Applesauce: All Things Apple
February 10, 2013

Applesauce: All Things Apple – February 10, 2013

Apple is number 2 all over the world. So what, no big whoop, wanna fight about it?

Why don’t you get your fisticuffs ready, we’re about to punch up a nice bowl of Applesauce.

There’s been a lot of talk lately about Apple being number 2 behind Android, and that’s just fine. After all, what’s wrong with being number 2, especially when being number 2 means you get to do exactly what you like? Plenty of other great things have come in second place in our great history, like the 2010 Texas Rangers, Peet’s Coffee, or even Abbey Road.

After all, though Let It Be was technically recorded first, (the lads had all but checked out by this point) Abbey Road will always be, in my humble opinion, seen with greater regard than The Beatles’ Last Album, a melancholy album if ever there were one.

You’ll never catch me besmirching a Beatles album, but the point remains…If ever one wishes to uphold the importance of Number Two, look no further than Abbey Road.

Apple is Number 2, and It’s Obvious Why

Anyone who ever expected Apple’s iPhone to become number one in the global market is a foolish person. This should have become exceedingly obvious once Android hit their stride, licensing out the mobile OS to anyone and everyone who needs something to power their cheap, plasticky devices. It’s a question of numbers, really, and this week, we got a double-dose of proof that Apple is and will probably always be behind Android when it comes to the global market.

And that’s just fine.

First, ABI released their study which claims Android is just really beating the tar out of Apple in terms of global market share.

ABI claims that of the 1.4 billion smartphones in the world, 798 million of them are taken by the Ugly Green Monster that is Android. According to some quick calculations, that’s just under 60 percent — a modest majority. Apple’s iPhone, on the other hand accounts for only 294 million, or 21 percent of the global market share.

Another study by Canalys released later in the week takes a specific look at the smartphone race from the perspective of last year’s 4th quarter.

According to Canalys’ research, there were 216.5 million smartphones “shipped” (because shipped is different than sold) in the entire world during the last quarter of 2012. As you might (and should) expect, something more than a modest majority of these were Android phones.

Of all the hundreds of million smartphones sold during Q4, 69 percent were Android based, helped along by partner Samsung.

As an aside, it would be interesting to know how Canalys defined the Note II and if these units were included in the smartphone numbers. Moving On…

According to Canalys’ research, Apple only earned 22 percent of the global market share, and while the iPhone 5 is said to have helped push them from last quarter’s 15 percent, principal analysts Pete Cunningham couldn’t help but describe the divide between Apple and Google as “colossal.”

“First-placed Samsung shipped 74 million more than Apple — the gaps are colossal. But there is still a big opportunity as smart phone penetration increases around the world,” said Cunningham.

Microsoft, BlackBerry and other new OS entrants, such as Mozilla, must make the OS switch as simple as possible and drive and localize their respective app and content ecosystems.”

There’s more than one common thread running along both of these studies. In fact, there are precisely two, and it is with these common threads that I intend to weave for you a lovely quilt of conjecture.

It’s Not Apple Who Should Watch Their Backs, It’s Android

The ABI study was mostly uninteresting, a recap of a game of which we already know the score. Android wins, Apple trails far behind, but still earns second place, the others are left with the remains.

Yet, ABI analyst Aapo Makkanen believes that it’s these “other” companies, namely BlackBerry (remember, they’re called that now) and Microsoft, which are primed and ready to take on these two leaders and possibly become a real threat to either Android or Apple.

“2013 should be seen as [a] relative success for both Microsoft and BlackBerry,” said Markkanen in the report.

For the end of the year, we expect there to be 45 million Windows Phone handsets in use, with BlackBerry 10 holding an installed base of close to 20 million. Microsoft will also have 5.5 million Windows-powered tablets to show for it.”

In other words, Markkanen expects this to be the year of BlackBerry and Microsoft, the year these two platforms begin to make their move, to become phones worth considering.

Let’s be honest, at this point, when a friend of yours mentions that they just bought a new phone, one of the first questions is always “Android or Apple?”

BlackBerry definitely has their strongholds in other parts of the world (definitely not the U.S.) but they and Windows Phone are often the unspoken third option. It seems normal to choose Android or iOS. If your buddy responds, “I went Windows Phone” it’s likely you’d be just a little surprised.

(And these statements aren’t any judgment on the merits of the platforms of course, it’s simply the way things are.)

But, with BB 10 fresh out of the gate and relatively new Windows Phones available, it’s likely these two could finally gain some ground.

Even Canalys’ analysts suggested that this could be the year for change amongst the top three leaders in the smartphone race.

This second report focuses more on hardware manufacturers than platform, but even here the numbers show that perhaps the time for change is on us. For instance, Sony, once the fifth largest phone manufacturer in the world, was recently dethroned by Lenovo, a company who grew 216 percent over the previous quarter and sold 9.5 million phones. Almost all of these phones, by the way, were sold in China, the country Apple sure would like to take over.

Other leaders Huawei and ZTE also grew in triple-digit percentages over the previous quarter, catching up to Samsung’s lead and nudging in on Apple’s thunder. Nicoel Peng, a China research Director for Canalys, seems to believe that Apple would do better in terms of global market share if they continue to increase their presence in China.

“China is a massive growth prospect, but Apple is not making the market share impact there that it is in other markets. The lack of a device on the China Mobile network is a big drawback, combined with high price points. Addressing these issues with the combination of a TD-SCDMA device and a cheaper model would open the flood-gates,” said Peng.

And once again, we have another analyst suggesting Apple make a cheap iPhone… but I’ll let that one go.

But Wait! There’s more!

A third study from late January by Kantar Worldpanel ComTech has also shown that, yes, Android is more popular than Apple. More importantly, this research shows that Windows Phone is already gaining ground in Europe and the UK.

Point is, both of these reports suggest that perhaps this will be the year that either Android or Apple are finally dethroned as number one and number two, respectively. BlackBerry and Microsoft continue to improve upon their offerings, while OEMs other than Apple and Samsung are starting to push back. They’ve got quite a bit of work ahead of them, of course, but according to these numbers, it looks as if it could happen.

ABI’s data also backs up another commonly found phenomenon…those who pick iPhone more often stay with iPhone, while users on other platforms aren’t always so loyal. Therefore, it seems only logical that, if the millions of users needed to boost BlackBerry and Microsoft back to the top are willing to try out something new, they’ll probably be leaving Android first. Once again, it seems as if Number Two isn’t looking like such a bad place to be. At least they’ve got a great view…

Apple: Destined to be Number Two

And what of Apple’s penchant to always come in second place?

Co-Founder Steve Wozniak recently gave another quote-inducing interview this week to German-language site Wirtschafts Woche.

The comment from Woz that made headlines: “Currently (Apple) are in my opinion in the smartphone business with the features somewhat behind. Others have caught up. Samsung is a great competitor. But precisely because they are currently making great products.”

[ Editor’s Note: The quotes from Woz have been translated from German using Google’s translation tool, which isn’t ‘perfect,’ although we think you can get the point Woz is trying to make. ]

This isn’t the first time Woz has compared Apple to their most hated competition, of course. He’s said before that he likes Android and even carries around such a device. The co-founder even recently said that the design of Microsoft’s Surface with Windows RT made him think Steve Jobs had been reincarnated and started working for Redmond. That one… had to hurt.

More than just admitting, once again, that Apple is behind, Woz also reiterates what is really important at Apple: Great products and profit.

Wozniak said that Steve Jobs had convinced him “that one with great products can get great profits. Which in turn provide financial flexibility to build better products.”

“At Apple, we always had the philosophy that not one of the market share, but profit. Apple was profitable from the start. Mike Markkula always preached that one must have a good profit margin, so you have to collect any money from outside to survive, while above average must leave by his company.”

Sure, Apple may be second in terms of global marketshare, and their stock may have free fallen by 50 points or more, but they also recorded their highest profits yet.

Just as Woz said, it’s these profits that allow Apple to build the great products they do. They won’t build anything if it’s not going to earn them the kind of money they want.

It’s why Lightning adapters and cables are pretty outrageously priced, and why they want to hold on to that technology for as long as they can.

It’s why the iPad mini debuted at $329 instead of $199 or even $259.

It’s even why Steve Jobs looked as if he could literally feel the millions of dollars slipping through his fingers when he announced users could order a bumper for iPhone 4 for free in the midst of “Antennagate.”

Apple wants to make the best products possible, but they can’t do it without those high-powered profits to push them along.

It’s these profits that, I believe, will keep them from creating a “cheap” iPhone. It would go against their very culture spirit to sell either a cheaply made device or a product with slim profit margins. Should they find a way to strike a harmonious balance between these two, to create and sell a phone with the beautiful design of Apple’s pedigree and the profit margins they love for less than $99, I’ll be surprised.

I’d also be surprised that no one else on the face of this earth hadn’t figured this out and done it yet.

This Is Not A Race

So, yes…Apple is second place, and that shouldn’t surprise anyone. So long as they’re making the profits they want by selling the best products on earth, they’re fine with being second place or even third place. This isn’t a race for Apple, it’s an opportunity to do what they want, to “make a dent in the universe,” as Steve Jobs once said.

Call me naive, but I believe Apple still has this desire, even if Jobs is no longer with us. They’ve got an uphill battle to fight this year to stay ahead of the competition, maintain profitability, and continue making the “best stuff” out there, but I also believe they’re up to the task.

Even if they are number two.

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