It looks like 2010 will be the year where the smartphone war really kicks off. Apple and RIM (the makers of the Blackberry phones) have been securing market share in 2008/2009 but Nokia is still the market leader with 37% of the smartphone marketplace … and Google clearly want a significant piece of the action, launching their Nexus One handset yesterday.
Google are trying to disrupt the marketplace, selling the Nexus One directly on the Web without need for a network contract. At just over $500 it isn’t cheap, but customers will probably like being able to put any SIM card they want in it (for example, as they travel abroad). Google realises that phone applications are critical to the handset’s success and will be using its Internet muscle to ensure developers get to work. 17,000 applications already exist for Android (Google’s operating system) and developers tell me that it is quicker and easier to create applications for Android than Apple’s iPhone. By the end of 2010 I am sure Google will have started catching Apple as they have a very loyal ‘techy’ following. Google also have additional support in the form of Motorola who have already created Android phones. If you ask me, being manufacturer independent is a very clever move indeed. It reminds me of Apple vs Microsoft when personal computers were invented.
Apple have been rapidly gaining market share while the others snooze and work out how to compete. The iPhone has the best content by far and this is one of the main reasons people are buying their phones. I personally see not having a version with a keyboard as a drawback – business users want to be able to type efficiently and I’ve yet to see a touchscreen keyboard that allows the typist to go as quickly as they would on a physical keypad. Apple also has quite a large problem in the form of Nokia, who claim a large number of patents have been infringed. They are also worried about Google, who absolutely dominate online advertising both on computer and mobile. Hence they have recently acquired Quattro Wireless having lost the battle for the larger AdMob to Google.
Nokia appear to be a little lost at the moment. Will they continue to push Symbian forward or instead switch to Maemo 5 (a slimline version of the Linux operating system)? Nokia have staff calling around development companies, urging them to please develop applications for their mobile store Ovi.com. They have a lot of catching up to do. However, as the market leader and the first out of the four to make mobile phones, they own many patents which the others cannot avoid using. It seems likely that Apple will have to pay Nokia if they want to keep certain functionality in their phones. This reminds me of IBM who get paid every time someone makes a hard drive. Their intellectual property will keep them in the game, even if they have become too large and slow to compete right at the cutting edge. Developers will not be able to ignore their market share, even if it is being eroded.
RIM (Research In Motion) appear to have the business market all to themselves at the moment, with only Nokia to worry them in that space. However they are moving towards the everyday consumer with their Storm and Curve products. Like Nokia they have a lot of work to do to catch up with Apple in terms of choice of content. This is the key to the consumer.
Out of the above, I have to say I like Google’s approach the most. Let the experts make the handsets/hardware to give the consumer a large choice of device styles, control the OS and encourage content development. Google has said for several years that mobile search will be bigger than Web-based search … clearly they want to ensure they are the default search provider for as many people as possible (e.g. in case the Blackberry uses Microsoft’s Bing instead) and dominate advertising sales. If RIM or Nokia decided to install Android on one of their handsets it would be a serious blow for Apple. Google also believe that the Web browsers on mobile devices will improve to a point where mobile applications will become obsolete. I tend to agree with them, but we don’t know how long that will take.
Apple shares are at an all-time high, I would not necessarily be buying them right now (everyone is anticipating their new Tablet computer – there may be a sell-off when it is finally released). Google’s shares, however, are quite a lot lower than their peak in 2007 despite their acquisition of AdMob. Buying shares in their preferred handset manufacturer HTC might also be a smart play. Nokia shares are less than half of their 2007 peak, as are Research in Motion shares.
My guess is that the Apple bubble will deflate/burst somewhat as the heavyweights react and adapt to the new standards that have been set for them. I would HOLD Apple @ $214, BUY Google @ $620 and BUY Nokia @ $13 as a recovery play and a bet that they will ultimately end up getting royalty cheques from Apple (in no small part due to the EU being on their side). Nokia is also extremely dominant in emerging markets which are already growing rapidly again. Buy HTC stock if you can trade them in Taiwan.
Will revisit these in 6 months or so! Good luck!
UPDATE: Dell & AT&T have announced they will be launching an Android phone in the near future. I expect Google will quickly sign up more and more handset manufacturers that will install Android, making life very difficult for Apple.