Google's (GOOG) Android Could Squeeze Out Apple (AAPL)

Nokia’s (NYSE:NOK) Symbian mobile operating system has dominated the handset software business for years. Microsoft’s mobile Windows has made some progress in picking up market share during the last decade, but its success has been very modest.

The operating systems which are part of the Apple (NASDAQ:AAPL) iPhone and RIM (NYSE:RIMM) Blackberry were almost instant successes because of the popularity of their handsets.

Among these four powerful mobile OS players there seemed to be no room for a fifth, and certainly not a fifth that could take any significant market share. Google’s (NASDAQ:GOOG) is in the process of proving that conventional wisdom wrong.

A new study by research group Gartner as covered in the FT,  predicts Android will eat into Nokia’s leading market share and be featured on 18 per cent of smartphones by 2012. Gartner forecasts “would put it (Android) ahead of RIM on 13.9 per cent and Apple on 13.6 per cent.” That would leave mighty Microsoft as the odd man out.

Google is attaining its advantage through several clever moves. None of them would work if Android were not a viable alternative to it competition in quality and features, but its adoption by a number of handset companies and cellular carriers, which has happened as Android in barely a year old, has laid that concern to rest.

Google offers Android to handset companies for free. The OS is also “open source” so programmers can deal with the core software code to build new applications. Microsoft, by contrast, has never been willing to give out source code for Windows and, so far, this has been true of Apple and RIM.

Android may force a significant change in the handset operating system market. Microsoft may have to drop what it charges per phone for its OS down to zero from over $10 per handset. Redmond has often shown that it is willing to loss money in a market to pick up share.

Apple and RIM are each another case entirely. Their operating systems only work on their proprietary hardware. They are not likely to give this code to competing handset companies because it would undermine their core hardware sales business. The Apple and RIM OSs will have to rely on the sales of the firms’ phones to make headway against Symbian, Windows Mobile, and Android.

The biggest issue for mobile operating systems going forward is probably how software programmers who write the applications that are essential for the adoption of these systems spend their time. There are not enough talented programmers to create a robust number of applications for all five operating systems. That mean that the OSs with the largest market shares are likely to get the most programmer attention.

Without enough programmers to go around, one or two of the operating systems is likely to loss it value to users because it is “under featured”. Leading that list is Microsoft which has neither a hardware system of its own or a free software platform that can be used on almost any mobile device.

Douglas A. McIntyre