The Android Worm Keeps Eating Apple's Core

Android, it seems, is the worm that continues to eat away at Apple's core.

According to Gartner, Android-based handsets outsold iOS-based handsets 4-to-1 on a worldwide basis in Q1:2013, up from a ratio of about 2.5-to-1 in Q1:2012.  As such, Android accounted for 74% of global smartphone sales last quarter, up from 57% in Q1:2012, while iOS accounted for just 18%, down from ~23% last year.

Apple bulls / fans (and even some critics) will likely race to highlight that: Apple didn't have a major new release last quarter; tablet sales should be weighed in this discussion; the installed base of iOS devices should be taken into account; developers still generate more revenue through iOS than Android; and, that Apple continues to generate the majority of the industry's profit, among other defenses.  

Blah.  Blah.  Blah.

All very true; unfortunately, though, also largely irrelevant going forward, given the alarming rate at which consumers worldwide are speaking with their wallets and selecting Android handsets over iOS handsets.  With just a few more quarters like this, coupled with the cumulative effect of similar such sales data over the past 2-3 years and the likely coming wave of Android-based tablets, it is a given (to me, anyway) that Android will be soon be effectively ubiquitous around the globe.

In the world of technology platforms, ubiquity matters (a lot) when developers, manufacturers, etc., are considering future products / solutions.

And, so, I will reiterate the view I've held for some time now: the mobile battle that Apple started, first with the launch of iPod in 2001 and then moved into hyperdrive with the introduction of iPhone and iPad in 2007 and 2010, respectively, is over (or, will be over shortly), and Google / Android is the victor.

Make no mistake, Apple will clearly continue to play a prominent role in the industry and maintain leadership in some respects.  It will also continue to boast a large installed base and a substantial number of loyalists and devotees.  But, the company's days of dominance, let alone being an effective monopolist, are behind it.

To this point, I urge pundits, analysts, and investors to get their heads wrapped around one simple notion: Apple's product cycle and performance between 2001-2012 was a once-in-a-generation event.  In my view, no company in history has had (or, likely, will soon have) so many successive "grand slams" as did Apple with iPod, iTunes, Mac, iOS, iPhone and, finally, iPad.  The company's hardware, software, and "it-just-works" approach to integration absolutely annihilated existing competition and ignited massive new markets in which Apple had a multiyear near-monopoly and from which Apple was able to generate once-in-a-generation revenue growth and profitability.

As unfair as it may be, the inevitable comparisons to those days are going to be bleak for Apple for some time.  The hard reality is that the company's future — even under the best of circumstances — will likely reflect diminished influence and declining revenue (perhaps substantially so), with the prospect of shrinking margins to boot.

To make matters worse for Apple, I think the company is poorly positioned for the battleground of tomorrow: Web (or, cloud) services that function like utilities — seamlessly, across all devices, across all operating systems, all the time — at low or no incremental cost.

As discussed in prior post on One Blind Squirrel, “Welcome to Google’s Playground, Apple,”  the increasing importance of Web services substantially diminishes the value of Apple’s closed-loop hardware/software core, while simultaneously highlighting the strengths of Google’s business.  To this end, Web services are Google's lifeblood, and the company prints money, either directly or indirectly, from use of many of these cloud-based services, even if those services are accessed via an Apple device (e.g., Maps or Gmail for iOS).  Apple, on the other hand, is almost at ground zero and, as a result, may be forced to acquire a string of services that have proven themselves in the hands of consumers at scale.

Fun days for Apple, I know.  But, hey, at least it's not Dell!