by Tony D’Altorio, Investment U Research
December 31, 2009
Name any internet-connected device and you’re bound to find an application or “app” store for it.
It’s all the rage these days, and every telecommunications company worth mentioning has put significant time, money and resources into having the best array, including:
- Nokia (NYSE: NOK)
- Palm (Nasdaq: PALM)
- Microsoft (Nasdaq: MSFT)
- Apple (Nasdaq: AAPL)
- Research in Motion (Nasdaq: RIMM)
And that list doesn’t include the surging number of gadgets running the Android operating system from Google (Nasdaq: GOOG).
They each provide access to online retail centers where people can browse, buy and install programs on their mobile phones.
Apple started it all with the iPhone, which still reigns supreme today with 100,000 available applications, a number that has greatly aided the company in nearly matching Google for market value.
But while much of the competition’s attempts to mimic Apple pale in comparison now, that dominance can only last so long before some other equally driven company steals the spotlight.
And savvy investors should understand that before it happens… not after it’s too late.
There’s An App For Everything… Literally
Though offering 100,000 applications is an impressive feat one way or the other, with all of the possibilities out there, quality means much, much more than quantity these days.
Even if it didn’t, competitors are working hard every day to best Apple on every front, even while it, in turn, does all it can to stay ahead.
Developers already point out that tweaking iPhone programs to run on other gadgets isn’t difficult, and nearly every industry expert admits that the surging “app economy” is bigger than any one company.
And now that other hand-held devices can connect to the Internet in user-friendly ways, the iPhone could very well be losing its competitive edge altogether. Though it might not lose it’s #1 spot, it more than likely will have to share it with other smartphone platforms.
Attack Of The Android
Out of the list of contenders, Google has done the best job of showing itself as a viable option to the app-obsessed world this far.
Its Android system – released little more than a year ago – just doubled its number of apps to 20,000 in the last five months.
Technology consulting firm Gartner predicted in October that the Android phone will overtake Apple in unit sales by 2012, ranking second to only Nokia in global smartphone share.
Considering that it now boasts the largest number of customers with all four U.S. wireless carriers now running Android, it seems that Gartner may very well have called it correctly on the Google-supported, open source system that anybody can modify.
Of course, Android does have its less desirable aspects, including how users have to buy their apps through Checkout, Google’s less accessible version of Paypal.
In addition, since it runs on a range of hardware, programmers can tailor a game on one type of Android phone… but then have to completely revise it to work the same way on another model.
Still, even with those difficulties, Android is doing good business. Since the beginning of the fourth quarter of 2009, transaction volume and revenues from app sales have tripled.
Sharing: The Reality Of The Future
The truth is that iPhone competitors at large can look forward to continuing progress towards the awe-inspiring “cloud:” A time and place where data is stored remotely and can be accessed by phones or computers anywhere.
When that happens – and according to industry experts, it will – the iPhone will lose even more of its exclusive appeal.
Those same industry experts believe that no single company or type of hardware will dominate the market in the near future.
With that said, they do see profits ahead for those software companies that show a commitment to flexibility – something that Apple severely lacks – to allow different experiences from varying devices.
So sure, the iPhone might have the most applications right now, but that can’t last much longer, especially in a world where web access matters most?
The days of Apple domination are drawing to a close at the accelerated pace set by its competitors … and there’s little it can do to stop it.