The iPad from Apple Inc. (NASDAQ: AAPL) lost nearly 20% of its 96% share of the tablet market in the fourth quarter of 2010 to tablets using the Android operating system from Google Inc. (NASDAQ: GOOG). Nokia Corp. (NYSE: NOK) shipped more than 100 million smartphones in 2010, but it, too, lost share to Android-based devices. Have the mighty, at last, fallen?
Apple maintains its near-monopolistic share of the tablet market, but the Android-based Galaxy Tab from Samsung Electronics Co. (OTC: SSNLF) is now firmly in the game, according to a report from Strategy Analytics cited in The Wall Street Journal. Because Google provides Android at no cost, tablet makers can create devices that are cheaper than the iPad, and it may be that an iPad can’t command the premium price that an iPhone does. We’ll get to see if that’s true as more Android-based tablets hit the market in the coming months.
Perhaps compounding Apple’s hold on the tablet market is a report from an analyst at Concord Securities that the coming iPad 2 will offer incremental improvements, and not any game-changing new features. [] That does leave an opening for lower-priced competition, if competitors like Hewlett-Packard Co. (NYSE: HPQ) and others can deliver.
On the mobile handset front, Nokia has lost its lead in smartphone shipments during the fourth quarter, despite being the first company ever to ship 100 million smartphones in one year. Again according to Strategy Analytics, Android-based phones from Samsung, HTC, Motorola Mobility Holdings Inc. (NYSE: MMI), and others posted market share of more than 37% in the fourth quarter, compared with Nokia’s share of just over 30%. Apple posted market share of over 17% in the fourth quarter and Research in Motion Ltd. (NASDAQ: RIMM) posted share of 15.5%.
While Nokia struggles with declining share, Apple continues to prosper in the smartphone market due to its stupendous margins. According to Horace Dediu at asymco.com, Apple takes a whopping 51% of the profit in the entire mobile market (both feature phones and smartphones), while it maintains a market share of just 4.2%.
If the iPad doesn’t command profits in the tablet market in the same way that it commands the mobile market profits, can the predictions of Apple’s growth come true? Or will the Android-based competitors be forced to compete in a race to the bottom on price? If that happens, Apple won’t have to sell as many iPads to maintain its premium pricing and profits.
Apple’s share price is up slightly this morning, to more than $337/share. The stock’s mean target price is about $415 and its 52-week range is $190.25-$348.60.
Paul Ausick
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