With tablets running the Google mobile OS beginning to proliferate now, those days of Apple’s easy dominace of the market are winding down. Shipments of Android devices in the quarter, for example, leapt to 2.1 million units from about 100,000. “Apple’s volumes will continue to go up, but market share will inevitably go down,” Strategy Analytics’ director Neil Mawston told Bloomberg . “Even at $500 retail, based on some of the research we’ve done, that’s probably two or three times more than what most mass market consumers are expecting to pay….If you were to ask me in two years time will Apple have less than 50 percent of the global tablet market, I think that’s a certainty.”

Perhaps. Depends on how the competition shakes out, I suppose. And just how high Apple raises the bar for its rivals with the iPad 2.

UPDATE: It also depends on the manner in which the competition reports sales numbers. To wit, it turns out that those 2 million Galaxy Tabs Samsung sold were actually sold into the channel and not necessarily to consumers, suggesting that this spike in Android growth may not be quite what it seems.

“We have narrowed [the issue] down to the way we assemble the engines,” Nokia Executive Vice President Niklas Savander explained, adding that the number of devices affected is small in comparison to the total number shipped. “However, for the one individual where it’s not working, it is, of course, a significant issue. As a precautionary measure we have taken immediate action across the product line.”

A tough break for Nokia and the N8, its long-awaited marquee smartphone and the first to run the Symbian 3 OS. Said Strategy Analytics Neil Mawston, “This doesn’t help the Nokia brand, that’s for sure. The problems have been mounting for the past few years and every little negative headline adds to that. It’s not a great start for their supposed iPhone or Android killer.”

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• Nokia N8 Ships
• Nokia’s N8: Table Stakes in the High Rollers Room

[Image credit: Flickr/Christchurch City Libraries]

The cause of the delay isn’t clear, though its result most certainly is. When LePad finally arrives at market, it will be competing with a group of rivals that extends well beyond Apple’s iPad–Samsung’s Galaxy Tab, Reasearch in Motion’s PlayBook and the like. As Strategy Analytics analyst Neil Mawston said in a research note earlier this month, “The tablet wars are up and running. Apple has quickly leveraged its famous brand, an extensive retail presence and user-friendly design to develop the tablet market into a multi-billion-dollar business. Android, Microsoft, MeeGo, WebOS, BlackBerry and other platforms are trailing in Apple’s wake, and they already have much ground to make up.”

’Course Mawston also said, “Apple’s huge lead will be shortlived.” We’ll see, I guess.

Apple (AAPL) now has an almost 14 percent share of the smartphone market and an almost three percent share of the overall handset market. The company shipped 8.4 million iPhones during the quarter–a nice increase from the 5.2 million it shipped a year earlier, but down from the 8.8 million of the prior quarter. And to Strategy Analytics, that suggests the iPhone juggernaut may be slowing, if only a bit. “The honeymoon period for Apple in the mobile world is clearly coming to an end,” Strategy Analytics analyst Neil Mawston wrote. “Apple was criticized for its intensive production methods in China, while the iPhone has been heavily criticized for its poorly designed touchable antenna, and may have lost some heartshare in recent weeks because of its perceived mishandling of the antenna problem.”

Because of that, said Mawston, the iPhone is now “more vulnerable to competitive attacks from rivals like Nokia, Android, BlackBerry and Motorola.” More vulnerable, sure. But only to the well-armed attacker, and I’m not sure you could say that about everyone on Mawston’s list. Not yet, anyway.

And seriously, Nokia?

“We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”

Palm CEO Ed Colligan, December 2006

“Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”

– Microsoft CEO Steve Ballmer, January 2007

At 37.9 percent, Nokia’s share of the global handset market is the largest in the industry. Odd then to learn that it is not the most profitable. And odder still to learn that that honor belongs to Apple, which has been in the handset market for just two years.

According to Strategy Analytics, Apple’s third-quarter iPhone operating profit was $1.6 billion, while Nokia’s was $1.1 billion. Driving Apple’s profits: Strong sales, high wholesale prices and tight cost controls.

“We have identified at least 4 key factors underlying Apple’s success,” Strategy Analytics analyst Alexander Spektor explains. “First, Apple created a simple sub-brand–the iPhone–which was memorable and easy to remember. Second, the firm developed an attractive family of models with standout usability that enabled Apple to charge way-above-average prices to operators and consumers. Third, Apple distributed and co-marketed its handsets through top-tier carriers in numerous high-value countries. And fourth, the vendor has kept a solid grip on production costs by working with Foxconn, the world’s largest contract handset manufacturer.”

Quite an achievement for Apple (AAPL) and a major humiliation for Nokia (NOK), which has seen its dominance eroded by the likes of Apple and Research in Motion (RIMM), and not just in North America, but in Europe. Indeed, in its latest quarter Nokia’s smart-phone market share dropped by six points.

As Strategy Analytics analyst Neil Mawston noted at the time, “[Nokia has] no iPhone killer to drive a major revival in its smartphone volumes. [It] is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia’s battles can only get tougher in 2010.”

Analysts mulling over Nokia’s IP infringment suit against Apple seem to be of two minds about how the action will play out. There are those, like Neil Mawston at Strategy Analytics and Ben Wood at CCS Insight, who warn that Apple (AAPL) is on dangerous ground here at best. It’s almost impossible to build a cellphone without using Nokia’s (NOK) intellectual property, they claim. And if that’s the case with the iPhone, then Apple could end up paying Nokia hundreds of millions of dollars in licensing fees if Cupertino ends up on the losing side of this suit. (Click on text image below to see list of patents at issue.)

Some analysts, like Maynard Um of UBS, see Nokia’s action as a preemptory move against a possible infringement suit from Apple aimed at Nokia’s own multitouch handsets.

“We believe Nokia’s suit could be a pre-emptive move ahead of its new handsets launching soon that may have multi-touch capabilities for which Apple has IP,” Um wrote in a note to clients this morning. “We would not be surprised if Apple eventually files an infringement suit if Nokia’s handsets are deemed to infringe its IP and we believe Nokia would prefer any court action to be combined as prior cases have been. We expect the legal process to be drawn out & could involve US Patent Office reviews.”

The endgame here? Most likely an out-of-court settlement and cross-licensing agreements–assuming Apple’s willing. After all, Nokia is on record admitting its fondness for Apple’s technology.

Asked once about the striking similarities between a touchscreen device it was designing and Apple’s iconic handset, Anssi Vanjoki, Nokia’s head of multimedia devices replied, “If there is something good in the world then we copy with pride.”

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Dragging the company down: A 908 million euro goodwill write-off in the Nokia Siemens Networks venture it co-owns with Siemens (SI). Revenue was 9.8 billion euros, or about $14.6 billion, which was down about 20 percent compared to last year. Worse, smart-phone market share declined to 35 percent from 41 percent in the previous quarter.

Six points gone in three months? That’s a brutal loss and one that demonstrates just how much pressure the company is seeing from Apple (AAPL) and Research in Motion (RIMM), among others.

“Nokia is launching plenty of new high-end smartphone models, such as the N900 and N97 mini,” Strategy Analytics analyst Neil Mawston told Reuters. “But as yet there is no iPhone killer to drive a major revival in its smartphone volumes. Nokia is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia’s battles can only get tougher in 2010.”

Still, Nokia (NOK) did have some good news to report. It expects mobile device volumes to increase in the fourth quarter of 2009 and it sees the global handset market shrinking less this year than analysts had feared–seven percent instead of 10 percent.

“It is encouraging to see some signs of recovery in our markets,” Kallasvuo said during a conference call. “But let’s be clear, uncertainty in end-consumer demand remains.”

Dragging the company down: A 908 million euro goodwill write-off in the Nokia Siemens Networks venture it co-owns with Siemens (SI). Revenue was 9.8 billion euros, or about $14.6 billion, which was down about 20 percent compared to last year. Worse, smart-phone market share declined to 35 percent from 41 percent in the previous quarter.

Six points gone in three months? That’s a brutal loss and one that demonstrates just how much pressure the company is seeing from Apple (AAPL) and Research in Motion (RIMM), among others.

“Nokia is launching plenty of new high-end smartphone models, such as the N900 and N97 mini,” Strategy Analytics analyst Neil Mawston told Reuters. “But as yet there is no iPhone killer to drive a major revival in its smartphone volumes. Nokia is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia’s battles can only get tougher in 2010.”

Still, Nokia (NOK) did have some good news to report. It expects mobile device volumes to increase in the fourth quarter of 2009 and it sees the global handset market shrinking less this year than analysts had feared–seven percent instead of 10 percent.

“It is encouraging to see some signs of recovery in our markets,” Kallasvuo said during a conference call. “But let’s be clear, uncertainty in end-consumer demand remains.”

“Android has fast been winning healthy support among operators, vendors and developers,” said Strategy Analytics director Neil Mawston. “A relatively low-cost licensing model, its semi-open-source structure and Google’s support for cloud services have encouraged companies such as HTC, Motorola, Samsung, T Mobile, Vodafone and others to support the Android operating system. Android is now in a good position to become a top-tier player in smartphones over the next two to three years.”

If that comes it pass, it’s bad news for Palm (PALM) whose Pre handset and WebOS will be facing off against a powerful mobile triumvirate: Apple (AAPL), Research in Motion (RIMM) and Google (GOOG).