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More of the Android Onslaught: Increasing Handset Revenues and Growth
Yesterday, I stated that Android is taking market share away from all
of its competitors, and illustrated that Apple is clearly included
included in this group (see Empirical Evidence of Android Eating Apple, Literally!). Today, I would like to demonstrate where that Android growth that is being bled from Apple, Nokia, RIM, etc. is going.
The companies that have skillfully adopted Android 2.1/2.1 are
literally growing like weeds. Collectively, they outstrip the growth of
the iPhone, and individually most area setting internal growth records
for any phone or smart phone product, often limited only by their
production capacity. I have prepared the charts below using the data
that I made available to my professional subscribers through the 
Smartphone Market Model – Blog Download Version (anyone
who downloaded it yesterday should get a fresh copy, pertinent data was
mistakenly locked inside the model preventing users from switching from
company to company).
By comparing HTC (a company that has specialized in Windows Mobile
and Android phones with customized GUIs) handset shipment growth with
that of Apple’s, both in relation to the growth in the smart phone
market in general, we can see that HTC disproportionately benefiting
from the expansion of smart phone use.
In observing this phenomenon as a trend, you can see that HTC’s
growth in shipments has surpassed that of Apple’s. This growth rate is
shared by other major handset vendors who have adopted the Android
platform as well, ex. Samsung and Motorola. Long story short,
manufacturers are finding gold in them thar Anrdoid hills!
Even when taking into consideration growth trend as a function of
smart phone market growth HTC sees major improvements in its shipments
and penetration. This empowerment of Android handset vendors combined
with the near 900% growth spurt in Android from last year and its
capturing the number one spot in the US last quarter. From Digiital Trends:
New reports from market analysis firms Gartner and IDC
confirm what most industry watchers already knew: the second quarter of
2010 was a boom time for smartphone sales, with both firms agreeing
worldwide smartphone sales increased 50 percent compared to the second
quarter of 2009. The firms also agree that Google’s Android platform
also benefited significantly from that growth, with Gartner saying
Android has overtaken Apple’s iPhone to become the third most-popular
mobile operating system on the planet—and the top-selling mobile
operating system in the United States, beating out RIM’s BlackBerry
line. But the king of the hill? Still Finland’s Nokia, with either 38.1
percent (IDC) or 34.2 percent (Gartner) of the worldwide mobile phone
market.
Gartner attributes Android’s success
to a variety of manufacturers bring devices to market at a number of
different price points. “A non-exclusive strategy that produces
products selling across many communication service providers and he
backing of so many device manufacturers, which are bringing more
attractive devices to market at several different price points, were
among the factors that yielded its growth this quarter,” said Gartner
research VP Carolina Milanesi, in a statement.
Below is a smart phone comparison chart generated on Cnet.com.
I use Cnet for intelligence (although I believe that there editors have
shown undue Apple bias in the past) because it is arguably the most
visited consumer technology website, and as such offers the deepest
views of user opinions and ratings, (hopefully) unfettered by editorial
content, subjectivity and opinion. Here you can potentially get a
glimpse of how people really feel about their products.
Notice how the 3 out of 4 of the selected Android phones have a
higher user rating than the Apple iPhone 4. This flies in the face of
both the marketing mantra and what you may hear from the editorial
columns. The sample sizes of the reviews are large enough to be
statistically relevant nearly 300 for the Evo and 222 for the iPhone 4),
and the fact that the reviewers are able (and often due) offer verbose
and specific reasons for their ratings make this a rich source of
opinion discovery. I urge those who are still in disbelief of Android’s
onslaught or the ability for it to outsell iPhone (ex. a battle between
the two on Verizon’s popular yet overrated CDMA network) to review the
nearly 1,000 user reviews of just these 4 phones (there are many dozens
of others).
This bound to release a swarm of developers to the Android platform,
which creates the reflexive relationship of reinforcing Android’s growth
prospects which in turn draws more development resources to the Android
platform. Apple users are all too familiar with this effect.
Next, I will illustrate how Nokia is doing in terms of shipments in
market share, and I will be releasing a 40 page plus forensic report of
RIM that will determine if I was correct when I said After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play.
More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars!
- There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
- The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
- An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
- Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
- This article should drive the point home: An iPhone 4 Recall Will Hurt Apple More By Opening Additional Opportunity for Android Devices Than Increased Expenses
- A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- Android is gaining preference as the long-term choice of application developers
- A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
- Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
- Apple on the Margin
- RIM Smart Phone Market Share, RIP?
- Motorola, the Company That INVENTED the Cellphone is Trying to Uninvent the iPad With Android
- Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space
- There
Goes Those Fancy eBook Aspirations from Apple, Barnes and Noble, and
Amazon: 100,000’s of FREE eBooks from the Public Library - How
Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall
Street Will Enable This Without Sheeple Investor’s Having a Clue - Empirical Evidence of Android Eating Apple, Literally!
- advertisements -
Just in case my reference was obscure Oracle is suing Google for the Java runtime.
So what happens to the Goog if they have to pay a royalty??
It is so much nicer to develop real tech in house.
You highlight one of the big vulnerabilities of the Android platform, and that is the open source license. Right now, developers have to indemnify Google for code in Android. LOL consider this scenario -- a long-haired dude sitting in his underpants "borrows" some code from IBM and manages to get it in Android. Oh, no problem boys and girls, he signed a paper that indemnified us! I'm sure the IBM lawyers will be impressed.
Invest in IP legal firms Reggie, they may be the fastest growing part of the Android ecosystem.
Oracle Bitchez!
;-)
Yeah, that HTC HD2 sporting WinMo 6.5 is, in a word, SPECTACULAR!!! Never overestimate MS. Why they insist on releasing half-ass crap like the aforementioned WinMo 6.5 on an otherwise impressive phone is, well, typical. It reminds me of Windows Me, 2000 & Vista. WinMo 7 MIGHT (and that's a big MIGHT) help jump start their mobile computing business, but if it's buggy, and given that many smart phone producers are already gun shy, MS will deal itself a fatal blow in the marketplace if WinMo 7 is not a bullseye. A total lack of apps and coders willing to support WinMo is a HUGE problem as well.
WinMo 6.5 is so overwhelming that many over at XDA Developers are dedicating countless hours to putting Froyo on the HTC HD2.
Actually, I challenge you to find any phone that retails for $50 that comes close to the HD2. That's like comparing the original iPhone to this product, and you know how that would turn out.
I would be interested to know the installed user base of the Droid phones. I think that's germane to the discussion. Apple had at last count 51 Million iPhone users. This was a number of months ago. The installed user base along with active users, those that have the iPhone and are still able to pay the bills, is what determines developer interest.
Not only that but the Droid has multiple versions out of it's O/S. For example, Dell released 1.6 on it's latest ( panned) device while the latest version is 2.2 What does this do to any special features hardware manufacturers put on? Sales wise, none of the other manufacturers derive revenue from the following:
1. Content sales
2. App Sales
3. Halo/ Developer Sales - where developers have to buy a Apple Mac to develop for iPhones. End users are also seen gravitating towards Apples computers as the ease of use of the iPhone, iPod, iTouch, iPad attracts them to the rest of the product lines.
4. Lets not forget that Apple is just not a iPhone maker. They have full lines of other products that compliment the iPhone but aren't necessarily reliant on the iPhones . No one can deny the resurgence of Mac products is due to the consumer products, but at what point to they begin to stand on their own legs? Maybe Apple can afford to sell a million less phones per quarter if iPads are selling ( No Droid iPad in sight yet) and they are deriving additional revenues from the contracts AT&T gets ( There is an exclusive contract for a reason, Steve Jobs didn't do that because he has a soft spot for AT&T)
It becomes harder to add users when the installed base is so large. Microsoft is a no growth company yet look at the profits it pours out. Yet in a side by side comparison of new sales, all the combined alternatives don't see new users coming in greater percentages, because nothing can match the installed user base. As apples installed base grows, that graph may quickly invert.
Google and the Chip maker are the primary beneficiaries of the surge in Droid sales and Google only if a far bigger installed base of active users are consuming applications and content. One had to wonder if the manufacturers feel like they have to offer this like the PC manufacturers offered the netbook, but see no benefit after the initial sale or much on the sale itself.
They have No Halo effect, no residuals, repeat customers will be rare since the O/S is available on many phones whose users are going to be fickle and run to the the competitor's with the next greatest feature when the contracts run out. No brand loyalty. How much longer will the "me to" manufacturers realize they are the launch pad for Google and the Chip makers and don't get to make the trip with them?
There is no great leap from Apple users to Droid users (less than 1%) . But Apple as a brand commands far more loyalty than all the brands put together who are putting out "me too" phones.
Apple has 46 Billion in cash. Probably nothing right? Nothing new coming out? No huge improvements? Yet who among the "me to's" will be able to make a 10 Million unit commitment to anything to get best price on the components. Apple is a ATM machine. It won't last forever. But this stock has travel distance before it starts doing a Microsoft Chart Dance. Apple is a proven software devloper and hardware devloper. In a sense they rely on no one. Google is relying on everyone as everyone is relying on Google and the Chipmaker. I would venture to guesss that the combined balance sheets of all the companies are not nearly as attactive as Apple's which has one of the cleanest blance sheets with the most liquidity out there combined with an all star R&D team.
Finally look at all the PC makers that died on the way to making Wintel what it is today. I see the same scenario playing out with the phone makers as they start to beat each other up on price and quality slips as a result. Apple may just be the Porsche brand here. Wildly popular and expensive and willing to let bigger manufacturers get in the weeds to fight for the price buyer.
I heard they had 51 million but 47 million dropped their phones watching porn on them and broke them.
Do you work for Apple? or just really long the stock?
No, I don't nor am I long the stock. I won't short it either. Right now I think they have significant operating advantages that people tend to overlook . It really sounds like the old Windows vs Apple religious wars from years ago. Of course the PC won, but Apple has probably learned a thing or tow. The post sales revenue model from multiple sources is what intrigues me. The other is the buying power. Which manufacturer will put up a 10 Million unit commitment on Googles Chrome IPad when it comes out? They get nothing but the initial sell profit. Assuming apple is working on a 50% gross margin , cost of goods sold come in at around 3 Billion in upfront cash for one product. Who has that kind of cash to put up for a product that is non proprietary in every sense of the word?
He works for Apple. Can't you tell?
I (personally) don't know of any Android 2.+ users that have went to Apple but I know of quite a few that have left Apple for Android.
As for brand loyalty, that is really ephemeral in technology. Eventually, you have to perform or be outperformed. As the handset makers beat each other up over price, Apple will get beat up as well. It is not offered at a premium to these handsets, it is offered at the exact same price. The handset vendors are currently competing on functionality not price, and as they inevitably (they have more R&D dollars) outstrip Apple in features and functions (ie the HTC Evo), Apple will have to be play catch up and/or drop prices. Either way, their margins get hit. Do yo really expect brand to trump functionality over any material period of time. These are not tiny, unknown start ups, but some of the largest electronics companies in the world we are talking about here.
The biggest winner is the conusmer. We have these big companies fighting each other to give us the best product as quickly as possible.
>Do you really expect brand to trump functionality over any material period of time.
In Apples case, long enough. If each owner has to sign a two year contract, it's unlikely they will go to a Droid phone unless the Droid phone has features or apps so compelling that they are willing to drop the iPhone. It's not just a matter of the Phone itself, much of it has to do with how much the owner has put in to it in terms of apps, content and work which they can't readily port over to a Android. Admittedly, they would probably buy ifart again for 99 cents, but once we get up into a multitude of $10 dollar and up apps, $50-$1000s of dollars’ worth of iTunes books, movies, TV shows and Porn …of course. What functionality is going to cause that user to drop the iPhone? I imagine DRM crap is all over the content to keep it from going from phone to phone so even in the contract expiration period when Apple should be the most vulnerable, one has to ask what exactly is going to make them switch other than coverage.
You've done the Research Reggie. I'm just going from memory, so you must have a better handle on it than I do. Let’s keep in mind when Apple should have gone bankrupt in the 90s, the cost of the switch over was holding a significant amount of users to the Apple line even though they had a huge cost premium over the PC with a shrinking to flat line of functionality. As you have seen people switch to Droid, I have presented my clients with ass kicking laptops for half the cost of an Apple MacBook with a $400-$500 cost differential and they actually went out and purchased the MacBook anyway.
Seeing this up close and personal suggests to me that Brand equity shouldn't be underestimated.
Finally it seems like your suggesting this is a zero sum game or at least Apple has seen its best days. I suggest an alternative view of ultimately Apple catering to the upscale market and Droid getting the rest. One thing we have to consider that hasn't been covered is after sale support. How much is the manufacturer whose profits stop at the point of sale going to offer when apps and content is downloaded from Google's servers. How much is Google going to provide or the carrier. There are now three responsible parties whose margins are not as great that will be pulling support duty and absorbing costs on a product that is more than likely being sold to a majority of people who will say "Broke don't work".
The great unknown is the Enterprise market which is what RIMM has been living off of. There is already enough evidence that I've seen that suggests this market will make the consumer market look small by comparison. Especially with the 1-2 punch of the iPad and iPhone. Start with the medical profession, move to the legal profession all the way to the manufacturers of complicated equipment that sell maintenance contracts who can now equip a repair person with a easily assessable library and interface of repair videos for the company’s products with say a bill of replaceable parts with a check off and a tag that is clicked on to order overnight to the repair person. One may respond, “they have laptops” to do that. Yeah. Ok. Lets say you are hands deep into any kind of complicated machine. Let’s compare watching the video on a iPhone with some velcro on the back, a iPad or a Laptop. Repaid people generally try to go from memory rather than try to find a resting spot on a surface that’s no hospitable to a uneven distribution of weight of 5-7 pounds which can easily fall and damage the lap top itself or worse fall right into the equipment that is being fixed. The iPad and iPhone represent a completely new way ( along with the Droid) for repair people to work who are increasing being pressed to do more with less.
Give a company a choice of hiring more repair people or buying thousands of devices that make the repair staff they either employ or contract with 3x more productive while making geographical proximity to the equipment that much less to worry about and it’s not even a question. Give the repair person the ability to present a bill electronically and get paid on presentation for contract repair person and you have extreme loyalty. With that there is also a very easy way to monitor and track the time put in on a case number and match that to the repair bill in milliseconds before a release of payment is made.
Let’s also not forget about the ease of updating all the iPhones or Ipads with at 2:00am every morning with the latest videos, stock reports, prices on parts and new techniques. 3G or 4G , it will happen quickly and virtually anyplace which is exactly when or before that when Apple will be able to claim 100% coverage. Hell with their Market cap and Cash they could buy Quest tomorrow and put in 50-60 Billion without borrowing a dime just by having a secondary with any breakthrough tech that will carry these signals and own their own carrier. Having 46 Billion In cash and a rich valuation and some of the tightest management controls since inception to the point where it’s ingrained in the culture, means don’t take anything for granted. Apple has the become the new Microsoft. Despite people who stood up and yelled Nice Try when windows NT came out to those who yelled about the all the various database companies until there was 2 Majors. Apple will be careful, but they have the flexibility to put down claims of superiority in a evening with a PR in the morning
In the medical profession can you see a big Pharma company writing the prescription pad app that auto checks customer records for drug interactions and the database, routes the prescription to the closest pharmacy with stock, and now has data in real time about how advertising and marketing is pulling the product through. Not only can I see that but I can see GE and Abbott and other companies that have complicated devices offering buyers 500-10000 iPads with every purchase with their applications preinstalled along with another 5000 iPhones. Especially since it may be a hospital chain that wants that 1 Million dollar device in all 177 hospitals
I could go on, but since we have to look at the future and not the right now, I suggest any advantage the Droid may be experiencing is due more to connection availability than features. This is something that Apple can fix when it please. There are no known technological hurdles. If AT&T are carrying Droids, which they are, it may becoming sooner than we think.
Finally, no one has an idea how big this market can grow. Will it become like an email address? What do you mean you don't use email? The same thing I experienced with Fax machines a number of decades ago when they were $2500 Each? Or is this simply a upscale product on the consumer side that has significant resistance once it dips into a certain demo/income class. I don't have those answers, but before I would build a case against one or the other, I would certainly want to have a handle on it. The other side is that the Enterprise market is no longer interested in best of breed assuming that is what you think the Droid is. It is more likely to switch to a well capitalized company that have single points of responsibility.
I have enough anecdotal evidence that no matter how good a software product is, Large companies won't buy it unless a large company is offering something similar which may be the hidden push to a lot of the M&A activity by Cisco and Microsoft and even Apple for smaller companies. As I said the vertical market will be the dominant influence here on profitability over the next year or two possibly longer.
I wouldn’t underestimate how vulnerable Google’s Eric Schmidt made Droid with his recent speech about what he see as the future of smart phones. It involves a rather significant loss of privacy something that shouldn’t be underestimated as Google itself has proven itself to be vulnerable to sophisticated Hacks. Maybe the NSA won’t have to have a office on the back bone. They just need to be able to pick up 3G and 4G right out of the air. Not only do they have the person’s identity they have an entire web of all his contacts.
If I were a Google shareholder, I would have sold. Also, despite the claim of 200,000 connections daily, where is the stock headed and the market cap headed?
well i'm still short RIMM, are you suggesting I start converting some of my dollars to hong kong.....
so will android make it easier for google to supply it's search engine info to who ever might be interested
That's the idea, combine that with their search engine... in a few year they will know what we are going to do before we even think of doing it.
What good are these devices when a EMP pulse takes out the whole grid?
We have enemies, friends. They are going to strike at us, soon I fear.
Am I a ZeroHedge fringe loonie tune or what?
"Am I a ZeroHedge fringe loonie tune or what?"
Yeah, because generating widespread EMP effects requires a fairly large weapon, and a missile big enough to put it in the right spot. We're talking all out war if that ever happens, and I don't know too many countries willing to find out why we have those Trident subs on patrol.
Good idea for an app though, maybe somebody clever will write one for iOS to map the EMP kill zone given the various parameters.
the new phones will EMP resistant. Apple will build a new ahrdware that blows up right before EMP signal is released.
While many praises android ( i still think we need another 6m to an year to polish it), many people taken Microsft out of the game. I would not be basing projection for the next 6-12 month only on the android. I think MS with their cash and marketing machine ( including forcing others to do what they plan to do) will be able to start putting a dent on the phone markets. It may take some time , but it's comming.
The moment the hardware will be upgraded ( we are looking at the dual core 1.5 ghz before end of the year) we will see MS will pick up some power.
Right now the phone is still the phone with some multimedia capabilities, but in the very near future it will be come a personal computer. That's where i belive MS full integration will go .
MS not too far away from the droids family since they don't produce hardware like apple or Rim. And probably at first , they are going to go after Droid , not Apple.
It will be interesting to see and consumer may get some benefits of the war .
I agree. Droid is the likely Target because of its growth trajectory though, not business model similarities.
All well and good Reggie,, but making those shiny gadgets is only a small part of the game. The real players need a strategy. Don't be so quick to dismiss the boyz in Cupertino. They've been busy and this is what keeps Eric Schmidt awake at night:
http://www.businessinsider.com/apple-buys-siri-a-mobile-assistant-app-as...
http://www.youtube.com/watch?v=MpjpVAB06O4
Siri + iGadget + cloud supercomputer = ??
A breakthrough technology based on Siri could generate more revenue for Apple than all the gadgets sales combined. Steve Jobs is no dummy. There are still a few more moves in this chess match.
It appears as if Steve is wisely trying to plug the gapsbitbhas with Google. That is a lot of plugging though. Time will tell if he is successful.
Download the free places app and use a voice command to ask for a sexy bar or a seafood restaurant while GPS is on and see what happens.
hmmm ... siri sounds a lot like search. Could Apple also go ad supported?
Siri goes beyond search. It learns about the user and adapts to the changing schedules, priorities and uses feedback to refine its future actions. Revenues come from the service providers and companies that want to participate. If you've ever spent a couple of days planning a vacation online, you realize the value of a traditional travel agent. Siri is like that travel agent, but for general purpose use. IMO this technology is going to be the next "killer app" for i-devices. Google is so caught up in Adword, it missed the boat on this one.
Adwords is a greying business model, ripe for revolution. Like I said on another Android post, if Apple can deliver an iTune for a buck and make money, they can deliver text/contextual ads as well. I have yet to meet an adwords advertiser that actually likes to hand over their credit card to google and get jerked around with their "self-serve" ad system. It is a system that is rife with fraud.
Apple could simply go fixed cost advertising versus auction based and slap google so hard they wouldn't know what hit them.
My Druid 2 arrives tomorrow. I had a 3G Iphone, but Apple first killed its usefulness with iOS4, and than they released a second update that bricked my phone almost to the day that my 2 year contract was up. They were going to charge me the same to tether my IPAD to the Iphone to the IPAD, as to have a data plan for individually available for the IPAD.
Steve Jobs has become this Centurys Bill Gates. Someone who intentionally kills working hardware to sell an incremental upgrade. As someone who ones a full Apple suite, I wont be buying anymore soon. Greed has exceeded usage.
A Druid 2 with mobile hotspot is the killer ap, everyone can access the internet where ever we are, vs two way video conferencing in my phone which takes someone else of equal tech.