Is iOS or Android the New Windows?http://www.fool.com/investing/general/2012/12/12/is-ios-or-android-the-new-windows.aspx Doug Ehrman
December 12, 2012
While within the U.S., the battle for the top spot among smartphone makers is highly driven by the accompanying ecosystems -- making Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) disproportionately the top contenders -- this is not the case on a global scale. Using this reality as a backdrop gives us a much richer context in which to consider the assertion recently posed by Steve Milunovich of UBS Securities that iOS "is the New Windows."
He is, of course, referring to the OS that most defines the personal computing space; implicit in this stance is the idea that smartphones and tablets have become more relevant than PCs. Ultimately, while fortunes may shift over the near term based on the dominance or lack thereof of a given platform, this battle will be won by consumers who will have diverse choices and no need to be limited.
The U.S. stage
The really telling portion of these figures, however, is that other smartphone sales accounted for only 5.2% of the domestic market. While this duopoly doesn't exist on a global basis, Travis McCourt of Raymond James points out that "[i]n the parts of the world where a smartphone ecosystem matters, it is a much more even match between Android and iOS."
Given the importance of the ecosystem and the availability of apps, Microsoft (NASDAQ: MSFT) has made a big push to give developers more tools and easier access to portable core code. A recent piece in Wired highlights the issue: "There are more than 120,000 apps in the Windows Phone store and more than 16,000 in the new Windows 8 Store. Those are big numbers, but they look paltry compared to Apple's App Store and Google Play. Microsoft knows it needs more apps." In terms of the battle for mature markets, like the one in the U.S., a fully developed ecosystem remains critical.
To be fair, the Apple-versus-Google battle is so ingrained into most of our psyches at this point that it's easy to write off Microsoft's efforts. While one of the company's biggest challenges will be to get consumers to even consider a Windows phone, it can be done. When Google first entered the smartphone market, a general scoff went out from many who believed that Google could never catch Apple in the apps race. Clearly, new market entrants can be competitive over time.
The global stage
Adding to Apple's non-U.S. woes was the announcement last week that China Mobile (NYSE: CHL), China's largest wireless carrier, has reached an agreement with Nokia (NYSE: NOK) to sell the Lumia 920t. The Nokia Windows phone will represent another critical non-iPhone in the enormous Chinese market. Still, by pure volume, low-cost smartphones made by "other" manufacturers are the largest growing market segment in China. When you consider than while smartphone sales are growing at 46% annually, but by 63% within emerging markets, it is easy to understand why Android is so far outpacing the higher priced iPhone.
Returning to the "New Windows" question, Milunovich argues: "Apple is gaining as the ratio of total notebooks to iPads plus MacBooks peaked at over 30x in 2006 and is now just 1.6x. Not only could iPad maintain half the tablet market, but MacBooks might steal a significant number of Windows PC users." While Apple certainly enjoys a significant first-mover advantage in tablets, Android has come a long way as well. Heading into the holidays, the significantly lower price of the Google Nexus 7 should give it a distinct advantage.