Nielsen Measures Android's Muscle
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The competition between Google’s (NASDAQ: GOOG) mobile platform Android and Apple’s (NASDAQ: AAPL) iOS has never been hotter. Apple has a myriad of lawsuits pending against various manufacturers of Android devices and every few weeks it seems we see more Android devices facing a potential sales ban. Though these usually turn out to be temporary, as with HTC’s One X being held by US customs, or Samsung's Galaxy Nexus being pulled for a brief time from the Play store, they are still concerning. So concerning in fact that the legal hot water Android consistently finds itself in was one of the main reasons Google spent 12.5 billion dollars purchasing Motorola. Beyond Steve Jobs personal vendetta against Android, in which he vowed to go thermonuclear, Apple may be feeling some pressure as Android’s open strategy garners it ever increasing success. However, recent numbers from Nielsen indicate that the extended legal cat fight between Apple and Android is not seriously damaging either.
The report issued by Nielson dealt with the US smartphone market as of the end of the second quarter. Android has continued its slow climb in US market share and now runs on 51.8% of all smartphones in the US. Android’s climb has not come at the expense of Apple’s iOS, which also increased its market share to 34.3%. Android and iOS are both growing at the expense of smaller platforms, Microsoft's (NASDAQ: MSFT) Windows Phone and Research in Motion's (NASDAQ: BBRY) BlackBerry. BlackBerry’s market share has dwindled to just 8.1% and Windows Phone is running on a paltry 1.3%. Windows Phones predecessor, Windows Mobile has more than twice Windows Phones market share with 3%. The only two platforms that Windows Phone is currently ahead of are the defunct Symbian and Palm’s Web OS. In fact Nokia has more phones running its Symbian operating system .9%, which has largely been replaced than they do on their current operating system Windows Phone, .3%.
Even more worrying than the current state of affairs for Microsoft and Research in Motion is what customers are currently buying, which serves as an indication of future sales. Over the past three months 54.6% of customers purchasing a new smartphone chose Android. A strong indicator that Android’s market share will continue to increase. 36.3% of customers chose iOS in this last quarter again indicating future growth, however in February the percentage of new customers choosing iOS was reported at 43%. At this point many customers may be waiting for the release of iOS 6 and the rumored iPhone 5 thus temporarily dropping the iOS adoption rate. Only 4% of new customers chose a Blackberry smartphone and with Blackberry’s new operating system pushed back until 2013, Blackberry is in for several more quarters of decline at a minimum.
Microsoft based mobile operating systems are also likely to continue their decline through the rest of this year. The 3% of smartphones still running Windows Mobile will undoubtedly drop, however they will not be replaced by Window Phone smartphones. This is because Microsoft announced in June that their upcoming release of Windows Phone 8 will not be coming to any current Windows Phone device. This will depress Windows Phone sales for the rest of the year as consumers hold off their purchasing until they can get their hands on Windows Phone 8. Additionally Windows Phone smartphones are not widely available in the US, there are none on Verizon at all which will keep US Windows Phone sales low. The latest sales numbers from Nokia show just 600,000 Lumia Windows Phones were sold in the US this last quarter.
Smartphone adoption hit 50% in the US in March and it has already reached nearly 55% according to Nielsen. Nielsen earlier reported that two thirds of all consumers are now opting for a smartphone over a feature phone. With less than half of the mobile market still up for grabs, the smaller players are running out of time to secure their place in the market. And thus far Windows Phone and BlackBerry are moving in the wrong direction.
Android and iOS will both continue to grow, domestically and internationally and they will also continue their legal fight, domestically and internationally. Microsoft can afford to lose money on Windows Phone. They are paying hundreds of millions to Nokia as part of their partnership, and have launched an aggressive advertising campaign for their Windows Phone operating system. Microsoft also makes a royalty from intellectual property off of 70% of all Android devices sold, which by one estimate from Goldman Sachs could net Microsoft $444 million dollars in 2012. So once again the smartphone maker that does not currently have a compelling product in the market and cannot afford more than a few more quarters without one is Blackberry.
Research in Motion has less than two billion dollars on hand, is undergoing major layoffs and has less than 10% US market share. Combine this with the recent delay of Blackberry 10 and the 80 million customers that Research in Motion's CEO recently bragged about may not be enough to save them.
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