Google Knocks Nokia Off the Top Spot, but Apple Gets the Cash

If you are from the US, you probably don't think of Nokia as being a dominant player in the PDAPhone / Smartphone market. Nokia, however, has been at the forefront of the PDAPhone space for the entire decade long life of the market. Unfortunately, most of their PDAPhone handsets, based on Symbian, have never made it to acceptance by US carriers as subsidized handsets. So the only people using Nokia devices have been those that bought one unlocked from a supplier that got them from Europe or Asia, and then shipped them to the US. This is a very expensive way to by a phone in the US, so only a tiny number have made it here. But if you study the marketshare history, you'll find that Nokia has held a dominant position over the years... a position they still hold for non-Smartphone devices today, but Google has finally knocked them off in terms of platform share as of the latest analysis by Canalys.

Base on their latest research, the first notable fact is that the PDAPhone market has doubled in size over the last year from 53.7 million units in 4Q 2009 to 101.2 million units in 4Q 2010. If we look at how Apple has done for the year, they also doubled their sales from 8.7 million to 16.2 million units, maintaining their sales share of approximately 16% throughout the period. Google, however, grew from 4.7 million to 33.3 million units sold during the quarter, an impressive 615% year to year growth. This allowed them to edge out Nokia's 31.0 million units and take top spot in sales share for the quarter. Nokia still grew their sales by 30%, a number that most business would be ecstatic to achieve, but even with that level of growth, their share dropped from 44.4% to 30.6%. When the market size is doubling, you have to do better than a 30% gain to keep pace. RIM did better than Nokia with growth of 36.0%, but still dropped in share from 2nd position all the way to 4th place with 14.4% of the market sales. Microsoft was the biggest loser. They actually saw a decline in unit sales from 3.9 million to 3.1 million during the quarter from a year ago, a 20.3% drop in unit sales. This brought their market share from 7.2% down to 3.1%, and one step away from getting tossed into the "Others" category along with Palm/HP which no longer shows in the chart.



So platform growth is great, but what do Google, Nokia, etc. get out of this? For Google, since Android is open source, they are after market dominance so that they can leverage it for their revenue generating advertising. So they must maintain a large market share to make this worth their while. Apple and RIM are the only platform suppliers in the hunt that sell a total solution of hardware, software, and services (cloud, email, etc.), and so their profit from market position is more directly related. Google does sell their own hardware, the Nexus S, but its share of Android sales is minimal and device makers HTC, Samsung, LG, and Motorola are bringing in the direct sales revenue for Android handsets. Nokia controls Symbian and sells handsets, but is not as involved with other services as RIM and Apple, and their apps market has a ways to go to compete with Apple. Microsoft views mobile devices the same as desktops... they want to sell the OS that runs on it. As competition heats up and device makers have to cut costs, it will be a challenge for them to sell Windows Phone against Android which is free for hardware makers to use. They are operating on a different model from all the rest.

Industry researcher Asymco analyzes market share and estimates the profit of each vendor on a quarterly basis. Their latest analysis shows a continuing dominance of Apple in taking home the profit from the PDAPhone / Smartphone market. If their analysis is anywhere near accurate, Apple brought in more profit from PDAPhone sales during the quarter than all others combined. Apple brought in approximately half of the profit of the industry, and this with only 16.0% market share. RIM has a slightly lower market share at 14.4% and had only a quarter of the profit. Apple appears to have a profit margin of four times its most similar competitor. This gives Apple a significant competitive advantage going forward in terms of research and marketing. But we can't forget that Google, who doesn't directly profit at all from Android device sales, brings in a lot of indirect profit and seems to have no problem funding their research.



The most interesting thing about this market is that we have very dissimilar market models being tested in a highly competitive space. There are significant differences in approach and philosophy across the spectrum of Nokia, Google, RIM, Apple, and Microsoft. All are huge. All have experienced market leadership. None are happy not being in the top position. Apple and Google are the newest in this market and have been only been at it for 3-4 years, vs. approximately 10 years for the others (and HP/Palm), but they are schooling the veterans in this market for the time being.