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Which Also-Ran Will Run the Fastest in the Smartphone Race?

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

Smartphones and tablets have come to play such an important role in our lives that a sense of paranoia might set in if someone is asked to spend a week without one. But these mobile devices go way beyond than just making people’s lives easier. They help companies make billions, they help investors get richer, they help technology analysts/bloggers earn their bread and help tech websites survive.

Being a blogger who is always on the lookout for investment opportunities in semiconductor companies that power smartphones, I decided to use almost all the important smartphone platforms out there in 2012. The idea was to zero in upon the operating system that would keep me entertained and productive along with delivering the best user experience.

I started the year with Research In Motion’s (NASDAQ: BBRY) BlackBerry, switched to a Nokia (NYSE: NOK) Symbian for some time next, followed by a Microsoft (NASDAQ: MSFT) Windows Phone. Next came an Apple (NASDAQ: AAPL) iPhone 4S and finally switched a Google (NASDAQ: GOOG) Android powerhouse in the form of the Galaxy Note II. Although the experiment set me back by some bucks, it was undoubtedly worthwhile.

To see if my experiences actually reflected in the smartphone market during the year, I decided to check out the market share statistics of these platforms at the end of November. And this is how things looked like:

<table> <tbody> <tr> <td rowspan="2"> <p><strong>Operating System</strong></p> </td> <td rowspan="2"> <p><strong>3Q12 Market Share (%)</strong></p> </td> <td rowspan="2"> <p><strong>3Q11 Market Share (%)</strong></p> </td> <td> </td> </tr> <tr> <td> </td> </tr> <tr> <td> <p>Android</p> </td> <td> <p>72.4</p> </td> <td> <p>52.5</p> </td> <td> </td> </tr> <tr> <td> <p>iOS</p> </td> <td> <p>13.9</p> </td> <td> <p>15</p> </td> <td> </td> </tr> <tr> <td> <p>Research In Motion</p> </td> <td> <p>5.3</p> </td> <td> <p>11</p> </td> <td> </td> </tr> <tr> <td> <p>Bada</p> </td> <td> <p>3</p> </td> <td> <p>2.2</p> </td> <td> </td> </tr> <tr> <td> <p>Symbian</p> </td> <td> <p>2.6</p> </td> <td> <p>16.9</p> </td> <td> </td> </tr> <tr> <td> <p>Microsoft</p> </td> <td> <p>2.4</p> </td> <td> <p>1.5</p> </td> <td> </td> </tr> <tr> <td> <p>Others</p> </td> <td> <p>0.4</p> </td> <td> <p>0.9</p> </td> <td> </td> </tr> <tr> <td> <p><strong>Total</strong></p> </td> <td> <p><strong>100</strong></p> </td> <td> <p><strong>100</strong></p> </td> <td> </td> </tr> </tbody> </table>

 Source: Gartner (November 2012)

When I saw this table, I said to myself -- “My sentiments exactly.”

So, why did I embark on this experiment? The reason’s pretty simple -- to see which OS is close to perfection, and what has been ailing others. I thought this would help me in predicting (to an extent) where the next balance of power in the smartphone race is headed for and if there could be any potential game breakers as well. And finally, I would now intertwine my own experiences with the shifts in smartphone market shares and try to see who might win and who might lose at the end of 2013. I will go in order of platforms I used and discuss Apple and Google in a separate post after this.

Research In Motion: RIM’s decline in 2012 wasn’t at all surprising as the company did best what it’s good at -- delay BB10. Its wheels had stalled long back, as RIM focused on marginally upgrading its phones and user experience. People wanted to do more with their phones but a BlackBerry wasn’t simple good enough and I felt this during my time as a BlackBerry boy.

From BlackBerry OS 5 to OS 6 to OS 7, there have been minor changes, and the devices aren’t great for media consumption in my opinion. BB10 might change this as initial videos of the software look promising, but lack of apps initially would certainly be a drag. RIM says that it would have 70,000 BB10 apps ready at launch, and this trails Microsoft’s app store.

Apps play a very important role in determining user experience and I don’t see many consumers in the beginning, apart from BlackBerry fanatics. But given the novelty that the software would bring in a polarized smartphone world, and also the fact that RIM used to have a big user base, the odds of RIM recording a share gain aren’t outlandish either. Its strong base across the globe, especially in emerging countries might help RIM affect a turnaround of sorts this year.

Nokia’s Symbian and Microsoft’s Windows: As evident from the table above, Symbian is on the verge of extinction. But there’s more to it than just that. Symbian OS has traditionally been used in feature phones, which used to account for a significant share of Nokia’s revenue at a point of time. But with the advent of cheaper smartphones, Nokia’s feature phone market has been hit hard and Symbian’s decimation depicts this.

Hence, this leaves Nokia with Windows Phones to save its skin. The windows platform is a clean one, easy to use, never hangs or restarts. I had a good time with a Windows Phone and there were a number of things to like about it. However, applications were a problem. Applications on this platform just worked, there was nothing great about them and neither were they quite seamlessly integrated with the system like iOS or Android.

Nokia’s latest flagship, the Lumia 920, has found initial success but there are possibilities that it is more due to short supply rather than huge demand. But, on a positive note, Nokia has managed to land itself in the Chinese market with China Mobile, the world’s largest carrier and this bodes well for it. The Lumia 920 is a compelling device, and this could help Nokia arrest its fortunes, lest RIM grabs some of its defectors back with BB10.

Speaking about the Windows Phone platform in general, it is indeed promising but Microsoft needs to develop the entire ecosystem fast. But there are some significant hurdles. Firstly, the platform hasn’t found adoption in a big manner across smartphone makers. Nokia remains the primary exponent with HTC and Samsung participating sparingly. Thus, Microsoft will need to pull of an Apple to succeed with fewer devices.

The App Problem

However, a small collection of apps as against those on the Google and Apple app stores is a big challenge. Google isn’t interested in making apps for the platform as users are “not on Windows Phone or Windows 8” according to  Google Apps product manager director Clay Bavor. And lack of Google apps was one of the main constraints I faced while using a Windows Phone. The slow rate of adoption also reflects in a meager 0.9% growth in 2012, and the task ahead is difficult.

The latest Lumia and the HTC 8X might be selling well now but the platform needs such phones consistently to do well. Moreover, Nokia’s low cost Windows Phone offerings might help it better in the Chinese smartphone market but it will again be a steep challenge here in the face of Android dominance.

The momentum is undoubtedly with Nokia at the moment and the stock has rallied 90% in the past six months. If the company keeps landing devices such as the Lumia 920 along with good low-cost offerings to replace its dying Symbian breed, then I have no doubt that it will be able to turn around, provided the collection of apps on the platform improve and grow at a fast pace.   

Final Words

The competition is stiff among the also-rans in the smartphone arena with Nokia managing to arrest its slide and RIM slated to release its next-gen platform. The fight will be intense among these two and I would be waiting to see how RIM’s BB10 is received and whether it can challenge Windows Phones’ first mover advantage.

But the market remains polarized with Apple and Google leading the charge. Tune into this space again for the next part of this post, for the showdown between the two biggest players in the arena.

TechJunk13 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 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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