The Future King of the Smartphone Industry

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

Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) are currently the largest technology companies in the world. Each of these giants has its own domain where it is the leader and pioneer. Microsoft is the leader in software operating systems and Google absolutely dominates the search arena. Apple has developed itself into the world’s largest technology company due to the immense success of its iPad and iPhone. The two devices have triggered a technology revolution which has totally transformed the computing and ‘phone’ industry. Apple has not just provided revolutionary hardware to its customers but a comprehensive eco system as well.

The Industry

Since the launch of iPhone, a number of companies have come up with their own take on a smartphone. The most successful in these attempts has been the Samsung and Google partnership. The hardware of Samsung combined with Google’s Android has given Apple a run for its money. The real power of Google’s Android is not only its visual beauty, but in fact the Google’s ecosystem. Recent trends in the smartphone industry show that manufacturers and consumers are placing more emphasis on the capability and price than design only. These are signs of a maturing industry because customers are less willing to pay for a brand name only and want their money’s worth.

Like other technology industries, the smartphone industry also relies on specialized semiconductor companies. Therefore, every manufacturer almost has the same capability to load more power and speed into their device. This makes it very hard for companies to create a competitive advantage based only on their hardware offerings. That is the very reason that ecosystems are the future of smartphone industry and all major players have to further enrich their respective ecosystems if they want to dominate the handheld arena.

Ecosystems

Microsoft currently has the largest ecosystem in the world, primarily due to their Windows presence. On the other hand Android and iOS dominate the smartphones and tablets. The Android is currently the largest handheld ecosystem in the world and offers itself to handheld manufacturers all around the world. Therefore, Android users have tons of choices when it comes to selecting handheld hardware and Google ensures that Android gives a uniform experience across those devices.

While the dominance of Android and iOS is absolute in the smartphone industry, Windows might find a way through tablets and hybrids. Android and iOS are currently the first user choice for leisure computing but Windows is universally accepting as the leading ‘work’ operating system. The software giant is trying to bank on this and has already launched Windows 8; its first touch based operating system. The software giant has also taken a leaf out of Apple’s book and is offerings its own Surface Pro and Surface RT tablets. The Windows 8 is also available on hybrid devices of partner OEM’s such as Samsung, Lenovo, Asus, Dell, HP etc.

Google’s Cloud

The ‘cloud’ is one of the primary component of future ecosystems because handheld devices have limited space onboard. According to recent reports, Google is doubling its office space Seattle to further improve its cloud offerings. Amazon’s cloud services are currently the most widely recognized in the industry with Microsoft’s the second biggest player. Google already has a significant presence in could and enterprise services but lags behind both industry leaders. This expansion is aimed at reducing this gap and giving Google a large control over Cloud. According to analyst, a stronger Google Cloud will encourage businesses and developers to become more invested in Google products as compared to other offerings. A lot of Android applications are developed on Amazon’s cloud and Google plans to wrest back control.

This move will also increase the ability of Android to significantly strengthen its ecosystem. The company will be in a better position to offer more Cloud based Product’ on Android and indirectly control the development process as well. As compared to other players in the Cloud arena, Google has the unique ability to offer its service for lower prices or even free. This is because a very large portion of Google revenues comes from online advertisement, reducing the pressure on the search giant to be profitable from all its ventures.

In conclusion I believe Google and Microsoft are neck to neck into this rapidly evolving industry. Microsoft plans to attract its current Windows consumers to shift to hybrid Windows 8 devices and this transition to fuel its revenue growth. On the other Google sees its ecosystem future in its cloud services and Cloud based application. Apple is currently plagued by slowing growth and contracting margins, but the company certainly has enough resources to make a comeback. The route that Apple takes now to reclaim its top spot can be the deciding factor in this industry.


Mohsin Saeed has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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