Empirical Evidence of Android Eating Apple, Literally!

Publish date: 2024-07-10
2010-08-18T18:37:22Z

Continuing my analysis of the high growth smartphone market and putting the finishing touches on the RIMM, GOOG and AAPL models, I had my team perform extensive drill downs of market share and market penetration of the various players involved. As stated in my in my earlier posts, many (if not a majority of) retail investors and surprisingly enough – quite a few professional investors fail to take a purely empirical look at Apple, and instead inject a significant and material amount of passion and subjectivity into their perspectives. It is my opinion that this could potentially set some Apple investors up for an unpleasant surprise.

Below, please find the results of our market share and market penetration drill down for Apple. We have performed identical analysis for Nokia, Research in Motion and HTC. This dynamic model (complete with data populated from Gartner, Canalyis, Nielson and other sources) provides a very rich, in depth view off the trends in handset sales growth, market share growth, and smart phone market penetration (an aspect I never see discussed on the web) for all of the players mentioned above. It is available for download as an Excel model to BoomBustBlog professional and institutional subscribers, here: File Icon Smartphone Market Model – Blog Download Version. Those who wish to subscribe or upgrade their subscription can do so here.

I often scan the comment sections of many blogs and websites to get a feel for the readers’ perspective. One premise I see espoused often is that Android is succeeding at the expense of Nokia, RIM and MSFT, and not that of Apple. Both I, and the facts, disagree with this notion. As it stands now, Android is literally eating Apple’s smart phone market share, and as of last quarter – which does include a partial month of the big sellers from both the Apple (iPhone 4) and Android (Evo, Samsung Galaxy, Droid X) camps – Apple’s phone sales are actually growing slower than the market is expanding. In comparison to the near parabolic growth of the last few years, it is evident that that growth is going somewhere. Where do you think it is going? The potential for lag in phone sales right before a major hardware upgrade should be taken into consideration, for there was probably a lull in Apple phone sales in anticipation of the iPhone 4 release, but the same can be said for the Android handsets as well (all around the month of June). 

Below is a graph showing the longer term trend of Apple market share in the smart phone space. It illustrates the explosive growth Apple has had through its iPhone series, and it also shows some seasonality (ex. lull before hardware upgrade season, etc.). As you can see, the growth trend, viewed either directly or as a moving average, shows marked downward momentum. Of course, it is highly unreasonable to expect a company to continue to grow at the pace that Apple has, but that is exactly what many Apple valuation models that I have come across have – literally hard-coded in. This is folly, in my opinion – particularly considering the effect of the Android competition that is already showing up. If you look closely, Apple’s smart phone market share is already showing NEGATIVE growth!


Since I know that the chart may be a little difficult to read at the tail end encompassing several years of data, I have taken the liberty to drill down to the past year to get a closer look. Remember, Android sales didn’t really get started until 8 months ago, and the big surge didn’t occur until the Evo/Droid X/Samsung Galaxy series were launched in June, July and August – most of which is not captured here. The same is to be said for Apple and the iPhone 4.

Click to enlarge to printer size!

Despite increases in both the overall mobile market and more importantly, the smart phone contingent’s penetration of said market:

  • Apple’s smart phone shipments are showing a negative growth trend
  • and more importantly, Apple’s smart phone market share is experiencing a very sharp downward trend as shown by both direct observation and that of the 2 period moving average.

    • By trailing the actual growth of the smart phone market, it is far from a foregone conclusion that Apple, nor any other company for that matter, can necessarily tread water by relying on the expansion of the smart phone market. It is quite possible for the winner in this space to capture enough market share to put a material hurting (in terms of valuation multiples) on the loser, primarily if that winner becomes a de facto standard (ex. Android OS, MSFT OS, iOS or even Nokia’s Symbian OS) that can lock out the users of the competing devices for much of the smart phone functionality.

    I will be exploring this concept in illustrative detail with the release of the Research in Motion forensic analysis and valuation within roughly 48 hours.

    More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars!

  • There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
  • The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
  • An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
  • Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
  • This article should drive the point home: An iPhone 4 Recall Will Hurt Apple More By Opening Additional Opportunity for Android Devices Than Increased Expenses
  • A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone
  • After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
  • Android is gaining preference as the long-term choice of application developers
  • A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
  • Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
  • Apple on the Margin
  • RIM Smart Phone Market Share, RIP?
  • Motorola, the Company That INVENTED the Cellphone is Trying to Uninvent the iPad With Android
  • Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space
  • There Goes Those Fancy eBook Aspirations from Apple, Barnes and Noble, and Amazon: 100,000’s of FREE eBooks from the Public Library
  • How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue

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