Apple (NASDAQ: AAPL) has sold 14.1 million iPhones in 2010. The phone’s sole carrier, AT&T (NYSE: T), activated 5.2 million phones, 24% of which were for brand new subscribers. Last week, the IDC Worldwide Quarterly Mobile Phone Tracker named Apple the No. 4 mobile phone vendor in the world, trailing just behind Nokia (NYSE: NOK), Samsung, and LG Electronics. Even after more than three years on the market, growth is not out of reach for the iPhone, and with the device expected to branch out to other mobile carriers like Verizon (NYSE: VZ), Sprint (NYSE: S), and T-Mobile next year, that growth should be exponential.
While Apple is still making gains as a manufacturer though, its hold on the smartphone software market is being eroded every day by Google’s (NASDAQ: GOOG) Android operating system. While the software giant doesn’t make its own phone like Apple, the popularity of the smartphones that do use Android is starting to impact Apple’s potential reach; there may still be growth opportunities for the iPhone, but Android phones are steadily diminishing them. In October, the Nielsen Co. released a poll that found Android was a more popular brand than the iPhone in the six months of 2010 that preceded the iPhone 4’s release. Some 32% of polled individuals who purchased a smartphone between February and August purchased an Android phone, compared to 25% who purchased an iPhone. Today, the NPD Group reported a surge in Android’s market share in the U.S. after the third quarter. Some 9.1 million Android phones shipped between July and September, while Apple shipped just 5.5 million iPhones. If Apple hopes to be the No. 1 smartphone software maker in addition to a leading manufacturer, it is going to need to find a way to halt Google’s rise. Here are seven ways Apple can knock Android down.
Widening the Scope
1. Bring the iPhone to Verizon, T-Mobile and Sprint. Obvious or not, Apple needs to end its exclusivity with AT&T immediately. Google’s open policy with Android has allowed the carrier agnostic mobile phone makers of the world like HTC Corporation, Motorola (NYSE: MOT), Sony Ericsson (NYSE: SNE, NASDAQ: ERIC), and others to sublimate Research in Motion (NASDAQ: RIMM). Resarch in Motion has been knocked out of the top five worldwide mobile phone vendors due almost purely to the increased popularity in Android devices. Apple needs to branch out to other carriers in the first quarter of 2011 if they don’t want to suffer the same fate.
2. Diversify the iPhone line. Apple needs to bring a more competitively priced iPhone to the market that doesn’t also seem like yesterday’s tech. While the iPhone 3GS is a more affordable option than the iPhone 4, the 3G struggles to compare to the newer tech and even has trouble running more recent iOS 4.1 features. Much in the same way that the iPod Nano helped propel the iPod line, it’s time for Apple to offer a range of smartphones at varying prices but that are at least comparable in functionality. This will help combat the vast selection of different smartphones running on Google’s software.
3. Refresh the marketing blitz. Apple is peerless when it comes to marketing its devices, but the iPhone line has yet to see an advertising blitz as iconic as last decade’s silhouette iPod commercials. Apple can no longer tie the iPhone’s branding to the App Store since the app markets are uniform across mobile operating systems, Android included. Apple needs a new campaign to recapture some of the glitz the iPhone has lost in comparison to Google’s device.
Ipad and the IOS Brand
4. Lock down the tablet market with iPad. The iPad is off to a good start, but its dominance comes from a lack of competition. Apple needs to cement its dominance in the tablet market before Google can launch a flagship device of its own or through its partners. (While there are already tablet PCs available running Android version 2.2, Google has openly said that the current version of the operating system is not optimized for tablets.) Apple has already taken a step in the right direction by getting other mobile carriers to sell the device beyond AT&T, but it needs to broaden the product line much in the same way as it has with the iPhone. The rumored smaller, dual-camera iPad 2 should launch in the first quarter of 2011 and accompany a slight price drop in the current model to keep momentum strong. An iPad Nano line should follow in late 2011.
5. Grow iOS brand and continue to lead software development. It was rumored last summer that Apple would reposition all its operating systems under the iOS name, changing OS X to iOS with the Lion update. This is still a strong idea, one that would at least reinforce the strength of iOS as a brand if not an actual mobile platform. Apple should push to blur the line between its mobile and home platforms with iOS 5, making the iPhone and iPad appear as powerful and capable as any home computer. Fostering the idea that iOS is capable of more than Android is, at this stage, more important than actually being a better operating system.
Game Center and Adobe
6. Commit to Game Center development. Some 61% of smartphone users download and play video game apps on their phones. iPhone game development has proven to be big business — just look at the $400 million sale of iPhone game developer Ngmoco last month. Apple has a great opportunity with its newly launched Game Center gaming network, but it has yet to leverage it in the same that Microsoft (NASDAQ: MSFT) has its Xbox Live network. Apple needs to pour resources into developing Game Center, build awareness of the service through marketing, and change the network’s branding to something less generic as soon as possible. A unifying brand for video game apps on iOS platforms will give Apple a significant advantage over Android’s game market.
7. Acquire Adobe. HTML5, the new Web standard that builds video and other media directly into websites without needing added applications, is Apple’s main ammunition in trying to end the ubiquity of Adobe’s (NASDAQ: ADBE) Flash as the dominant video format online. HTML5, however, still more than a year away from broad implementation. If Apple really wants to put pressure on Google, it should just acquire Adobe. Then Apple would have control of the most frequently used video format, the format used by Google’s YouTube, on the Internet. It would increase its software presence on smartphones , portable and home computers alike.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
