Should Apple be watching its back?

Oct 19, 2010
Finance

If you want an Android phone, there are 20 or so choices out there. Last week, Microsoft (MSFT) announced nine new phones internationally and five in the USA sporting its Windows Phone 7 operating system. That sort of diversity makes for a healthy ecosystem. It’s just like planting a variety of trees near each other. […]

If you want an Android phone, there are 20 or so choices out there. Last week, Microsoft (MSFT) announced nine new phones internationally and five in the USA sporting its Windows Phone 7 operating system.

That sort of diversity makes for a healthy ecosystem. It’s just like planting a variety of trees near each other. But where only a single tree-type grows, there is danger from pests wiping out a species.

Likewise, is the iPhone at risk?

Apple (APPL) only offers the iPhone which is available solely from Apple stores or AT&T (T). Another iPhone is expected next year from Verizon Wireless (VZ).

Miguel Helft reported in the New York Times that Apple is facing some tough choices and competition: “…for all its success in the phone business, Apple suddenly has a real fight on its hands. Americans now are buying more Android phones than iPhones. If that trend continues, analysts say that in little more than a year, Android will have erased the iPhone’s once enormous lead in the high end of the smartphone market.”

He noted that Apple has been in this sort of fight before in the early 1980s with its introduction of Macintosh, which was met by a barrage of PCs running Microsoft software. Apple almost went extinct, but has had a remarkable comeback thanks to great design and a loyal fan base.

A similar sort of battle is emerging now in the iPad-dominated tablet market, as the BlackBerry (RIMM) PlayBook, a variety of devices using a Microsoft OS, Samsung’s Galaxy, and others are storming the Apple barricades with their own slate of tablets.

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Apple is mum on all this. It has weathered the competition in the past and does plan to release a Verizon Wireless iPhone next year, just as it is releasing a Verizon iPad later this month using its MiFi Mobile Hotspot.

Experts predict that iPhone may lose market share, but will remain a profitable product for Apple.

Helft said, “For now, the smartphone market is growing so rapidly that the rise of Android has not necessarily been at the expense of the iPhone. That will change as the market matures. But most experts predict that no single company or operating system will rule the mobile market like Microsoft ruled the PC.”

VC Matt Murphy, a partner at Kleiner Perkins Caufield & Byers, where he manages a fund that invests in applications for iOS devices, told Helft: “I don’t think we’ll be in a situation where there is one operating system. This market will be more fragmented than the PC market.” He said he expected one or two operating systems to co-exist with Apple’s.

Meanwhile, when it comes to smartphone competition, Joseph Palenchar reported in TWICE that Microsoft has a steep hill to climb against Google’s (GOOG) Android. He said: “The number of new Android phones unveiled at the CTIA show handily outnumbered the five Windows Phone 7 smartphones unveiled after the show by Microsoft for U.S. availability starting next month.”

He said WP7 phones’ high prices might hamper its competition against Android. WP7 phones go for about $200, while Androids go for as little as $49.

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But price isn’t everything, especially for those who have oodles of cash and want the latest toys.

Along these lines, TWICE cited an October research report from Canaccord Genuity: “Our industry checks and discussions with store reps indicate increasing enthusiasm for the upcoming Windows Phone 7 launch.”

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