The latest comparison of market share data of Apple (AAPL +1.18%) products to Android and others is out.
Recently the Gartner Group published a report on mobile phone sales for the 3-month period ending Sept. 30, 2013. You can access a summary of the study here.
The study results were picked up by analysts and the blogosphere but in some cases were misconstrued and headlines emphasized the wrong information.
Apple is losing it
Apple is losing it: market share, that is. The iPhone portion of worldwide smartphone sales by units declined from 14.3% to 12.1%. Market share of smartphones running on the Android operating system (now up to 80%) is exploding. That is the fact that typically gets reported and dissected in minute detail in most news reports with scant analysis of other statistics.
What is not reported or analyzed in great detail is the fact that Apple shipped nearly six million more devices in the period than last year (a gain of 20%) and increased revenue by nearly $3 billion (growth of almost 20%) year-over-year despite a general decline in average selling price of the iconic device.
So a 2.2% decline in market share translates to a 20% jump in revenue. I think most companies (and investors) would take that trade-off.
Apples to oranges
Another fact not widely discussed is that many analysts and those in the media lump all "Android" products together when comparing against Apple. It is not entirely correct to do that.
Most Android devices are in the very low end of the market and have an average selling price of $200 (the ASP for iPhone is $635). A report from the research firm IDC confirms the market share data of the one from Gartner, but adds a caveat missing from most headlines:
The problem for Android is that its high-volume sales are not generating profits, because the majority of those volumes represent very low-end phones.
Apple will increase it
Note that the numbers above do not fully reflect the recent updates to the iPhone family, the 5c and the 5s, which went on sale only near the tail end of the reporting period. Consumers waiting on the new models might have held back on making purchases and the demand for Apple products in the July-September quarter may have been somewhat muted.
Several new technological advances, including the upgrade to a 64-bit computing architecture, a fingerprint sensor in the home button for added security, and increased battery capacity for longer life between charges, will probably boost sales of the new devices and keep Apple on an upward trajectory in smartphones over the next year. Every update to the iPhone has resulted in greater sales year-over-year so far.
Apple will innovate it
A curved iPhone, and one with a larger screen (something that many users have been clamoring for), are on the horizon according to reports.
Indications are that Apple is readying a smart watch for sale next year as well.
All of the talk generates lots of excitement among loyal Apple fans and they stay interested in the iOS ecosystem and the various iDevices offered. In the case of the iPhone alone Apple has a 91% retention rate of current customers (vs. 76% of Android users). This bodes well when consumers will want to upgrade their devices.
No. 3 with a bullet
A distant 3rd in the rankings on a platform basis at 3.6% is the Windows Phone (WP) operating system developed by Microsoft (MSFT +0.66%) . It might become a more important player in the industry down the road if it can get some more traction. About 9.5 million devices running WP were shipped in the last quarter, up more than 150%. An impressive figure to say the least.
Since early 2011 Microsoft has been partnering with Nokia (NOK 1.71%) in smartphones. Nokia ranks No. 2 in unit sales of all types of mobile phones with nearly 14% of the overall market, which includes feature phones as well as smartphones.
Underscoring the importance of the mobile market, and the decline in the growth of PC shipments affecting the core product of the company, Windows 8, a few months ago Microsoft announced it was interested in acquiring Nokia's wireless business.
The move might benefit shareholders of both companies as long as Microsoft doesn't overpay and take on too much debt and that the American company can right the ship of the struggling Finnish one.
There have been rumors around that former Nokia CEO Steven Elop will replace outgoing Microsoft CEO Steve Ballmer next year. At a minimum he will join Microsoft as head of the devices division after the merger.
During the three years Mr. Elop was in charge at Nokia the company didn't do so well at all. Revenues fell 40%, profits fell 95%, and Nokia’s market share of smartphones dropped from 34% to 3.4%. Microsoft investors might be hoping that Mr. Elop doesn't come on board in any capacity.
The latest Nokia WP is the Lumina 1020 which is billed as the "first phone built around a camera." Indeed, with a beastly 41 megapixels and enhanced zoom capability the phone can be used for high-end photography in addition to the standard Internet surfing, texting, and telephone calls.
In another plus for Apple, the Lumina phones on the market will probably take away more market share from the Android side than the iOS side as it completes in the lower tier price-wise. One can be had for $200 with a two-year wireless service contract.
Foolish conclusion
Looks can be deceiving. Headlines blaring that "Apple is losing it" don't necessarily tell the whole story. It's usually worthwhile to dig a little deeper in the details.
Apple, even with a declining market share, has reported increasing unit shipments and revenues from its line-up of iPhones. The trend should get even better going forward as the latest models of the device have just been released for sale.
Investors who ignore the hype will be rewarded.
Microsoft is betting that a relatively new mobile OS, called Windows Phone, and a partnership (and potential merger) with Finnish company Nokia will allow them to penetrate further into the mobile space in order to compensate for declining growth in PC shipments which will affect their flagship product, Windows 8.
However, judging by Elop's performance at Nokia, investors in Mr. Softy are probably hoping he doesn't take over in Redmond.
