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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: Apples and oranges
By theapparition on 8/22/2011 2:45:09 PM , Rating: 2
When your operating system ships on cheap phones as well as flagships it is only natural that you have the market lead in number of shipped devices.

You mean like Apple, which still sells the seriously outdated iPhone 3GS for $49?

RE: Apples and oranges
By messele on 8/22/2011 3:03:31 PM , Rating: 2
The 3GS is that outdated that it still outsells any individual model of Android phone in the USA at this moment.

The wire's 3G actually still feels relatively usable, which is nice.

RE: Apples and oranges
By lukarak on 8/23/2011 12:27:16 AM , Rating: 2
It's not the subsidized price that matters. Plus, Apple sells more 4s than 3GSes. Plus, android sales consist of even more 'outdated' devices, spec wise when compared to flagships, not by release date.

RE: Apples and oranges
By messele on 8/23/2011 2:44:13 AM , Rating: 2
Yes, exactly.

Google Android is poised to take over from Nokia as the OS of choice for budget low end handsets, most of which will be purchased by people who are not aware of what Android is or probably what an operating system is for that matter.

Those people are not the people who are vociferous on internet discussion groups but there's several orders of magnitude more of them.

Good luck to Android, it's a fantastic Operating System but nobody should pretend for one minute that it's ubiquity is any sort of an indication of the state of the market for high-end handsets. It clearly isn't.

RE: Apples and oranges
By lukarak on 8/23/2011 7:02:18 AM , Rating: 2
It is not that different from the PC world, where the Mac even dominates the $1000+ market, virtually the only one it is present in (excluding the mini)

It has to be careful not to fall behind in applications as it did in the Mac space.

RE: Apples and oranges
By kmmatney on 8/23/2011 2:48:52 AM , Rating: 2
The iPhone 3GS is pretty fast, and does everything you need a smartphone to do. I'm still running mine after 2+ years, and it generally provides a smoother experience than my wife's much newer Android phone. It will easily tide me over until the next generation comes out. For most people, it's all they need - and it has much better battery life to boot. The only real criticism I would have would be the mediocre camera, and lack of facetime (which works a heck of a lot better than Skype, from my experience).

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007

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