Google getting larger in Apple's rearview mirror

Fri Oct 8, 2010 5:08pm EDT

Related Topics

* Motorola, Samsung, HTC phones selling well

* Could eat into Apple margin advantage -analyst

By Gabriel Madway

SAN FRANCISCO, Oct 8 (Reuters) - It seemed Android smartphones was all anyone at a telecoms industry pow-wow in California talked about this week.

After years alone in the limelight, Apple Inc's (AAPL.O) iPhone now shares it with a slew of devices built on Google's (GOOG.O) operating system.

At the CTIA wireless industry show in San Francisco, Android smartphones, such as Motorola's MOT.N Droid, Samsung's (005930.KS) Galaxy S and HTC's (2498.TW) Evo, dominated displays and conversations.

Sales of the iPhone are still growing at a healthy clip and its annual smartphone launches generate hype that rivals only dream of matching. In addition, Apple could get another boost if Verizon Wireless gets the iPhone on its network next year, as many expect.

But Android is giving Apple a run for its money in the consumer market, according to research data. Android was the most popular platform among U.S. customers who bought smartphones in the past six months, despite the launch of the iPhone 4 in June, Nielsen reported.

"Anybody who watches it with a keen eye would be crazy to assume that Android wouldn't gain more share than Apple over time," Pacific Crest Securities analyst Andy Hargreaves said.

"They've got more devices, they're going to be on more networks across a wider spectrum of price points."

Android has effectively expanded the smartphone market, which had been dominated by Apple in the consumer space and Research in Motion RIM.TO in the business world.

ComScore said Android gained 6.6 percentage points of U.S. market share from May through August, while Apple remained essentially flat and Research in Motion -- which makes the BlackBerry -- shed 4.1 percentage points.

ComScore put Apple's U.S. smartphone market share at 24.2 percent and Android's at 19.6 percent.

FREE TO AIR

Hargreaves said that because Android software is free for handset makers to license, it means Apple could have a tougher time generating higher margins on the iPhone than its rivals can on their smartphones.

Analysts estimate Apple sold about 12 million iPhones in the September quarter, which would translate into roughly 60 percent growth from last year.

That's despite reports of a faulty antenna on the device.

But rivals are nipping at its heels. Motorola on Tuesday announced what it called the single largest launch of Android devices at any one time. It also unveiled the Droid Pro, as it aims to make inroads in the enterprise market. [ID:nN05222763]

"The Motorola phones are pretty good. The HTC phones are pretty good," said Sterne, Agee & Leach analyst Vijay Rakesh.

But Rakesh said much of Android's growth has come because of heavy promotion at Verizon Wireless, the biggest U.S. mobile provider, which is owned by Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L)

Rakesh expects Android growth to slow next year if Verizon begins to offer the iPhone, as many analysts expect.

"The only thing Verizon could push was Android. Next year, if Apple gets on Verizon, that should slow," he said.

The developer community has also increased its support for Android. Apple launched the craze for mobile applications when it opened the App Store in 2008.

Apple's store now boasts more than a quarter of a million apps for purchase. The Android Market is smaller, with more than 80,000 apps, but can still offer its growing user base access to many of the most popular mobile programs. (Editing by Edwin Chan, Gary Hill)

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