Due to Apple’s 1st mover advantage in their iOS, I strongly believe that Apple’s earnings will be approximately double last quarter’s in one year. That aside, it appears that there will be Android competitors for BOTH the iPad and the iPod.

Android has proven in the marketplace that they can overcome Apple’s 1st mover advantage as their OS outsold Apple’s for the first time last quarter in smartphones as I had earlier predicted. The Android platform is not at a material disadvantage in applications with over 60,000. Therefore, the Android competitors for both ipads & ipods can hit the ground running with enough content.

I see a future for tablets and iPod like products replicating the history in the smartphone space in which the Android OS eventually outsells Apple’s iOS. Apple can certainly thrive with this competition because I do not believe this is a winner take all market as was the case in the PC space. The PC OS space was originally won by MSFT because programs were written primarily for the OS that had the largest footprint. There are a number of reasons why this is no longer critical. 1. The internet has enabled cloud computing, leveling the OS field. 2. Todays mobile applications are more easily ported to multiple OS’s and are usually less complex than computer programs (I’m not so sure about this). 3. If I’m wrong about #2, the total current footprint of all of the Apple iOS’s (iPods, ipads, & iPhones) is much larger than Androids and will ultimately be too large for programmers to ignore. 4. If the MAC can thrive today at 4-6% worldwide market share then footprint size is not as important as it once was. This may be the most important point.

Unfortunately, the street will likely restrain AAPL’s PE multiple out of fear of a repeat of the PC OS war in which Apple lost. I increased my position in Apple by 15% today to take advantage of the selloff as I cannot see anything but booming revenues and profits for the foreseeable future. Is my logic sound?

jeffi - 16 August 2010 04:30 PM

Android has proven in the marketplace that they can overcome Apple’s 1st mover advantage as their OS outsold Apple’s for the first time last quarter in smartphones as I had earlier predicted.

Really?  How much did it sell for?

The point I was trying to make is…

Will the old PC wars (Apple vs MSFT) forever haunt Wall STs view of Apple (low P/E) when it comes to the current and future Android vs. iOS war?

This is the tech war of all wars.

Android will eventually win the market share war. But this time Apple’s loss will not matter as Apple will be making most of the profits.

Will Wall ST understand?

Android outselling apples OS.  Was that world wide or just the US market.  I read it when the news came out but I can’t remember…...

So if I’ve got this right Apple will earn WAY more money than any of the cell phone manufacturers for the foreseeable future. Apple will continue to lead in customer satisfaction and retention. Apple will continue to release new hardware that we didn’t know we needed but will soon be unable to live without.  And within the next two years the cash on hand will exceed $100/ share. Who gives a rats pituity what the street thinks, someday this will all be understood, and rewarded, until then sell calls and take the money.

dtm

jeffi - 16 August 2010 04:30 PM

...it appears that there will be Android competitors for BOTH the iPad and the iPod.

I’m not so sure.

1) Apple has optimized its OS and its programs for two screen sizes. Android will have to scale. To get an idea of how that might look, take a glance at an iPhone app sized for the iPad. Not a pretty sight.

2) Android phones may have outsold iPhones last quarter, but they didn’t affect Apple’s growth. Both Apple and Android are devouring the non-competitive dumb and feature phone markets. They are NOT competing with one another. For an Android tablet to succeed, it will either have to target a market that the iPad has not targeted or it will have to go head-to-head with the iPad. The low cost of the iPad will make it difficult for an Android tablet to do the former. And the quality and utility of the iPad will make it difficult for an Android tablet to do the latter.

3) Android is the only competitor with a viable app marketplace. However, the Android marketplace does not compare with the quality of the Apple App Store. I believe this deficiency will become even more glaring when Google attempts to spread it’s marketplace to cover both phone and tablet Apps.

4) Your points regarding why today’s apps are not as important as yesterdays applications was very well thought out. However, despite your well reasoned analysis, I’m not sure that you are correct. Apps may still prove to be the straw that stirs the drink. Let me put it this way. If you (or a business) decides that you need to own both a phone and a tablet, is there any chance that you would mix and match between iOS and Android? I think that would be madness. Clearly it is only economical and logical to buy both a phone and a tablet that share the same OS and the same apps.

Like you, I’m not sure. I’m just thinking out loud. And I’d be happy to hear your thoughts on my thoughts on your thoughts…. I think.

jeffi - 16 August 2010 08:19 PM

Android will eventually win the market share war.

I’m not willing to concede this yet. Unlike many others, I think that Apple has every intention of winning the market share war.

Let me put it this way. If there were only two choices - iOS devices and Android devices - and these choices were available everywhere in an unlimited quantity, which device/OS would most people choose?

bilter2000 - 16 August 2010 08:23 PM

Android outselling apples OS.  Was that world wide or just the US market.  I read it when the news came out but I can’t remember…...

Both, and the momentum is increasing.

Per Gartner Group…

http://www.afterdawn.com/news/article.cfm/2010/08/14/android_outsold_iphone_last_quarter_globally

FalKirk - 16 August 2010 08:59 PM

jeffi - 16 August 2010 04:30 PM

...it appears that there will be Android competitors for BOTH the iPad and the iPod.

I’m not so sure.

1) Apple has optimized its OS and its programs for two screen sizes. Android will have to scale. To get an idea of how that might look, take a glance at an iPhone app sized for the iPad. Not a pretty sight.

Not pretty, but useful as a starting point. The most important applications will be reissued in short order. Apple had over a year head start (two years?) over Android in smartphones. That should have been insurmountable. It wasn’t. Android is only one to two quarters behind this time in tablets and they have mindshare and momentum in smartphones.

2) Android phones may have outsold iPhones last quarter, but they didn’t affect Apple’s growth. Both Apple and Android are devouring the non-competitive dumb and feature phone markets. They are NOT competing with one another. For an Android tablet to succeed, it will either have to target a market that the iPad has not targeted or it will have to go head-to-head with the iPad. The low cost of the iPad will make it difficult for an Android tablet to do the former. And the quality and utility of the iPad will make it difficult for an Android table to do the latter.

Android is not taking Iphone sales because Apple has manufacturing and distribution issues. If Apple didn’t have these issues, Android would take share from customers that were price sensitive because Apple does not compete on price. On the manufacturing side, Apple can’t make and distribute iphones fast enough (still 3 week wait) while on the distribution side, the iphone is not a choice on many carriers. For both of those reasons, Apple can’t win the market share war. The result of this is that Apple is ceding customers to Android.  Once people have both an Android phone and tablet (or iPod like device) they will become even more loyal to the platform. I believe there will be Android tablets that undercut the Ipad on price and features. Many people want flash (even if it’s buggy and a battery/ resource hog). Android tablets will tout this. The one saving grace is that component shortages will likely retard Android tablet production for the foreseeable future.

3) Android is the only competitor with a viable app marketplace. However, the Android marketplace does not compare with the quality of the Apple App Store. I believe this deficiency will become even more glaring when Google attempts to spread it’s marketplace to cover both phone and tablet Apps.

Apple cannot make and distribute enough product to meet demand. Android will pick up the balance by default even if the product is 2nd rate. Many Android phones are not 2nd rate and they continue to get better. The same will occur in the tablet wars. Footsteps?

4) Your points regarding why today’s apps are not as important as yesterdays applications was very well thought out. However, despite your well reasoned analysis, I’m not sure that you are correct. Apps may still prove to be the straw that stirs the drink. Let me put it this way. If you (or a business) decides that you need to own both a phone and a tablet, is there any chance that you would mix and match between iOS and Android? I think that would be madness. Clearly it is only economical and logical to buy both a phone and a tablet that share the same OS and the same apps.

I agree.

Like you, I’m not sure. I’m just thinking out loud. And I’d be happy to hear your thoughts on my thoughts on your thoughts…. I think.

I hope

FalKirk - 16 August 2010 09:04 PM

jeffi - 16 August 2010 08:19 PM

Android will eventually win the market share war.

I’m not willing to concede this yet. Unlike many others, I think that Apple has every intention of winning the market share war.

Let me put it this way. If there were only two choices - iOS devices and Android devices - and these choices were available everywhere in an unlimited quantity, which device/OS would most people choose?

The problem is your hypothetical comment is just that. Apple has manufacturing and distribution issues. Until that is cured, Apple will cede market share. Finally, Apple will not compete on price, as they want to preserve their margins. Market share and price usually go hand-in-hand assuming minimal product differentiation, as currently exists between Android and iOS. Apple’s business will continue to boom as the size of the market is exploding. But Apple can’t win the market share war with these constraints.

jeffi - 16 August 2010 10:46 PM

Apple had over a year head start (two years?) over Android in smartphones. That should have been insurmountable.

Disagree. Right now there is an insatiable demand for “App Phones”. Let’s wait and see how the market shakes out AFTER App Phones have saturated the market and AFTER App Phones have to turn on one another for additional market gains.

jeffi - 16 August 2010 10:46 PM

Android is not taking Iphone sales because Apple has manufacturing and distribution issues.

Disagree. Apple has a demand, not a supply problem. Demand for iPhones has exceeded all rational expectations. What should that be telling us?

jeffi - 16 August 2010 10:46 PM

Android would take share from customers that were price sensitive because Apple does not compete on price.

Disagree. You can buy a $250 PC or a bottom end MacBook for $999. That’s a big difference in price. In the world of subsidized phones, the difference between a $199 or $99 dollar iPhone and an Android phone at any price is negligible. And in the world of tablets, who knows. Is Android really going to be able to make a competitive tablet for under $350?

jeffi - 16 August 2010 10:46 PM

Once people have both an Android phone and tablet (or iPod like device) they will become even more loyal to the platform.

This is key. Will they remain loyal to Android? Or, if given a choice between Android and iOS, will they choose iOS?

Here’s my bottom line:

1) We cannot tell how much market share the iPhone will take until Apple is able to make more phones than people are willing to buy.

2) We cannot tell how much market share the iPhone will take until Apple is distributed on as many carriers as Android. That day is coming.

3) We cannot tell how much market share the iPad will take until Apple is able to make more tablets than people are willing to buy.

4) We cannot tell how much market share the iPad will take until we see what the competition has to offer.

Until those four things occur, it is WAY premature to cede the market share crown to Android. In addition, expectations that Android will be as successful in the tablet market as they’ve been in the phone market are extremely premature. John Gruber has reported the follow concerning Android’s App Marketplace:

You can only pay for apps in 13 out of the 46 or so countries where Android phones are available. For those of you who like stats, 13 in 46 works out to less than 30%. Contrast this with Apple’s App Store, which supports paid apps in 90 countries. This is a huge advantage iPhone developers currently have over Android developers.

Remember, right now people are deciding which phone they want. But in the future, they’ll be deciding which phone/tablet combo they want. Whose OS will look better when that comparison is being made: Android or iOS?

Again, I am not saying that Apple WILL ultimately win the dominant market share of mobile devices. But I sure as hell am saying that Apple thinks it can win the dominant market position. And I’m not in the habit of betting against Apple.

jeffi - 16 August 2010 10:57 PM

Market share and price usually go hand-in-hand…

Disagree. Market share and VALUE usually go hand-in-hand. For an example, think back on the MP3 wars. The Apple iPod was never the low cost solution.

adamthompson3232 - 16 August 2010 10:45 PM

Once Lady Gaga starts actively promoting the new iPhone in a worldwide marketing campaign sales will skyrocket. I am only half kidding.

http://www.9to5mac.com/lady-gaga-comes-to-apple-hq

http://www.9to5mac.com/jobs_plus_gaga_sitting_in_a_tree

There could be some truth to the story here.

The smartphone market is growing at above 50%.  At 1.2 billion units a year, the mobile phone market is still growing and provides a vast unaddressed pool of smartphone purchasers. The iPhone growing at 50% per year through 2013 would still not exceed 20% smartphone share, leaving 80% for others. At 20% share, Apple would sell 138 million iPhones in 2013. That would also equal 4% of all phones and 11% of all 3G subscribers.

http://www.asymco.com/2010/06/14/can-the-iphone-reach-6-of-the-worlds-3g-subscribers/
http://www.asymco.com/2010/06/14/can-iphone-reach-20-of-all-global-smartphone-market/

I don’t think the market is pricing Apple according to any of this.

asymco - 17 August 2010 02:32 AM

I don’t think the market is pricing Apple according to any of this.

Are you expecting someone to disagree? 

The media is ad nauseam full of “Android outsell iOS Q2 2010”
Now there is a good reason for this : iPhone costumers waiting for iPhone 4.
My guess is that iPhone regained control over Android in July but the media are mute about this.

Has any of us some info about July iPhone sales ?