Smartphone Wars: The Google Empire Strikes Back

Evan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

In the epic, intergalactic quest to achieve global smartphone domination, who is coming out on top?  According to the latest numbers from the International Data Corporation (IDC), the Google Empire is striking back.

Three tendencies in the smartphone market have been apparent for some time now.

1.) Google’s (NASDAQ: GOOG) Android has become increasingly dominant in the number one slot.

2.) Most other companies that aren’t named Apple (NASDAQ: AAPL) have been on the receiving end of major beatings in the market.

3.) The smartphone market is currently a two-horse race between Google and Apple.

According to the IDC’s recently released study, Google’s Android controlled the most market share in the smartphone industry for the second quarter of 2012, with a 68.1% world market share.  Apple comes in second with 16.9%.  When you combine Google and Apple together, the two companies control an 85% smartphone market share. 

The shipment of Android-based smartphones experienced a 106.5% gain while shipment of iPhones climbed by 27.5% this year.   A total of 104.8 million Android-based smartphones were shipped worldwide in the second quarter, compared with 26 million iPhones. That’s four Android phones for every iPhone, up from a ratio of 2.5 to 1 in the same period last year.

Why has the Android been so successful this quarter?  In recent years, Google has mounted a serious challenge with Android, both in product features and marketing push, and benefits from having several manufacturers as partners, including Samsung, HTC Corporation, and Motorola Mobility.

The triumph of Android phones shipped by Samsung Electronics Co. has significantly aided Google's operating system in extending its dominance in the smartphone market.   Samsung's Galaxy S III phone received good reviews when it was released late in the second quarter.  Samsung also profits from their strategy of creating various devices that aim at a wide range of consumers.  By contrast, Apple targets only the high-end market with its iPhone.

Apple still dominates in the electronic tablet market, with Android tablets lagging well behind the iPad.  Google is trying to close the gap with its own branded tablet, the Nexus 7.

How have other smaller companies fared in the smartphone frenzy?  Google’s gain has come largely at the expense of Research in Motion’s (NASDAQ: BBRY) BlackBerry and Nokia Corporation’s (NYSE: NOK) Symbian platform.   The BlackBerry now comes in a distant third with 4.8% of market share, down from 11.5% last year.  The Symbian lost the most, falling to a 4.4% share, which was down from 16.9% a year earlier.

Perhaps the second quarter's biggest surprise was Microsoft (NASDAQ: MSFT), which gained the most in shipments by percentage with its Windows 7 phone.  Combined shipments for Microsoft’s Windows Phone 7 and Windows Mobile platforms rose 115.3% from 2.5 million units to 5.4 million units.  Microsoft's year-over-year shipment boost even rocketed past the strong 106.5% growth rate posted by the Android.

Is Microsoft going to make a significant dent in the ongoing war between industry giants Apple and Google?  So far, Microsoft's first excursions into the mobile market haven't been a leisurely walk in the park as planned.  Although the company thought that the Windows Phone would supercharge the company's efforts in this sector, the competition from Google and Apple has proven otherwise.

Also, the IDC’s report isn’t that rosy for Microsoft’s future mobile endeavors.  Although Windows Phone sales have picked up considerably, its market share is only at fifth place in the smartphone industry.  Microsoft’s 3.5% share puts the Redmond, Washington company two ranks below the floundering BlackBerry.

Microsoft finds itself shoved to the side by the technological titans in the mobile industry.  With the mushrooming growth of mobile platforms and the slow decline of PCs, Microsoft will have to pick up the pace to keep up.

BlackBerry maker Research in Motion (RIM) seems to have been, allegorically speaking, banished to the icy planet of Hoth.  Although RIM, based in Waterloo, Ontario, broke new ground in the smartphone industry when it first started, it has struggled over the last couple of years as its aging line-up of BlackBerrys have not been able to compete against more-advanced devices like Apple’s iPhone and Google’s Android.

RIM acquired NewBay, a photo, video, and social-networking tools provider, in October 2011 for approximately $100 million according to industry estimates.  The company was optimistic as it sought to roll out a new strategy to curtail its steady decline, but now is seeking to sell NewBay and some of the other minor assets it has recently acquired to generate revenues and reorient its business to increase sales.

Every company not named Google or Apple is fighting for third place in this top-heavy industry.  The two monolithic titans continue to duke it out.  The main question as we head into the third quarter has come down to, “who will attain third place?”  At this point, nobody wants to be on Hoth as the smartphone wars rage on.

EvanBuck has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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