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Former friends, turned bitter rivals, Google and Apple now own a virtually duopoly on the U.S. smart phone market.  (Source: Flickr)

RIM appears to be fading fast with the BlackBerry smart phone brand dropping over half its U.S. market share over the last year. RIM is rumored to be considering pushing a new OS -- QNX -- to its smart phones in a bid to revitalize them.  (Source: Smart Phone Mag.)

Nokia and Microsoft are looking to Windows Phone 7.1 "Mango" to revitalize their smart phone sales.  (Source: Engadget)

HP courteously recused itself from the market, to webOS fans' chagrin. The departure leaves Microsoft, RIM, Apple, and Google as the only remaining major OS makers.  (Source: Mobile Knots)

  (Source: NPD Group)
Google solidifies its lead, Apple remains close behind

When it comes to veteran market research firm NPD Group, Inc., the latest report [press release] on smartphones is more good news for two major players and more very bad news for a third.

I. Google and Apple's Gains are RIM, Microsoft's Losses

For Google, Inc. (GOOG) and Apple, Inc. (AAPL) the news is happy.  Google rose from a 33 percent market share in Q2 2010 to a 52 percent market share in Q2 2011 -- a 57.6 percent increase in market share which came despite its legal troubles [1][2][3][4][5].  Apple, resigned for now to play second fiddle to Google grew from 22 percent to 29 percent -- a 31.8 percent increase in market share.

The bad news came for Waterloo, Ontario-based Research in Motion (TSE:RIM) who saw its U.S. market share drop from 28 percent to 11 percent -- a 60.7 percent decline.  In the last year the phone maker has lost nearly half its stock value as well.  

RIM appears to be fading fast.  Things look increasingly bleak for the company, which is rumored to be preparing to push its new operating system -- QNX -- into the smartphone market in a desperate revitalization bid.  It's easy to draw analogies between RIM of today and Palm, Inc. at the start of the webOS era -- beloved by some loyal customers, but increasingly scorned by the masses.  The similarities run deep in that both companies followed the largely defunct first-party OS model, a sluggish pace of handset releases, and inferior hardware.

The study also showed troublesome signs for Microsoft Corp. (MSFT).  Windows Mobile held approximately 10 percent of the U.S. market last year.  But by this year its successor, Windows Phone 7, had only accrued approximately 1 percent of the market, while Windows Mobile hung on to 4 percent of the market.  In other words, Microsoft saw its cumulative market share halved.

However, unlike RIM, Microsoft has deep pockets to try to revitalize its sales.  And with the upcoming launch of WP7's first major OS and hardware refresh, Mango, which seems to have strong support from a number of top third party handset makers, Microsoft looks poised to turn the corner and become a viable third place competitor.

II. Motorola Dips, Faces Puzzling Outlook

In terms of individual phone manufacturers, the biggest loser was recent Google purchase Motorola Mobility, Inc. (MMI).  Motorola saw its total market share drop from 15 percent to 12 percent, and its share of the Android handset market drop from 44 percent to 22 percent.

It saw its market share gobbled up by Android rivals LG Electronics (SEO:066570) and Samsung Electronics Comp., Ltd. (SEO:005930).

NPD analyst Ross Rubin was enthusiastic about Google's acquisition, though, which he says is beneficial to Android as a whole.  He comments, "Google's acquisition of Motorola shifts the balance of power in the handset-patent conflict between Google and its operating system competitors. Android's momentum has made for a large pie that is attractive to Motorola’s Android rivals, even if they must compete with their operating system developer."

He adds, "Much as it did in the feature phone market in the RAZR era, Motorola is experiencing increased competition from Samsung and LG in the smartphone market. Closer ties to the heart of Android can help inspire new paths to differentiation."

Of course, the Google acquisition of Motorola Mobility appears to have been primarily motivated from an intellectual property standpoint, so it remains unclear whether it will give choose to give unique advantages to its first party feature phones at its third-party partners' expense.

III. What Will the Market Look Like Next Year?

Overall there's still a great deal of uncertainty in the market.  Hewlett-Packard Company (HPQ) did refine the picture a bit, but voluntarily removing itself (and the ex-Palm webOS unit) from the smart phone market.  

Looking ahead, though, it remains to be seen whether RIM will find a way to revitalize itself or will become an acquisition target for one of the more successful or deeper-pocketed phone makers.  Don't be surprised if RIM has dropped even further in market share next year -- or has thrown its weight behind Android or Windows Phone 7.

But the biggest two outstanding questions are how Mango will be received and what will be the outcome of the Apple-Android legal war.  The outcome of those two factors should play a critical role in determining what the market looks like next August, when we sit back and look at the results of Q2 2012.

In the wild card category Intel Corp. (INTC) still has high hopes for Meego and Mozilla is cooking up a smartphone operating system of its own.  Don't get your hopes up that either of these projects will have generated even enough market share to earn a blip on next year's report, though.

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RE: BB for Android/iOS
By JasonMick on 8/22/2011 2:01:33 PM , Rating: 2
Honestly, IMHO, for RIM, it is time to get out of the smartphone market. Instead, create a app package that runs on Android and iOS to provide an encrypted envelope on a phone that handles emails and messages via the blackberry network and a BES. I prefer the tools that a BES gives me on the enterprise level over anything provided for connecting to other phones. Email & Scheduling is what RIM and their BB's still do best, it's everything else that has gotten way behind. Get rid of the dead weight, and bring it back to what made them so good.

Ditching hardware and going for enterprise software?

Do you mean it should pull an HP? ;)

P.S. That kind of play can pay off in the long run, but HP's stock was NAILED when it announced its plans to quit consumer HW.

RE: BB for Android/iOS
By Syran on 8/22/2011 2:13:21 PM , Rating: 1
I think RIM is already being nailed for it.

RE: BB for Android/iOS
By Souka on 8/22/2011 3:31:14 PM , Rating: 3
From what little I know, only RIM supports true encryption of being one example..

Not a small matter if I'm not mistaken.

Lets hear your comments! :)

RE: BB for Android/iOS
By jonmcc33 on 8/22/2011 5:34:11 PM , Rating: 1
Android and iOS don't do that natively but there are apps by companies that handle the encryption. Trust Digital (now a part of McAfee) is a prime example.

RE: BB for Android/iOS
By Samus on 8/23/2011 12:19:25 AM , Rating: 3
It's too bad because RIM makes solid hardware. I've always considered RIM products higher quality than Apple, especially regarding signal strength, reception clearity and obviously the keyboards. They are well-built and easy to maintain/repair. As a network engineer, RIM devices are by far the easiest to manage and deploy for single users through small businesses up to enterprise BES/Exchange.

The problem has been they keep coming out with O/S's that are slower, buggier, and more complicated, all the while offering no real improvements.

Most of my BB users wish they could still run BBOS5 on their newer devices, as reception of OS6 over the past 12 months has been for the most part negative.

Blackberry users aren't that much different from Apple users. They want a simple product that works. All RIM has had to do all along is make their OS relevant , not mature. To bet on QNX is a risky move. Alienate your loyal customers you will.

RE: BB for Android/iOS
By Iaiken on 8/22/2011 2:17:15 PM , Rating: 2
If they did that, it would open the door for Google, Apple or Microsoft to simply take them over without fear of anti-trust and those players could just roll that up into their OS.

RE: BB for Android/iOS
By phantom505 on 8/22/2011 2:42:24 PM , Rating: 3
HP has made stupid move and stupider move for years. They spun off their instrument division, Agilent, years ago. Any employee with a choice and any sense went to Agilent.

They surrendered to TI on calculators despite having the dominate position for over 20 years in the graphic calculator area.

They had the solid PDAs (the one I got in 1998 still works, and isn't even all that horrible for basic functions) yet they failed hard on making it into a phone.

I've had at least 3 HP laptops that performed well. I don't think any of the died before their MTBF.

They deserve to die off, their management is terrible these days. Then and Sony are going to crater... just a matter of when.

RE: BB for Android/iOS
By drycrust3 on 8/22/2011 5:12:43 PM , Rating: 3
Ditching hardware and going for enterprise software?

I wondered what all the hype was about until I bought my first smart phone, now I can see what the hype is about.
If you look at the PC you can see that what made it popular wasn't that IBM made it, it was that IBM let other people copy and build their own cheaper versions of it, and that they let other companies improve on what they had started; and that Microsoft made a standard operating system that a manufacturer could tweak to give it an air of distinctiveness, but it was still standard so that it would run the same software as any other Windows platform.
Android has pretty much followed a similar path until now: a manufacturer makes some hardware that is essentially the same as what other manufaacturers make, but they can then add their own distinctive features to the Android OS so their product has something that appeals to a niche in the market.
In the same way, if RIM made its software so it ran on a standard set of hardware, e.g the same as what Android runs on, then it could dispense with the hardware side of the equation and just deal with what made them stand out: a mobile platform that appeals to business people.

"There is a single light of science, and to brighten it anywhere is to brighten it everywhere." -- Isaac Asimov

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