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Before Latest Phone Debut, Apple Has Harsher Competition

Nick Wingfield and Jenna Wortham|The New York Times
Tuesday, 4 Oct 2011 | 9:58 AM ET
Android and iPhone
Android and iPhone

As soon as Apple unveils its highly anticipated new version of the iPhone on Tuesday, millions of people are likely to start plotting how to be among the first to buy it. But millions more may be considering a competitor — an Android phone.

Despite all the hoopla surrounding the Apple announcement, more people buy smartphones running Google’s Android operating system than buy Apple phones. Android’s share of new smartphone sales is now more than double Apple’s share, a striking change from a year ago, when the two were roughly even, and a reflection of how Android phones have improved and become more broadly available.

In this altered competitive landscape, any new phone from Apple will have to stack up favorably against the most popular Android phones. Even app developers, many of whom once devoted all their energy to building for the iPhone, now have more divided loyalties.

“The more the Android platform matures, the more it becomes a real competitor,” said Mike Novak, an Android engineer at GroupMe, a group messaging service that has over a million users. “It’d be foolish not to support both Apple and Android.”

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Yet Apple, by many measures, still remains the smartphone player to beat, with better profits from the business, huge influence among mobile app makers and innovations that rivals scramble to copy.

Apple is expected to introduce a new iPhone with a variety of slick new features, but the product could also get a lift from an old-fashioned distribution deal. Apple has struck a deal with Sprint Nextel to offer the new iPhone to its customers, according to a person with knowledge of the deal who was not authorized to speak about the arrangement.

The agreement could help blunt some of the distribution advantages that have helped propel Google’s Android into more and more smartphones. Until now, Apple phones have been available in the United States only on AT&T and Verizon .

Apple also faces another big challenge in releasing a new iPhone: it has to top itself. It must show it can still deliver enough of the cutting-edge features that have made the company a trend-setter.

“They set the bar,” said Phil Libin, the chief executive of Evernote, a start-up that makes a mobile note-taking app, who said he had no knowledge of Apple’s new phone. “Android and other devices have had to catch up.”

Analysts widely expect the new iPhone to include a faster microprocessor for running applications at a greater speed, along with a more powerful camera. Some have speculated that Apple might finally include big improvements in the voice recognition capabilities of the new phone using technology the company acquired when it bought Siri, a start-up, last year.

Some have also speculated that Apple might introduce more than one phone, including one with fewer new features that could sell for $99 with a carrier contract.

An Apple spokeswoman declined to comment before Tuesday’s event, which is to take place at Apple’s headquarters in Cupertino, Calif.

In the second quarter, handsets running the Android system accounted for 43.4 percent of worldwide smartphone sales, compared with 18.2 percent for Apple, according to the research firm Gartner. During the same period last year, the two companies were roughly neck-in-neck, with Android and Apple holding 17.2 percent and 14.1 percent of the market, respectively.

For both companies, growth in market share has come at the expense of technology laggards like Symbian, the mobile software backed by Nokia, and Research in Motion, maker of the BlackBerry, rather than each other.

Despite its smaller share of the market, Apple earns outsize profits. Thanks to its comparatively healthy profit margins, Apple had about half of the operating profits in the mobile handset business in the first quarter of the year, even though its sales accounted for only 4.9 percent of the phones sold, according to a recent report by the analyst Michael Walkley of Canaccord Genuity.

Apple could get a boost from its new relationship with Sprint, which may have a card up its sleeve to lure customers — its unlimited mobile data plan. That plan allows cellphone users to gorge themselves on streaming media services like Spotify and Netflix, without worrying about accidentally going over the monthly allotment. AT&T and Verizon both have monthly limits on the data its iPhone customers can consume.

A Sprint spokesperson declined to comment.

Android’s surge in the market means app developers are splitting more of their time between the competing phone systems. Mr. Novak, the engineer at GroupMe, who also helps organize a monthly gathering in New York for Android developers, said Apple would need to impress developers, as it did with the iPhone 4, if the company hoped to persuade them to stay committed to the iPhone.

“It really comes down to the wow factor,” Mr. Novak said. “Without that, it leaves the door wide open for whatever announcements Google plans to make.”

Adam Goldstein, a founder of a flight search engine called Hipmunk, said the company decided to release a version of its mobile application for Android earlier this month after watching the popularity of the platform grow.

“We definitely did the iPhone first,” he said. “But requests kept coming in from the Android side.”

Mr. Goldstein said the company was dividing its programming resources equally between Android and Apple phones.

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