Apple vs. Google: Who Will Win the Battle of the Smartphones?

Alexander Moschina
by Alexander Moschina, Managing Editor, Investment U

Apple vs. Google: Who Will Win the Battle of the Smartphones?

by Alexander Moschina, Investment U Research

Tuesday, September 21, 2010

In 2007, Apple (Nasdaq: AAPL) introduced us to the iPhone... and the world hasn't been the same since.

Sure, there were smartphones before it, but Apple's bestseller changed everything in an instant.

Today, it's the be all and end all of smartphones... right?

Well, not so fast. An even newer kid recently strolled into town - and is keen to grab its share of the smartphone pie, too...

The iPhone: Apple's $5.3 Billion Champion

Apple's success doesn't rest solely on slick advertising (although the company has that in spades). The iPhone's biggest marketing tool is the iPhone itself.

For example, if you were to research any new smartphone, you'd undoubtedly find numerous articles pitting it against the iPhone. Why? Because the iPhone is the smartphone benchmark - and for good reason...

In the second quarter of 2010, iPhone sales exploded to $5.3 billion. That's $2 billion more than Research in Motion (Nasdaq: RIMM)'s Blackberry and $3.6 billion more than Motorola (NYSE: MOT)'s entire mobile device division.

Considering the Blackberry and Motorola Droid are the iPhone's two biggest competitors, it's a huge victory for Apple. No wonder Apple boasts 48% of the smartphone market share. Impressive, for sure.

But take a closer look at those numbers and a completely different picture emerges...

The One Company Poised to Bring Apple Down

In 2008, Google's (Nasdaq: GOOG) Android mobile operating system changed the game. And it's already giving the iPhone a run for its money...

For example, Google recently announced that it's activating 160,000 Android devices per day, compared to Apple's daily activation of 70,000 iPhones.

This shift should come as no surprise. For all Apple's massive popularity, its products generate a considerable amount of negativity, in addition to adoration. You see, while its technology is always impressive, it's also very exclusive.

Have an iPod? Then you must use Apple's iTunes. Have an iMac? You must run Apple's Mac OS. And if you want an iPhone, you have to be on the AT&T (NYSE: T) network.

But Google does things differently...

Android Ups the Ante

With the Android, Google has kept everything that iPhone users love about Apple, but made it more accessible. For instance...

  • The "Mostly Free" Android App Store: A growing number of Android apps are luring consumers who are interested in mobile entertainment. But the big bonus is that 64% of Android apps are free - more than double the number of free apps that Apple offers (30%).
  • Freedom of Choice: Unlike the iPhone, which forces you into a contract with AT&T, Android users can choose from a variety of cellular carriers. This includes Sprint (NYSE: S), T-Mobile and Verizon (NYSE: VZ).
  • Unmatched Reliability: The biggest iPhone complaint is a design flaw that weakens signal strength. At one point, Apple addressed the problem by suggesting that its users hold the phone a specific way. Hmm, thanks for nothing! So far, nothing like this has come up with an Android device.

Companies like HTC, Motorola and Samsung are all jumping on the Android bandwagon. By the end of 2010, Google will have shipped more than 55 million Android smartphones, pushing the company's market share up to 24.5%. That's remarkable progress, given that it sat at a mere 5% in early 2009.

And as more manufacturers incorporate Android's technology into their products, that market share could rise further. The iPhone's reign is over. It's now the age of the Android.

Good investing,

Alexander Moschina

P.S. For more on the smartphone industry, my colleague Tony D'Altorio recently profiled Nokia's (NYSE: NOK) place in the market. The Finnish manufacturer has endured a rough time recently, as it struggles to keep pace with Apple and Google and has no successful alternative to the iPhone and Android.

With its market share collapsing and shareholders paying the price as a result (down by two-thirds since 2007), Tony discusses how Nokia's new CEO plans to restructure the firm and help it bounce back.

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