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Android Tiptoes Past iPhone, for Now

By Richard Adhikari MacNewsWorld ECT News Network
May 12, 2010 5:00 AM PT

Phones running the Android operating system outsold iPhones in the first quarter of 2010, according to figures released by the NPD Group Monday.

Android Tiptoes Past iPhone, for Now

However, that news didn't seem to faze the market -- on Tuesday, Apple shares closed at US$256.52, up $2.53, or about 1 percent.

Meanwhile, tickets for Apple's World-Wide Developer Conference (WWDC), to be held in San Francisco June 7 through 11, were sold out within seven days. Apple's widely expected to announce a new iPhone at the conference, which will also see the first sessions for iPad developers.

The Rise of the Machines?

In Q1, 2010, Android-based smartphones took 28 percent of the U.S. mobile market in terms of unit sales, coming in second place behind RIM, which had 36 percent. The iPhone, with 21 percent, came in third.

This is the first time Android devices have outsold the iPhone, and that's thanks in part to Verizon's aggressive buy-one-get-one free offers.

"In the first quarter, Android grew on the basis of Verizon's advertising and promotion," Ross Rubin, executive director of industry analysis at the NPD Group, told MacNewsWorld.

Verizon is pushing sales not so much because it loves Android as because it is trying to keep pace with AT&T. NPD's figures show that AT&T's smartphone sales took 32 percent of the market. Verizon Wireless had 30 percent; T-Mobile 17 percent and Sprint 15 percent.

Does the Market Still Love Apple?

On Tuesday, Apple's share prices rose, and that might be interpreted as a sign that the market doesn't necessarily think NPD's figures pose a threat to Apple.

On the other hand, the increase could be considered a continuation of the mad see-sawing Apple's stock prices have undergone in recent weeks. Apple's share prices hit their peak April 29, when they closed at $268.64. That was the day Apple CEO Steve Jobs published a letter on the company's website criticizing Adobe Flash.

Since then, Apple's share prices have taken a wild ride. April 30 saw them fall more than $7 to $261.09; they shot up to $266.35 May 1; and the wild fluctuations have continued.

It may be that investors are on edge because of overall market conditions. There's nothing like the Dow losing 1,000 points in one day and the possible collapse of Greece's economy to send adrenaline coursing through one's system.

On the other hand, it could be that savvy investors are taking profits and buying back shares when the prices drop before Apple's next major announcement at the WWDC. Hard to tell, and the old crystal ball seems to have clouded up somewhat.

The Real Comeback Kid?

Getting back to the technology, Android's ascendance over the iPhone may only be a temporary one.

"It's a snapshot of the calm before the storm," Chris Hazelton, a research director at the 451 Group, told MacNewsWorld. "You're going to have a new iPhone in the coming months that could potentially be on a new carrier. If it's on another carrier, the iPhone could easily eclipse Android handsets."

Apple will need to sign up with another carrier to see real growth in the U.S. smartphone market, NPD Group's Rubin said. "It will be difficult for the iPhone to grow share staying exclusive to AT&T unless the carrier makes significant changes to data pricing that would greatly expand the addressable market," he explained.

Translation: AT&T needs to reduce its charges. Comment: Think of moons and green cheese.

"AT&T would be less motivated to engage in such a promotion as a higher percentage of its subscribers use smartphones already," Rubin pointed out. "This has been fueled mostly by the iPhone."

So there are people who will snap up the iPhone if Apple either switches to another carrier or adds a second one. However, Apple has been resisting calls by analysts to make the switch for several months now, and it seems somewhat set in its ways.

Turning Up the Heat

Another factor that could impact demand for the iPhone is RIM's plan to refresh its BlackBerry OS and release new phones later this year.

Many iPhone users are unhappy over AT&T's service, and they may prove to be vulnerable to conversion by the RIM or Android factions. Further, Apple's new iPhone OS 4 will not run on some older iPhones, so they may opt to switch to Android or RIM instead of getting a replacement that runs on AT&T's network.

If Apple doesn't announce a new carrier when it presumably brings out the new iPhone at WWDC, watch the sales figures for the new device -- if they're low, and are not being offset by strong demand for the iPad and iPods, Apple's position might weaken.

What's With Developers' Conferences?

On the other hand, Apple's following may remain strong, if reaction to the WWDC is taken as a measure. Tickets to the conference sold out within seven days, and many developers were upset that Apple had only confirmed the conference's dates one month in advance.

Further, Apple will most likely officially reveal the new iPhone at the conference, which will also highlight the first session for iPad developers, and a session on working with the new iPhone OS 4 software development kit.

We might expect to see another wave of new apps for the iPhone and iPad hitting the market after the WWDC.

That's important to investors because apps drive sales of mobile devices.

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