Google Android Market Share Moves To No.1

Google’s (NASDAQ: GOOG) Android mobile OS has the largest share of the smartphone market worldwide, research company Canalys reports. Based on its survey of 56 countries, Android’s share was 48% in the second quarter. The question remains whether the product helps Google’s financials.

Android’s success is in a booming market. “Globally, the market grew 73% year-on-year, with in excess of 107.7 million units shipping in the second quarter of 2011,”  Canalys said.

Results of the research were predictable. “With shipments of 20.3 million iPhones and a market share of 19%, iOS overtook Nokia’s Symbian platform during the quarter to take second place worldwide. In doing so, Apple also became the world’s leading individual smart phone vendor, stripping Nokia of its long-held leadership position,” the new information showed. Research In Motion (NASDAQ: RIMM) and Microsoft (NASDAQ: MSFT) were the laggards.

More and more of the comments about smartphones have turned to the issue of profits. Recent research shows that while the iPhone is a high margin product, most other smartphone operating margins are low. Google’s Android product may not be a success for the OEMs that use it. Android may not even be a success for Google.

Google has not been able to convince Wall St. that Android has much utility as a profitable product. The source code for the OS is free. Smartphone company HTC pays Microsoft royalties of $5 each for the intellectual property used in Android. It is only a matter of time before this kind of license agreement moves to other handset companies. Google does not pay these fees now; the smartphone companies do. It is not clear whether that dynamic will stay in place. Microsoft may go directly to Google. Some analysts think total royalties received by Microsoft for Android use could be $1 billion a year.

Google has not been able to show investors that Android has any financial advantages for the search company. The OS may make it easier to get Google’s search products onto smartphones, but it is likely that Google is already by far and away the preferred search product for wireless devices as people migrate their preferences from PCs.

Google’s shares moved up to $615 when it announced better-than-expected earnings. That is still well short of its $747 peak reached in 2007. Android is viewed as a toy by many, the way that Google Maps or Google Finance are. Until that changes, Android’s global market share is a just a number.

Douglas A. McIntyre