Why Android’s Market Share Doesn’t Matter

July 29th, 2011

This commentary contains the sort of logical progression that I’m sure most of you understand. Unfortunately, some tech and financial pundits don’t, and so you have to repeat it over and over again. Even then, the meaning isn’t grasped.

So the other day, I read yet another article about how the growth of Google’s Android OS exceeds that of the iPhone. I wouldn’t presume to dispute the numbers, since they are probably correct. Indeed, it makes perfect sense when you consider that there are a number of companies making gear featuring Android around the world, and that there are dozens and dozens of models to choose from. So when you visit your local wireless phone center, you’ll see a hefty selection, but only one product line called iPhone. Well, make that two in an AT&T store, because they are still selling the 3GS, circa 2009.

By sheer force of numbers, you can be assured Android will get the lion’s share of sales, particularly when you consider that many of the models are cheaper than an iPhone, although others are in the same price bracket.

I hope I’m not boring you by repeating the obvious.

But Android’s presence is used as evidence that Apple’s iPhone strategy isn’t working, and is destined to fail. Customers aren’t comfortable with Apple’s “walled garden.” They want open even if the app selection isn’t as good, and even if the gadget is more susceptible to malware. What we have here, they say, is a repeat of the long-ago PC versus Mac wars.

Of course, Windows was never open in the sense that you could get a copy free with few restrictions. The difference has always been that Microsoft will license Windows to you if you pay the fee, whether you’re a small PC assembler, a large multinational corporation, or just a single consumer. Buy it, it’s yours, and you can install it on any PC with compatible hardware, up to the number of licenses you purchase. Period. Except for a failed foray into hardware licensing, only Macs are licensed to run the Mac OS (or OS X, as it’s officially known beginning with Lion).

In passing, it’s also true that Apple’s Mac growth continues to beat the industry, as it’s done for several years. Despite stalled PC sales, Apple continues to make lots of money from Macs.

When it comes to the iPhone, don’t forget how, in the last quarter, Apple reported sales of 20.34 million iPhones, some 142 percent better than the year-ago quarter. Not too shabby, particularly when you consider that Apple blew away Wall Street estimates, and hasn’t updated the iPhone since last June. Yes, a Verizon Wireless edition came out in February, but it was essentially the same phone with only the essential changes needed to support the CDMA network architecture. In April, the long-delayed white iPhone arrived, but again it was basically the same model in a new dress.

At the same time, Android OS handset makers are constantly churning out new models. Unless you follow the industry carefully, it’s nearly impossible to tell one from another, except from the spec sheets, or checking which version of the OS happens to be installed.

If Apple can keep the rapid growth curve on track to a reasonable degree, the profits will continue to soar, and it won’t make any difference how many people buy Android OS gear. Or phones featuring Windows Phone 7 or its successors for that matter.

But there is a huge cloud hanging over Android OS land, and that’s all the lawsuits filed against Google and their licensees. Apple won a round against HTC, although HTC’s purchase of the assets of S3, a company that owns graphics-related technology, resulted in a loss for Apple. Maybe there will be a cross-licensing deal that will put the matter to rest. But that won’t help Samsung and other companies facing legal actions over Android.

Worse, some Android OS licensees are already paying a $5 per handset ransom to Microsoft to receive licenses for intellectual property. It’s not that Microsoft’s demands for royalties have been successfully tested in court to my knowledge, but I gather they are not taking chances. But imagine if those companies were also forced to also pay money to Apple to license their technology, assuming Apple doesn’t get a ruling that forces infringing gear off the market. The free OS becomes more and more expensive, and you can bet handset makers will be looking for alternatives without the baggage.

I suppose Microsoft could be the big winner if that happens. HP’s WebOS still needs work to be competitive, and there’s no indication that customers are lining up to buy the new HP tablet.

And none of this addresses the biggest problem with the Android OS, which is that the tablets powered by Google’s OS have failed to demonstrate sales momentum in the marketplace. Although some companies claim to have sold more than a million units (the Motorola Xoom sold far less), those figures are dwarfed by the iPad, which seems to be getting more and more popular. For now, the tablet market is strictly an iPad market. The critics swear that, too, will change some day. Maybe. But if Apple can keep moving more and more iPads into the hands of eager customers each quarter, it won’t matter if rival tablets also succeed.

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6 Responses to “Why Android’s Market Share Doesn’t Matter”

  1. Joseph Futral says:

    It isn’t any wonder how the large the numbers are when the return rate is as high as 40%. That means people keep trying to find one that actually works the way they think it should!


  2. Bill S says:

    If you measure market share by profits, Apple becomes not only the largest phone (not just smartphone) maker in the world, they become nearly the ONLY phone maker in the word. They now have 2/3 of the world’s phone profits. Those are profits that can be poured back into R&D and expansion of the ecosystem. By keeping it’s supply chain lean, Apple is now able to undercut competitors on price. They’re not leaving much room for anyone, in any market, to compete.

  3. Market Mayhem says:

    The hedge fund manager knuckleheads continue to claim that Apple is under tremendous pressure by Android and Apple is on the verge of financial collapse. Wall Street says by 2015 Android will own about 75% of the smartphone market and Apple will have about 5% with even WP7 OS ahead of it. You ask the hedge fund jackasses and Wall Street and they’re certain that the iPhone will no longer be in demand and that Apple will have to slash iPhone prices by about 40% in order to stay competitive with the flood of low-cost, high-quality Android smartphones. Apparently, according to brilliant sources, nobody wants iPhones anymore. They’re all asking for Android smartphones that support Flash and 4G. Most of Wall Street is pretty certain that iOS is becoming more obsolete by the day and that’s why they’re sure that Apple stock is already overvalued. These are the same ignorant pundits that say Apple can no longer get away with cheating shareholders by not giving dividends or buybacks.

    To make a long story short, Apple is doomed and the Grim Reaper is the supposedly unstoppable force and open source called Android. As we can see, Apple is running scared and losing money every quarter as Android continues to grow by leaps and bounds. More claims abound that consumers will refuse to buy iPhone 5s because of the huge delay and abundance of various Android smartphones. Consumers are out for revenge against Apple.

    Aren’t those hedge fund and institutional managers and Wall Street financial pundits extremely talented by correctly prognosticating Apple’s last financial quarter right on the nose. Kudos to the jackasses.

  4. Husain says:

    too many assumptions by the author. Assuming Apple will keep the rapid growth. Then assuming Android will fail to demonstrate sales momentum (i am not sure how accurate this claim is). Then assuming that the Android app market will never catch that of Apple’s. This writer stuffing odds together in favor of Apple. This article does not make sense. Just look at the Apple stock chart to figure out how the stock never had a rest which totally violates the basic rules of stock market behavior. My friend, don’t talk about the past, and might be the present, instead the future is for any Apple competitor, which I expect it to be Android.

    • @Husain, Actually, it’s your response that contains too many assumptions. It doesn’t matter if Android fails or not — and there are clouds on the horizon as the result of those patent lawsuits, and Apple’s recent victories. It’s up to Apple to succeed or fail on their own merits.


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