My boss Henry Blodget says Apple should be worried about the fact that Android is racking up market share gains.
How worried should Apple really be about this market share dilemma? Probably not as worried as Blodget thinks.
Blodget has been banging the Apple-is-doomed-because-of-market-share gong for three years now.
- First time was in January of 2010: Hey Apple, Wake Up — It's Happening Again. Apple's stock was ~$212. For that quarter, Apple reported $13.50 billion in revenue and net quarterly profit of $3.07 billion.
- Then in July of 2010, the gong was struck again: This Android Chart Should Scare The Bejesus Out Of Apple. Apple's stock at that point was ~$260. That quarter, Apple had $20.34 billion in revenue and net quarterly profit of $4.31 billion.
- Fast forward to April 2011: Android Is Destroying Everyone, Especially RIM — Apple Is Dead In The Water. Apple's stock was at ~$335. That quarter revenue was $28.57 billion and quarterly net profit was $7.31 billion.
- The latest was on Friday: This Trend Is Very Worrisome For Apple. Apple's stock is at $527 today. Revenue for this quarter is forecast to be $55 billion, net income is expected to be close to $12 billion.
So, as you can see, for three years running Blodget has warned Apple that market share losses are going to lead to something bad happening. And for three years Apple has been fine.
That's not to say Blodget is going to be wrong, it's just to say, this is a very worrisome trend for his prediction about Apple.
But what is his prediction about Apple, exactly? When I ask him, he says he's not making a prediction.
When I press him, he says he believes Apple's margins will eventually be compressed because it's going to have to chase market share at some point. That means selling a cheaper phone to get new users. Logically, this makes sense. But, there's some evidence that it might not actually work out that way.
Horace Dediu of Asymco recently noted that late smartphone adopters are behaving differently than early smartphone adopters. In the U.S. market, 50% of cellphone owners have smartphones. If you use comScore data — which I think is shaky in absolute numbers, but instructive for trends — you find that the most recent buyers of smartphones are leaning towards iPhones over Android.
Here's Dediu:
In the last six months, Android share growth is slowing while iOS is still gaining.
If this trend continues then the next 50% may not behave as one might expect (namely that late adopters would take the low-cost commodity offering accelerating Android adoption.) Late adopters may, in fact, be choosier than early adopters. And it’s not at the cost of overall growth. Late adopters are still converting at the same rate of the early adopters.
So, it's entirely possible the next group of smartphone buyers isn't just cheaper, but choosier. And they might choose the iPhone.
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