Android Success Surges, Smartphone Sales Rise

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No one knows quite how Google (NASDAQ: GOOG) will make money on its Android mobile OS. Some of the software in the OS may violate Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL) patents. Those issues have not stopped the remarkable growth of the product, which had 52% of the global smartphone OS market in the third quarter. Android’s success continues to defy expectations, mostly because of the IP issues.

Gartner released its quarterly OS report. Roberta Cozza, principal research analyst of the firm said, “Android benefited from more mass-market offerings, a weaker competitive environment and the lack of exciting new products on alternative operating systems such as Windows Phone 7 and RIM.” Cozza said, “Apple’s iOS market share suffered from delayed purchases as consumers waited for the new iPhone. Continued pressure is impacting RIM’s performance, and its smartphone share reached its lowest point so far in the U.S. market, where it dropped to 10 percent.”

Nothing in the report was entirely unexpected. Apple’s market share has not grown as quickly as predicted. But Android’s share is based on a number of devices. Apple’s in based on the iPhone alone. Market share means little in terms for profitability, however. Apple makes several hundreds dollars of each iPhone. Some Android devices probably are sold at a loss to gain market share.

What is a bit  of a surprise is that the number of IP barriers to the use of Android has risen significantly in the past two quarters. Manufacturers must think enough of the OS that they are willing to risk high royalty fees. There is no other explanation.

Note: Smartphone sales to end users reached 115 million units in the third quarter of 2011, up 42% from the third quarter of 2010, according to Gartner.

Douglas A. McIntyre

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