The Android Phones That Should Really Frighten Apple

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Want to see what a real iPhone killer looks like? Well don't waste your time drooling over reviews of Motorola's (NYSE: MOT  ) Droid X or HTC's EVO 4G. Instead, take a look at the Racer, a new Android phone from China's ZTE.

No, the Racer doesn't have a 4.3-inch display like the Droid X or the EVO. Its display is a modest 2.8 inches, and with a much lower resolution. Nor does the Racer have a gigahertz processor like the aforementioned phones; the Qualcomm (Nasdaq: QCOM  ) chip that powers it runs at a mere 600 MHz. Its camera clocks in at a mere 3.2 megapixels.

Android at a discount price
So why should a phone with such relatively unimpressive specs make Steve Jobs nervous? Because of its very impressive price tag, and what it implies for Android's future. While the iPhone 4 will set you back at least $599 without a contract, and phones like the Droid X and EVO generally go for more than $500 without one, British carrier 3UK is offering the Racer for a little over $150 as a prepaid phone. If a user is willing to sign up for a contract, the phone is free and plans start for less than $23 per month. I'd say that compares pretty favorably with the $199 and $70 per month or more that consumers in the U.S. typically have to pay for a top-shelf smartphone via contract.

Of course, I doubt anyone who has their heart set on an iPhone 4, and can afford to buy one, will opt instead for a device like the Racer. But as far as both ZTE and Google (Nasdaq: GOOG  ) are concerned, I suspect that's quite all right. The goal here is to appeal to hundreds of millions of wireless users worldwide who would love to get their hands on a smartphone running an advanced operating system like Android, but who can't afford the headline-grabbing models.

ZTE is far from alone among Google's partners in pursuing this goal. Android phones such as Huawei Technologies' Pulse Mini and the upcoming Motorola WX445, as well as numerous devices from "grey market" Chinese manufacturers, are also targeting smartphone buyers on a budget. Meanwhile, Apple (Nasdaq: AAPL  ) appears content to keep its hardware focused on the high end.

More phone sales = more developers
By reeling in users that the iPhone can't, phones like the Racer will spell serious trouble for Apple's competitive position over the long haul. I'm confident that the iPhone 4 -- antenna issues and all -- will do good business in the coming months, as high-end smartphone buyers continue to snap it up. But I'm just as confident that the lead Android appears to have opened up against the iPhone in terms of phone activations will only expand, as Google's platform penetrates both the high end and the low end. It's only a matter of time before this lead results in Android supplanting the iPhone as the most popular platform for wireless developers.

Thus, no-frills phones like the Racer are a much bigger threat to Apple than they might first appear. And probably also for Nokia (NYSE: NOK  ) , which stands to see the drubbing that its high-end smartphones have taken now extend to its cheaper models.

Meanwhile, Android's popularity across different market segments should eventually create hundreds of millions of additional wireless users viewing ads served up either by Android apps or Google's mobile search engine. Which means that Google's mobile advertising business is likely to become a major cash-generator sooner than many on Wall Street expect.

Fool contributor Eric Jhonsa has no position in any of the companies mentioned. Nokia is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers pick. Apple is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Google. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (15)

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 July 20, 2010, at 3:45 PM, shanghaid wrote:

    My June trip to China revealed local colleagues with HTC phones and loving them. They like the app centric operating system, the wide range of phone styles alto choose from supporting Android and of course the price. What did several folks ask me to bring from the USA? An iPAD!

    When I lived China last year, $99 iPhone knockoffs were extremely popular. No data plan required, pay you go. BTW, iPOD knockoffs or alternative name brands were more popular as mp3 players.

  • Report this Comment On July 20, 2010, at 3:47 PM, Henry3Dogg wrote:

    Oh, come on. You're clearly in the USA.

    Three is a joke. They would have to do that to sell anything.

  • Report this Comment On July 20, 2010, at 3:54 PM, Henry3Dogg wrote:

    "British carrier 3UK is offering the Racer for a little over $150 as a prepaid phone. If a user is willing to sign up for a contract, the phone is free and plans start for less than $23 per month. I'd say that compares pretty favorably with the $199 and $70 per month or more that consumers in the U.S. typically have to pay for a top-shelf smartphone via contract."

    Actually, this is completely bent. You are comparing USA price of 70 Dollars a month with with a UK price for a prepaid phone

    How much is that UK pre paid phone per ega Byte ? You don't say.

    For the record My iPhone 4 in the UK costs £15 (22 Dollars) per month including calls and unlimited data.

  • Report this Comment On July 20, 2010, at 4:37 PM, Henry3Dogg wrote:

    Why do you assume that a cheap Android phone takes share from iPhone rather than from mid price Android phones?

    This is garbage. Clearly there will be some drift between Android and iPhone, and once Android has a user base, then that will be in both directions.

    But each new Android phone takes the vast majority of it's Market from last weeks best Android phone.

    PS why wound anyone buy the EVO when it is widely reported that Sprint will ditch Wimax and go LTE.

  • Report this Comment On July 20, 2010, at 7:04 PM, DefunctAcct wrote:

    Reality is not as simple as this article would imply.

    "More phone sales = more developers" is completely wrong without sufficient qualification.

    Nokia is selling very well and what about its developers?

    RIM is selling relatively well too and what about its developers?

    Androids are selling well too with 70,000 apps now and what about its developers?

    The article forgot that developers need to make a profit. Profit is possible when goods are priced with sufficient reasonable profit. Reasonable profit are possible only when sufficient people are paying for a product. People will pay for a product only when it is useful and serves a need; be it entertainment or business or personal. Most importantly, people will part with their hard earned cash only when there is cash to be spent.

    Is there any data to suggest that $100 phone buyer will spend as much as $299 phone buyers? In fact, is the Android Market Place turning in large profit for developers yet?

    If a developer is not realizing the required amount of profit, will it continue to toil for little to no gain?

    The hypothesis put forth by this article lacks concrete supporting data. Until the questions above are answered, it is impossible to draw any conclusion. Claiming that cheap phones are somehow a threat to Apple or any other high-end Smart Phone maker is at best premature and at worst, meaningless.

  • Report this Comment On July 25, 2010, at 7:44 AM, Henry3Dogg wrote:


    You respond with "As I noted, the Racer is also available for under $23/month (i.e. £15) under contract. That's not a pre-paid option."

    But in the original you continued with

    "I'd say that compares pretty favorably with the $199 and $70 per month or more that consumers in the U.S. typically have to pay for a top-shelf smartphone via contract"

    So again you are comparing UK Racer pricing with USA iPhone pricing and putting the difference down to the Racer vs the iPhone.

    Clearly, the Racer is cheaper than the iPhone to buy. It's cheaper to make. It's just not as good. But the network cost, in the same country, is the same in either case and you are trying to prove otherwise by not comparing like with like.

    Yes, my iPhone 4 was bought with cash, and more cash than a Racer would cost. But it then costs me the same $23 to service as the Racer, and not the $70 that you seek to suggest.

    I am sure they will sell some Racers. But that most of them will take mid price Android or feature phone sales.

  • Report this Comment On July 27, 2010, at 12:52 AM, QueridaNegra wrote:


    Check out for the PC-based version of the Android Market. It will install apps to your phone from the computer and let you do everything else you can do directly from your Android phone (in relation to apps anyway).

  • Report this Comment On June 13, 2013, at 6:15 AM, andrewraw wrote:

    iPhone/iOS has over automaton in terms of app monetisation is that the undeniable fact that it's a high quality PC-based platform for browsing and buying apps. <a href=>Android pub finder</a>

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