Apple Inc. (AAPL) stockholders have spent most of this week alternating between salivating and wringing their hands. Investors in the Calfornia tech stock and smartphone behemoth went into this past Monday’s press conference hoping for Apple to reveal a new iPhone SKU that could combat gains made by smartphones running on the popular Google (GOOG) Android operating system. Apple stock fell following the iPhone 4 announcement though, and continued to fall through Tuesday, down a total of 3.4% so far this week.
Investors are most likely leery of Apple stock as the announcement of iPhone 4 did not address Apple’s current exclusivity agreement with AT&T (T) as iPhone’s sole service provider. Many potential smartphone consumers haven’t opted the iPhone since it isn’t offered through competing service providers like Verizon (VZ), Deutsche Telekom’s (DT) T-Mobile, or Sprint (S).
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Both Apple and AT&T stock enjoyed a surge in popularity following the iPhone’s original release in 2007, but they have seen significant declines due to stiff competition from Verizon supported phones running on Google’s Anroid operating system, particularly the Motorola (MOT) Droid. Launched in 2008, Android enabled phones gained some 10% of the smartphone market by the end of Q1 2010. They continue to gain on Apple’s 15% market share, Research in Motion (RIMM), and their line of BlackBerry phones, 19% market share, and the 44% share of phones from Nokia (NOK) and the joint venture between Sony (SNE) and Ericsson (ERIC) running on Symbian. Google stock shareholders are already enjoying Android’s dominance over Microsoft’s (MSFT) line of Windows enabled phones, which control only 7% of the smartphone market.
Improvements to the iPhone are myriad in the latest technology revision. Coming in two models, a 16GB SKU prices at $199 and a 32GB SKU at $299, the iPhone 4 is 24% thinner than the previous model, the iPhone 3GS. It also features an improved, 960 X 640 pixel screen powered by Retina Display technology and longer battery life. Other new features include a sleek steel and glass case and a 3-axis gyro for more accurate controls in downloadable video games. (Apple is hoping to grow the iPhone 4 as a competitor in the portable video game market that has been so profitable for Nintendo (NTDOY) and their touchscreen enabled DSi.)
Apple’s critics have been quick to point that, despite these improvements, the iPhone 4 fails to equal the popular functionality in Android phones. Part of the problem is Apple’s inability to match Google’s popular cloud computing features, linking users Google documents, calendars, and Gmail accounts easily into their smartphone. If Apple hopes to dominate the smartphone market in the same way they have ruled the portable MP3 market with the iPod and iPod Touch, they will need to address the needs of consumers in the same way Google is, not to mention the need for more universal service provider support.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
