very well for itself, with a 21% market share in a weak quarter. iPhone sales will continue to drive the company's profits for years to come. And Google doesn't mind that one bit -- it's not a two-horse race from Big G's perspective, or even a three-horse race. Every smartphone browsing the Web and sending ad clicks to Google is a welcome addition to the team. The brand of the phone, the cellular network, or the software inbetween doesn't really matter.

Given the avalanche of Androids coming down the pipe, versus Apple's stubborn reliance on AT&T (NYSE: T  ) as its single carrier of a handful of iPhone models, I don't see the current trends abating anytime soon. So Apple will keep making money, but growing the honey pot slowly. The Androids, at their base royalty-free, will outsell every other platform without sending much money directly to Google -- but hey, more traffic is more traffic.

As a Google investor, I don't really care which smartphone wins, as long as there's more of them every quarter. Apple investors may feel differently on this issue, and they might want to tell Steve Jobs to open up to Verizon.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On May 10, 2010, at 4:07 PM, deemery wrote:

    You've missed the real story. Apple sales are flat. RIM and Microsoft tanked. Android ate not Apple but Blackberry and Microsoft mobile sales.

    Oh, and I suspect a lot of the Android "sales" came from the Verizon 2-for-1 deal.

  • Report this Comment On May 10, 2010, at 4:24 PM, ipodzrock wrote:

    It's very interesting reading articles that say that Apple should "just" cut a deal with Verizon without taking into account the cost of engineering considering the different networks. Yes, AT&T uses the global standard, but Verizon is still using CDMA with EVDO for data. Another consideration that the writers never seem to consider is the load that iPhones put on the network and that if the iPhone was available for Verizon that strains would be seen on that network as well.

  • Report this Comment On May 10, 2010, at 5:26 PM, baldheadeddork wrote:

    I'm only surprised that Android is overtaking the iPhone this quickly. I thought it would take a couple more big models before it overtook Apple.

    Google is clearly trying to follow Microsoft's lead of getting its OS into the hands of as many OEM's as possible, and I don't see any way for Apple to change the outcome. There are going to be more Android phone models, they're going to cost less, there will soon be more software for them, and you'll have local service instead of having to go to your nearest (or not) Apple Store. It will be a miracle if Apple doesn't lose half of its smartphone market share over the next 12-18 months.

    I think the bigger question is the threat Android poses to Blackberry in the corporate market. The advantage Blackberry has over everyone else is its software to run on a company's network and seamlessly integrate their mail and calendar server and manage the phones. You can sync practically any smart phone to an Exchange server, but there is no central administrations software for the iPhone, or anything else.

    Apple is never going to write software for a Windows server, so I don't think the iPhone is ever going to be more than a niche in the corporate market. But Android's open source platform means it's probably only a matter of time before someone writes a management and integration program that brings to Android what Blackberry Enterprise Server does for Blackberry devices. When that happens - look out.

  • Report this Comment On May 10, 2010, at 7:09 PM, TMFRhino wrote:

    ipodzrock,

    The engineering hurdles between connecting to AT&T's network and Verizons aren't that daunting. You see RIMM putting similar phones on each network while switching out receivers. People consider it, I just don't think it's quite the hurdle you make it out to be.

    I don't disagree at all that Verizon wouldn't see network strain, but that wouldn't exactly be Apple's problem to deal with. They're looking to double their addressable market in the US at the cost of lesser subsidies, that seems to be the real calculation.

    -Eric Bleeker (TMFRhino)

  • Report this Comment On May 10, 2010, at 7:30 PM, kramsigenak wrote:

    No android phone will ever match up to the iphone. The best model will win in the long run, and that is quite clearly the iphone. Remember this.

  • Report this Comment On May 11, 2010, at 2:27 AM, metalarmor wrote:

    We do realize that 50+ android phone models are taking on 3 models of iPhone here right??? (1 of them being obsolete) If you really think this is an accomplisment, only thing I have to say is... wow... iPhone is the clear fore-runner in technology and stability and with each new model Apple emphasized this a bit more. Please stop "creating" amusing stories about how Droid is taking on the iPhone, cause it just stays at that.... amusing.....

  • Report this Comment On May 11, 2010, at 2:27 AM, metalarmor wrote:

    We do realize that 50+ android phone models are taking on 3 models of iPhone here right??? (1 of them being obsolete) If you really think this is an accomplisment, only thing I have to say is... wow... iPhone is the clear fore-runner in technology and stability and with each new model Apple emphasized this a bit more. Please stop "creating" amusing stories about how Droid is taking on the iPhone, cause it just stays at that.... amusing.....

  • Report this Comment On May 14, 2010, at 12:09 PM, LifeDaddy wrote:

    The "race" between the iPhone and the Android platform will eventually mirror the market penetration between the Mac and the PC. Think about it -- Apple is the only producer of the Mac and the iPhone, and there are countless producers of PCs and will be the same for the Android platform. If anyone thinks that the Android is just a passing fad that will never catch the iPhone, or Blackberry for that matter, those persons lack the foresight and hindsight that is the broader technology market. For my money, I will keep investing in Google on a periodic basis. That is not to say that Apple is not worthy of owning as well, just that we are now beginning to see evolving landscape in the smartphone industry.

  • Report this Comment On May 17, 2010, at 1:19 AM, FoolishKwai wrote:

    @ LifeDaddy-

    this isn't anything at all like Mac vs PC in the way you suggest.

    PC (Microsoft) won the desktop wars because it was cheaper (using off the shelf hardware) and thus became a de facto standard. A software publisher could write for DOS or Windows and pretty much everyone would be able to run the program.

    Today the problem is almost reversed: Software publishers can write once for iPhone and it will run everywhere (3 models of iPhone + iPad). There is an established distribution network and free advertising in the app store. Android is the opposite - it's a bag of hurt to develop for the fragmented Android phone marketplace because there is little standardization between phones.

    - Kwai.

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