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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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don't write off microsoft just yet
By Bozzified on 8/22/2011 9:38:11 PM , Rating: 2
People seem to forget that Microsoft is not even in the game yet. I think we will see a very strong return of Microsoft to the mobile scene with the release of Windows 8 and Windows Phone updates. Everyone seems to easily overlook Microsoft dominance with Windows and Xbox 360 in the whole world. If they do it right, combine Windows 8 on tablets, desktops and laptops and integrate their XBL arcade market with Windows phone and tablets running windows 8 they can propel in market share at lightning speed. With the arrival of Ultrabooks people will undoubtedly want unified experience across the board and honestly,Microsoft is the only company that can deliver this on a large scale.

I am a big android fan due to its openness and great capabilities alongside hardware diversity but Microsoft is also able to deliver this across the board and with more control over experience.

I think they will come back stronger than ever and I might even consider my next phone sometime next year to be windows phone.

The real question is whether or not Microsoft can do it right. I think a lot of it is riding on how good of an experience windows 8 will be on desktops but more importantly on tablets. Reality is that if they compete only on phone level they will lose.

With this being said, I think it's definitely not too late, simply because mobile and tablet markets are just at the beginning and these percentages shown even though seemingly high, are just a drop in the ocean of the overall computing market worldwide, so owning 60% or 30% of a 1-2% of overall computing market is miniscule. We are at the beginning really and why I think Microsoft isn't out yet.

By spacemonkey211 on 8/23/2011 9:15:19 AM , Rating: 2
The real problem with Windows 8 in tablets is if they are running ARM... none of your old apps will be compatible. Even Microsoft is saying this.

Without backwards compatibility... Windows = no go. They will be no real difference between that and Android or iOS except they already have a huge amount of software running on it.

If they make the tablet ARM OS the same as their desktop OS, guaranteed they will have a huge outcry and amount of returns as people try to run their old ".exe" files only to have them fail.

The other option is to have emulation and then people will wonder why their apps run like crap and have a huge backlash.

By Taft12 on 8/23/2011 12:18:36 PM , Rating: 2
If they do it right, combine Windows 8 on tablets, desktops and laptops and integrate their XBL arcade market with Windows phone and tablets running windows 8 they can propel in market share at lightning speed. With the arrival of Ultrabooks people will undoubtedly want unified experience across the board and honestly,Microsoft is the only company that can deliver this on a large scale.

Microsoft is not the only company that can deliver this - like it or not, Apple delivers it TODAY.

Also can we please dial the hyperbole level down a couple of notches Mr. "propel in market share at lightning speed". Thanks.

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