Wanna Beat Android, Apple? End iPhone Exclusivity.
Apple needs a Verizon iPhone as badly as Verizon subscribers (and their frustrated AT&T counterparts) want one. And if it doesn’t bring one to market soon, it risks being overrun by Google’s massing Android army. That’s the theory put forth by Bernstein Research analysts Toni Sacconaghi and Pierre Ferragu, who predict that Android’s installed base could exceed that of the iPhone in just five quarters–unless Apple ends exclusivity on the device in the United States and abroad.
And they’ve got the numbers to back it up. According to the two analysts, Android’s device shipment run rate has more than tripled in the past seven months, from 60,000 to 200,000 per day. That means there will be some 53 million Android devices shipped this year. “Even under the conservative assumption that Android’s run rate remains constant for the rest of the year, Android alone will contribute 25 percent points of y/y growth to the entire smartphone market,” Sacconaghi and Ferragu contend (click image to enlarge).
Meanwhile, Apple (AAPL) is shipping “iOS devices” (a grouping that includes the iPhone, iPod touch and iPad) at a run rate of 230,000.
That means the smartphone market is going to see a head-to-head battle for market share between Apple and Google (GOOG) sooner rather than later. Sacconaghi and Ferragu’s advice to Apple if it wants to win that battle: End carrier exclusivity in Germany and the U.S. and add new iPhone carriers in countries that currently have just one, like Japan and South Korea.
“[The iPhone’s] distribution vacuum, coupled with weak competitive offerings from other smartphone manufacturers, has made Android a strong alternative platform,” the analysts argue. “The key to arresting Android’s momentum then will be for Apple to broaden distribution. We believe that a CDMA iPhone is being developed by Apple and are modeling it to be distributed at Verizon (VZ) in mid 2011–various data points suggest it could actually be sooner, likely in early 2011. We believe Apple needs to strike distribution deals with these carriers, even if it has to sacrifice some pricing power since doing so would (1) still be accretive to company gross margins; and (2) take away the strong foothold it currently provides to a potentially formidable competitor.”
Assuming Apple does that and this all plays out as Sacconaghi and Ferragu foresee, what’s going to happen to RIM (RIMM) and Nokia (NOK)? Nothing good. “While Android and Apple are growing above market rates, other platforms are languishing in terms of developer support, and our recent proprietary research points to limited excitement among consumers,” the two write. “Given the continued momentum for Android and Apple, a scenario in which Nokia’s and RIM’s platforms get increasingly marginalized becomes a possibility.”
[Image credit: Bernstein Research]