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Asymmetric Intelligence

Android

  1. Is the tablet computer a new PC or post-PC?

    Research · 60 comments

    Steve Ballmer stated and Andy Lees confirmed that Microsoft views iPad and other tablets as "just PCs". From a market measurement point of view Canalys agrees. IDC and Gartner don't, calling the new devices "media tablets."

    Before deciding whether tablets belong with PCs in market metrics, it would be interesting to look at what the data shows. When seen as a combined market, the focus should be on platforms. The following chart shows the four main PC+tablet platform volumes since late 2008 [1].

    The second chart shows the same data as share of total market:

    This comparison allows for some fresh observations:

    1. Excluding iPads, Apple is very close to being 5th largest global PC vendor. Global share likely to be above 5%. Including iPads, Apple would be 2nd.
    2. Platform year-on-year growth was Windows: +1.3%, OS X: +26%, iOS: +170%. Android growth cannot yet be measured since Android tablets have not been on the market for more than 1 year.
    3. In Q2 2011 one million more Windows PCs were sold than in Q2 2010. In same time, 903k more OS X PCs and 5.5 million more iPads.
    4. Excluding tablets, nearly 50% of the global PC growth was due to the Mac. Including iPad, Apple was responsible for ~70% of the growth in the PC market in Q2.

    The picture that emerges is that while Windows continues to be dominant with 84% of units sold in the last quarter, the growth belongs to tablets which captured about 90% of it. If Windows remains marginal on tablets, the "PC market" will likely tip away from Microsoft in two years (depending on how quickly Apple can build iPads.)

    Microsoft is making the commitment to move Windows to a tablet form factor but they are doing it while retaining the user interaction model of a desktop. This may or may not work but they are also conceding that a separate experience is also necessary. By rejecting the notion that a mobile OS alone can do the job, they are essentially building a "hybrid" tablet/laptop/desktop product which may be challenging to use but preserve their presence in the form factor.

    Whether Microsoft succeeds or not will depend on whether the new form factor is disruptive in more than user experience. In other words whether this is just a "new PC" or a "post-PC". The argument comes down to business model changes. For example the new model comes with different cycle time of product development (deep, integrated, yearly changes), different ecosystem (apps), different cost structures (high R&D in hardware), vast scale (device economics, components, ramps), and potentially new distribution (operators in the channel mix.)

    Summed up, the real challenge for Microsoft is whether they can keep their business model (selling OS licenses to hardware vendors) as PCs become more device-like. Not only is iOS setting the benchmark for performance but Android is potentially ready to take share if the market turns slightly more modular. Microsoft's differentiation looks to be primarily its legacy of PC software.

    It may also seem that much remains to be discovered in this market but I think the main bets have already been made. The PC market as we know it is in the end game.

    ---

    Notes:

    1. I used Gartner data for overall world-wide PC market and merged it with Mac and iPad data from Apple. Android data is estimated.
  2. Measuring Mobile Platform Churn in the US Market

    Research · 48 comments

    The following chart shows the net gains in users for the major mobile platforms in the US. The data is derived from comScore's MobiLens report.

    The raw numbers for the last period (ending May) are:

    1. Android gained 2.1 million users
    2. iPhone gained 1.0 million users
    3. WebOS/PalmOS lost 96k users
    4. Blackberry lost 202k users
    5. "Other" lost about 95k users

    The "churn" or percent of smartphone users who switched platforms is 1.22%/month  of the overall users (assuming users to left one platform moved to another rather than to non-smart devices.)

    The share of the platforms and the overall composition of users is shown in the following two charts:

    As usual, caution should be exercised when looking at share (top chart) outside the context of overall growth. The second chart may be more illustrative of what is happening. The light blue area on top is the smartphone non-consuming population.

    Android has been a tremendous accelerant of smartphone adoption while iOS has grown as well but share has not grown significantly. iPhone growth has kept up with market growth. This cannot be said for the other platforms which have been "squeezed" between these two entrants.

    So although the main competition is with non-consuming users and smartphones are winning in general, the loss of users by some of the incumbents is unsettling.

    Microsoft lost just over 2 million users in the US last year while RIM lost a net of 1.5 million. Palm lost about half a million. Contrast this with 8.5 million iPhone additions and 23 million new Android users.

    In particular, Windows Mobile/Phone is down to 5.8 million users (down from 18m in December 2009). With a loss of half a million per month, and share down to 4.5%, a lot is riding on the new platform.

    I've argued that the post-PC era will be a multi-platform era. Although it may seem that the situation in the US is rapidly moving toward a duopoly, it may not end up that way. Note how much non-consumption still exists.

    Note the time frame of the charts is only 18 months. The rapidity with which platforms gain ground could allow for continuing platform churn.

  3. The Post-PC era will be a multi-platform era

    Research · 104 comments

    Windows Phone Marketplace has reached 25,000 apps. That's an impressive figure given that so few devices have actually been sold. Compared with Android which is activating half a million devices per day, Windows Phone seems like a rounding error. According to Gartner, 3.6 million smartphones using a Microsoft mobile OS were sold in the first quarter of 2011, of which 1.6 million were Windows Phone 7. That implies a daily activation rate of 17,500 per day or one WP device for every 28 Android devices.

    And yet the number of apps on Windows Phone is more than 10% of the number of Android apps and Android Apps are about half of iPhone apps. As far as Windows Phone is concerned, apps are being added faster than users. Why is this?

    If we take the point of view that mobile platforms behave like the computing platforms of years gone by (i.e. Windows vs. Mac) then this is inexplicable. Developers should not be bothering with a distant third. This would be like betting on the Amiga in the era of Windows.

    But we're not in the PC era any more. That era had very high software development costs. It had very difficult software distribution channels (retail box sales typically) and very few categories of software with high price points. It was also dominated by institutional buyers which did not give quarter to small vendors. It was also a time when there were orders of magnitude fewer users and even fewer buyers.

    The post-PC era is characterized by an explosion of ideas and application of new talent to software. It's an era of immediate gratification and painless, one click distribution. App production is a cottage industry not something entrusted to only a few experts or those who can raise venture capital. It allows the small to distribute widely and get a shot at stardom. It has been (thankfully) avoided by enterprise buyers. The result is an explosion of apps: well over half a million new apps have been built in three years on three platforms that did not exist three years ago.

    So the very reasons which are driving developers to spread their bets across all and any new platforms should indicate the potential for new platforms and the sustainability of small platforms. The thesis that one dominant platform wins the mobile "war" is naive. The post-PC era will be a multi-platform era. Developers already understand this. Platform vendors know this. It's time to unlearn the lessons of the PC era.

  4. The Android (in)adequacy: How to tell if a platform is good enough

    Research · 97 comments

    About 10 years ago I met an advertising executive in New York who explained the difficulty of advertising a new brand of deodorant to consumers. “Most people never change their deodorant,” I remember him saying. “They pick one brand when they are young, and stick with it for a long, long time. If it works, why switch?”

    The same theory can be applied to customers who are making the switch to smartphones today. Once they have picked a type of phone, whether it’s Apple iOS, Google Android or something else, it’s difficult, and often expensive, to switch. Consumers become comfortable with the interface and design of the phone and the apps they have purchased on that platform. If it works, why switch?

    Many Smartphone Customers Are Still Up for Grabs - NYTimes.com

    This quote says a lot. The notion that customers remain captive to a platform is well understood. After all, it seems impossible to get people to switch out of Windows (or Mac or iPod). Platform vendors are aware of this as the land grab for users seems to be running at full pitch.

    However, there is a critical condition described in the quote above: "If it works, why switch?"  The condition which keeps users loyal is that the product they chose is good enough--i.e. "it works." That's a symptom of over-service and commoditization. If a product, like deodorant, is good enough you won't be tempted to move to another brand even if it's marginally better since the new brand has switching costs in the form of uncertainties ("Will it be as good? What if I don't like the smell? etc.) People are inherently conservative and you can't compete with comfort and familiarity by launching a marginally better product.

    So with that in mind, why is it that millions are switching mobile platforms?In this blog I've cataloged the massive shifts occurring away from mobile platforms that have been around for years with deeply entrenched user bases. Microsoft's Windows Mobile, Nokia's Symbian, Palm's PalmOS and RIM's Blackberry have collectively lost tens of millions of users. A net of half a million Blackberries are being abandoned in the US every month.

    So we would need to say that the condition of "it works" or being good enough was not met with those platforms. The attraction of something better is clearly greater than the switching cost.

    So this highlights a good test for how to tell if smartphones are good enough: If users are fiercely loyal with a given platform then it's probably good enough but if they are willing to switch (i.e. disloyal) then it's probably not good enough. It seems like a trivial observation but it's a very important clue to the bigger question of whether we can "call the end" of the market. Just like it would have been premature to call the end in 2006 when Symbian and RIM seemed unbeatable, it will seem premature to call the end now in the event that a significant innovation is yet to appear.

    The correct calling of the end has profound investment implications. Do you (like Microsoft) invest billions in a new platform if you know that there is no more room for entrants? Should Samsung bother with Bada or HP with WebOS if the game is already over? Even more, should Apple even bother to improve iOS if they have no shot at switching a billion likely Android adopters. Why not just nurture the current installed base and work on building walls and moats around them?

    So with this hypothesis in mind, it makes sense to analyze whether Android or iOS, the current presumed champions, are "good enough" on the basis of how often users switch out of them. My bet is that neither is good enough and that there will be increasing churn between platforms. I imagine that Android is less sticky (and hence less than good enough) based on app consumption but there is little evidence of churn because most phones in use have been bought less than one device generation ago. More importantly, there have been few opportunities yet for switching as many Android buyers don't even have the choice of other platforms either due to where they live or how much income they have available.

    To really tell where we stand, we would need to collect stats on switchers to know just how satisfactory the platforms may be. Remember that a choice of a new deodorant on the same shelf at nearly the same price is the test for loyalty. For an adequacy test we need to see better distribution and more choices for consumers. It's still very early even in the US for any conclusions to be drawn about the adequacy of Android.

  5. Nokia a trop écouté les réseaux télécoms

    Research · 70 comments

    My thanks to Robert van Apeldoorn, journalist for Trends Tendances Magazine, for asking good questions. My responses are reproduced below. The article (in French) is titled "Nokia a trop écouté les réseaux télécoms" and can be found in the June 23rd edition of the magazine along with more details in the article "Comment Nokia peut-il renaître?".

    -About your post “Does the phone market forgive failure”, that puts forward the idea that all mobile device vendors experiencing losses never really recover… It seems that this possible “rule” is more severe than in the computer industry. If Digital Equipement, Compaq, WordPerfect did fail, IBM and, yes, Apple, did survive failure and rebound strongly. Do you think that there is a difference between the industries? What makes the failures more lethal in the mobile device market ?

    The observation is unique to the mobile phone market and even there it's only an observation not a rule. It could be that Nokia will be the first mobile phone company that will recover from severe crisis, but history shows it to be very unlikely. I try to shed some light on the reasons why it's unlikely and what makes the mobile phone market so unforgiving. I think much of the problem rests with the fact that mobile phones are sold indirectly, through intermediaries who are amplifying both success and failure. A company like Apple was able to recover in the computer industry because it launched new products like iPod which could be sold directly to consumers. It had to convince the consumer and only the consumer. Having to convince a distributor, retailer, value added reseller, operator and consumer would be much more difficult. These intermediaries are "institutional" buyers who are risk averse and have low tolerance for untested ideas. Institutional buyers need to think about dealing with other people's money not just their own so they are doing the right thing from their point of view.

    Nokia needs to persuade first operators, then distributors and then consumers that its new products are great (even though maybe the old ones were not so great.) That's tough. Apple works in the other direction. It creates consumer demand then "sells" that demand to the intermediaries as needed.

    These intermediaries (which Steve Jobs famously called "orifices" to the market) amplify the success and failure of a company. For a long time after a product may lose favor with consumers, it will still be sold out of momentum of the channel. But it works the other way as well. If you're out of the channel, getting in is much harder even if the product may have favor with consumers. This is Microsoft's problem with Windows Phone. Surveys show that it's well liked by users, but because Microsoft relies on a long chain of intermediaries, it's still very hard to get started. Microsoft (and Nokia) rely on momentum to carry them once they get some traction and they plan to spend a lot of money ($ billions) to ensure they get some traction.

    -You are absolutely not optimistic at all about the Microsoft partnership (see “in memoriam” post). What could be the best solution? To enhance Symbian platform? Go for Android?  To create a new market with a new kind of device (cf book “How new ideas can win fast”)? Or to go back in the tire business ;-) ?

    I only observe and record data and then try to have a theory of why it happens that way. The empirical data shows that Microsoft has been very unsuccessful with mobile. Their partners seem to all have failed and the list is long. So the question is why. Is it just bad luck? Is there something wrong with management? Is it that perhaps there is a failure in strategy or business architecture?  All these are possible hypotheses but I believe the problem is that Microsoft has chosen not to integrate products and to rely on intermediaries at a time when that strategy leads to uncompetitive products. One can understand why they went with this strategy: They believe the scale of the market is so large that they cannot address it like they did with Xbox (building their own complete solution). However, that also means that they are likely to be uncompetitive during the time when integrated products/ecosystems are still not good enough and can iterate more quickly to capture the market. This was true for the iPod where Microsoft tried to license technology to device makers. It was true during the time of Windows Mobile when Microsoft's OS could not compete with either Blackberry or Symbian and it may still be true today with iPad which redefined what a computer could be.

    -What and when, precisely, Nokia did fail to understand how to be remain the market leader and innovator?

    I think the answer goes beyond the failures in execution or software development. Being late or sloppy with Symbian evolution is a symptom not a cause of the failure. What Nokia failed to understand is that software and data-oriented products would be built and sold and valued differently than voice-oriented products. Nokia listened very carefully to its best customers, the operators. Operators saw data as a sustaining improvement to their core business and steered Nokia into building "voice-plus" products. Every technology that came out of the laboratories was used to enhance the phone *as a terminal* in a network. Nokia never framed the product as a computer using the network as an accessory the way modern smartphones are valued (or if they did as with Maemo, it was a half-hearted effort). Users today are glued to apps and local media storage and see network access as a necessary inconvenience. The network is only valued in terms of being available.

    The re-framing of the device from being a terminal to being the center of user's focus is the "disruption" which is sweeping aside all the incumbents in the phone space. They all did what was expected of the best managers: they listened very closely to their best customers. That also leads to blindness when the industry itself is being ripped apart by disruptive forces.

    -In many aspects, Nokia developed many innovations (email on the phone, music store, smartphone with applications, tv on the phone,..). I remember visiting a Nokia exhibition four or five years ago, in Nice, with a broad and incredible new services range that I almost never see on the Belgian market. Many of the innovations were related (dependant) to a deal with telcos, as network device vendor. Blackberry (RIM) or Apple were more successful. Is it because they had nothing to sell as network device vendors ?

    This is answered by the previous answer as well. All of Nokia's services were designed to help operators improve their business. Operators were the best customers and they ensured Nokia would sell large volumes. But consumers did not see it that way. When a competitor came with an alternative, consumers defected en masse. By then it was too late to change the strategy. It takes years. Nokia still perseveres with this operator-first strategy. Elop continues to say they will do what operators need first. The first thing he did when on the job was visit every major operator. The decision on Windows Phone was based on whether operators saw it as a viable third alternative to the iOS/Android duopoly. Strategy is a matter of priorities not capabilities.

    -How is the Nokia strategic problem perceived in Finland ?

    The problem is very deeply felt in Finnish society. Nokia was a source of pride for the country and also a large employer both directly and indirectly. I think the impact is felt more psychologically than financially. There was a sense of betrayal when Symbian was publicly "terminated". Many people criticize present and past management, but I think that anger is misplaced. The failure of a company rarely comes from the failure of character or intelligence. It's usually a failure of being too rational, too reliant on best practices. What Finns need is a dose of independence in thought and a re-assertion of their willingness to take risks.

    The Finnish character is one of independence and perseverance in face of adversity. If Nokia loses its independence then it will need to deal with a lot more adversity. I believe however that innovation will continue. Case in point: Rovio, the maker of Angry Birds is a Finnish company.

  6. Capital.bg | Nobody wants to buy RIM

    Research · 24 comments

    Технологии и наука | Хорацио Дедиу: Никой не иска да купи Research In Motion RIM - Капитал.

    My thanks again to Andrian Georgiev for interview questions [Bulgarian] related to RIM. My answers to his questions (in English) are below:

    Q: What should RIM do to reinvent itself? Should it stray from its business-oriented image?

    RIM had begun to move away from a business image already in 2005 or so when it started its "Pearl" brand and a consumer-oriented strategy. The company probably foresaw that business customers would not be enough to maintain the growth they had become accustomed to. The strategy has led to a growing popularity in Latin America and other regions like the Middle East where the product is used as a low-cost alternative to SMS for avid texters. Even in the US, many teenagers use Blackberries instead of iPhones because they can use it for the BBM service (at a lower cost). I believe that it is not coincidence that iMessage was launched.

    The company's salvation is not in branching into new markets but in establishing a credible platform. When Nokia announced that they would be the "third option" after the iPhone and Android ecosystems, they did not even mention the Blackberry. The fact that Blackberry is not seen as an ecosystem is the root of the problem.

    Q: How should RIM accelerate the introduction of QNX?

    QNX is a solid operating system and I believe RIM should have begun developing with it much earlier. By waiting long after the iPhone launched (and even after Android) to upgrade its OS, RIM missed a great opportunity. The foothold market the company had was wasted by not leveraging it into building a mobile computing ecosystem.

    There is little that can be done to move any more rapidly now. Product development cannot be done any faster. What the company could do is to very carefully define why QNX based products are better than the competition and not rely on specifications. In other words, what jobs does their platform solve for users that current solutions don't address? I note that this is the problem with the Playbook. It's not differentiated on what it does to improve the life of the user.

    Q: Should RIM move on with just one CEO?

    The problem is not the number of managers but their view of the world. What would benefit the company is a better marketing manager where marketing is defined as understanding of user needs. Engineering expertise is not enough.

    Q: What would you advice RIM to do in terms of R&D?

    RIM is an engineering led company. Many successful companies rightly develop their engineering skills first because that is what allows them to create new products more quickly. This is true of Nokia and also of Apple and Microsoft in their early years. What is difficult is to allow marketing people to define products after that early phase. This is partly due to the fact that there is less respect for "Marketing" among engineers. Many see it as a "soft" discipline where there is little rigor. But this is not an accurate or fair picture. Great marketing determines what products should be built not just how they should be sold. Engineering can discover new products based on new technology becoming available, but Marketing can discover new products based on unmet user needs. Both need each other.

    My advice would be to allow a way for R&D to absorb input from marketing.

    Q: Do you think that RIM could be bought by a bigger company in the short-term?

    Mature companies are usually bought for their assets and not so much for their vision or priorities. The opposite is true for young companies who are selling themselves to the public via IPOs. For young companies the vision or priorities of business models is seen as more important. When companies are only valued for their assets, they are usually very under-valued. When companies are only valued for their vision, they are usually over-valued.

    RIM's challenge is that nobody believes they have any vision and their assets are weak (no good ecosystem as I pointed out above.) So the price anybody would pay for RIM today would probably be far lower than what management thinks it's worth. And since they are still profitable they won't sell the company at a deep discount.

    So my guess is that we won't see any acquisition soon.

  7. Android developers are more prolific but less persistent than iOS developers

    Research · 29 comments

    According to 148apps.biz, the App Store has seen over half a million apps since inception. The number of available apps, according to Apple, is now 425k. (148apps claims 402k apps available in the US store.) The history of the App store catalog is shown in the following chart (showing both US and World-wide measures).

    In an interesting new post by Appsfire, APPtrition - or why app store size does not matter that much... Ouriel Ohayon makes a good point: available is very different than accepted. When comparing catalogs it's important to distinguish between these measures. Apps are published and then unpublished for various reasons. He calls this app attrition and details the reasons it might happen.

    What makes this interesting is the contrast between attrition rates on Android's Market and those on Apple's App Store. About 80k (or 16%) of Apple's catalog has been removed while nearly a third of Android apps have disappeared from the catalog. (By another measure, the submission total is tracked here and shows nearly 375k apps while Ouriel points out that there are 206k available. An apparent attrition rate of 45%.)

    We can compare how the two marketplaces are adding apps here:

    (The iTunes data is US only)

    This data would indicate that the iTunes App Store has plateaued at about 20k apps per month while Android is still growing and adding at about 30k per month. The challenge for an observer is to reconcile the growth in Android submissions with the apparently far higher attrition rate.

    In other words, Android developers and producers seem to be more prolific but less persistent.  With few if any constraints on submission it's understandable that there will be more apps thrown into the catalog. But why would they be so rapidly removed remains a mystery. Maybe economics, maybe policing, maybe something else altogether explains this.

  8. Peak RIM

    Research · 37 comments

    In their monthly survey update on US phone usage, comScore reported that by the end of April 74.6 million people in the U.S. owned smartphones. In the same period a year ago only 48.1 million did. The percent of smartphone users out of total phone users has reached 32%.

    The following data points can also be deduced:

    • 2.1 million or 474k people/week became smartphone users during April.
    • 62% of smartphones in use in the US are either Android or iOS. The sum a year ago was 37%.
    • There are about 20 million iPhone users and 27 million Android users in the US today. A year ago there were 12 and 6 million respectively.
    • RIM's US user base peaked at 22 million in Sept 2010. It is now 19 million and dropping.
    • Usage of Microsoft mobile operating systems in the US is in steady decline dropping from 7 to 5 million users in one year.
    • During April 475,000 people abandoned their Blackberries.
    • Android and iOS gained 3 million users in April. One million switched from other smartphones and 2 million switched from non-smartphones.

    The following chart shows the evolution of installed base share of platforms among users of smartphones in the US.

    The impressive share gains for Android are apparently at the expense of RIM and Microsoft. Over the period shown, Android gained 25 million users while RIM gained only about 2.8 million.

    Although perhaps comforting to see some growth overall, the situation for RIM is more grim than that. During the first half of the period (December 2009 to August 2010) RIM had gained 4.6 million users. During the second half (Sept 2010 to April 2011) RIM lost 1.8 million users.

    The net user gains and losses for the various platforms is shown in the following chart:

    Note how RIM (green bars) went from being a consistent net usage gainer to a consistent net usage loser during this 16 month period. In addition, note how Microsoft's platforms (yellow bars) have had a very poor showing with very small gains during four months and moderate losses during the others. The losses in usage even increased after the release of Windows Phone late last year suggesting no traction whatsoever for Windows Phone.

    The other point to be made is that if we assume smartphone users remain smartphone users, then those platform losses are gains by other platforms. In other words, the areas less than zero in the chart above represent smartphone "churn" or switching between platforms (As a percent of all smartphone users that number represents 1.35%.) That number is far lower than the total smartphone gains, so it's safe to say that most of the iOS and Android gains were at the expense of feature phones rather than other smartphones. And since iOS share is consistent (and supplies are constrained), few if any Android gains are at the expense of iOS.

    There are many interesting patterns to observe in the data, but I think the most evocative is the erosion of Blackberry usage. If the Blackberry peaked, and a follower platform not yet in sight, the question is how long will RIM survive?

  9. Microsoft has received five times more income from Android than from Windows Phone

    Research · 197 comments

    Microsoft gets $5 for every HTC phone running Android, according to Citi analyst Walter Pritchard, who released a big report on Microsoft this morning.

    Microsoft is getting that money thanks to a patent settlement with HTC over intellectual property infringement.

    Microsoft is suing other Android phone makers, and it's looking for $7.50 to $12.50 per device, says Pritchard.

    HTC Pays Microsoft $5 Per Android Phone, Says Citi.

    A rough estimate of the number of HTC Android devices shipped is 30 million. If HTC paid $5 per unit to Microsoft, that adds up to $150 million Android revenues for Microsoft.

    Microsoft has admitted selling 2 million Windows Phone licenses (though not devices.) Estimating that the license fee is $15/WP phone, that makes Windows Phone revenues to date $30 million.

    So Microsoft has received five times more income from Android than from Windows Phone.

    Looking forward and assuming that Microsoft can receive this type of settlement from about half of the Android license takers, then the prospects of a windfall from Android dwarf the expected income from Windows Phone.

    Google's Android seems the best thing that could have happened to Microsoft's mobile efforts, ever.

    I could also calculate how the Android license income could be further funneled to Nokia (via their current agreement with Microsoft) for promotion of its phones. Thus, an Android licensee could reduce his margins in order to promote a competitor's products.

  10. "Other" vendors sell 10% of Smartphones but 30% of voice-oriented phones

    Research · 12 comments

    In the last post, I highlighted the difference between smartphones and non-smart device sales last quarter. The trajectory of share growth for smart devices would appear to have accelerated due to Android.

    The following charts show the evolution of smartphone vendors and platforms over the last few years.

    Like in the past, I used color clustering to show the separation between "integrated" (in green) and "modular" (in brown) platforms and their users.

    Unlike the non-smart market where "other" make up 30% of the market, smartphones are still a big brand business. "Other" make up only 11% of units. and that number has been trending down. It would seem that the age of unbranded Android phones is still not upon us.

    Comparing three years "before and after" here is Q1 2008 vs. Q1 2011 by vendors share:

     

    Apple added 15% of share, Samsung 13%, Motorola 4%, RIM and HTC 2%. Nokia lost nearly 20% of share.

    From a platform point of view, the unit chart looks like this:

    Note that Android's growth came at a time when Symbian had a terrible quarter. The evidence is visible in the share chart:

    Android's gain seems to be at the expense of Other, Windows Mobile and Symbian. In the pie chart snapshot over a three year period the transfer seems clear.

    Android took 35% of share, iOS 14% and RIM 1%. Windows Mobile/Phone has collapsed to 2%.

    But again I would caution about drawing "sustainability" conclusions from looking at this market with a share perspective. As it's growing at a huge rate (73% year/year) it's bound to be become so large that single digit share numbers still amount to vast ecosystems while huge shares of fragmented products don't amount to much of value. To emphasize the point, I would remind that in 2008 Symbian was not just Nokia but a lot of "Other" was made up of Symbian in Japan. The combined fragmented footprint of Symbian was well over 60% of the market. It did not do much good for the platform.

  11. Is Android responsible for Apple's deep market discount?

    Research · 96 comments

    At last night's closing price Apple was trading at a P/E of 16.3. Excluding cash that ratio was at 13. On a conservative forward basis (my estimates) the stock is priced at less than 10 times next twelve months' earnings.

    These figures show a remarkable pessimism that has persisted around Apple for years. It was slightly, but not much, worse during the great recession. It persisted whether the company was growing at 30% of, as now, 95%.

    There are many hypotheses about why Apple's earnings and growth are considered worthless. They come and go with the whims of the age: recession, elitist, luxury branding, health issues, macro "headwinds", earthquakes, phantom competition.

    Lately it's become fashionable to blame Android. That's a curious thing to me, because Android has been discussed at length here and it has been shown to be, for the time being, benign. Apple has not "lost sales" to Android as it has been selling all it can produce. In some ways it's been a boon as a co-belligerent against non-consumption.

    The argument that the discount is in effect because of the future of Android has one first strike against it: the fact that the market does not often discount the distant future. Capital markets are notoriously incompetent in spotting disruptions and often reward those who are failing right up until the bitter end.

    But let's take the "Android hypothesis" (i.e. that Android is causal to Apple's share price) seriously and analyze it. How could the impact be measured?

    Since Apple is trading at a fraction of (a) historic multiple (b) multiple based on growth (c) comparable companies' multiples then we can assume that a "normal" valuation would be twice the current (i.e. a multiple of about 32). That would still be a discount to growth and history but it would begin to match some of the comparables. A doubling of the P/E would be a good start.

    But a multiple of 32 would imply a doubling of market cap, which means that the Android hypothesis is causing the evaporation of about $300 billion in future profits. So it stands to reason that it's responsible for a $300 billion destruction of Apple shareholder value.

    That's an interesting number since Google itself is only worth about $169 billion.

    The measurement then presents a remedy: If Apple bought Google (it already has a third of its value in cash) and it shut down Android, it could create $300 billion in value. If could even throw away all of Google and still walk out with a profit.

    Seems like a great bargain.