Piper Jaffray’s Munster: Once Verizon gets Apple’s iPhone, Google Android’s success will be tested

Piper Jaffray analyst Gene Munster believes “that Apple’s exclusive agreement with AT&T has limited demand for the device. We expect Apple to correct this issue by the end of [the first half of 2011] and add Verizon to the list of carriers that sell the iPhone in the US,” Phillip Elmer-Dewitt reports for Fortune. “Munster points out that the U.S. is the only remaining country of the 89 countries in which the iPhone is sold that involves an exclusive agreement. (Some countries, such as China, have only one carrier, but those deals are not exclusive.)”

“According to Munster, the fact that only AT&T carries the iPhone — and Verizon still doesn’t — is the only reason Google Android phones are outselling iPhones in the U.S: ‘As an example, in countries where the iPhone is available on multiple carriers and competes with Android, we see the iPhone outselling Android. The greatest factor in the success of Android has been Verizon. Customers are loyal to their carrier, and once Verizon gets the iPhone, we believe Android’s success in the US will be tested.'”

Full article here.

MacDailyNews Take: We welcome all AAPL analysts to party, however late they may be. wink

Droid does sit on shelves while Verizon Wireless customers wait for The Real Thing.MacDailyNews, June 29, 2010

[Attribution: MacNN. Thanks to MacDailyNews Readers “Joe Architect” and “iWill” for the heads up.]

12 Comments

  1. I thought it was shown that there are more iPhones coming on line per week then Android phones. And yes, it is going to get much worse for RIMM and Android. Not better.

    Happy Holidays!

  2. People, including tech journalist, talk about “Android” as if it was a brand of smart phone. It is NOT. An Android phone “brand” is HTC, Samsung, Motorola, etc.

    You can think of iPhone (the device) competing against those other brands. In that case, Apple essentially sells ONE phone model for the entire world at any given time. The competing brands sell a splintered collection of devices (including several models from EACH brand). Apple wins (by a wide margin) in terms of platform consistency, quality of hardware and software, sales volume per device, profit per device, and overall profit. Apple makes most of the profit that is available in the market, without coming close to selling the most phones.

    OR you can think of iPhone’s OS (iOS) competing against Android, the OS. In that case, Apple sells iOS as an integral part of iPhone. Google gives it away for free. Google only makes money from Android indirectly, through related advertising. (Think about that, as an Android user. Success for Google is being able to constantly advertise to you.)

    I wouldn’t be surprised if (as a strategy) Apple intentionally wanted Android to become the de facto mobile phone OS for iPhone’s competition, to first squeeze out RIM, Palm, Nokia, and brands that use Microsoft’s (previous) OS until they were no longer a major threat. And once the “rest of the mobile world” became dependent on Android (just as they are dependent on Windows in the PC world), Apple can use it’s huge profits and expanding resources to gain whatever position it ultimately wants in the mobile world. Google and its Android collective simply cannot afford to keep up, because Apple is making most of the available profit.

  3. Speaking of Google, its new Chrome OS Web Store is a blatant ripoff of the iTunes Store, and its Cr-48 Chrome OS laptop is a blatant ripoff of the MacBook. Just like in the mobile space, Google uses Apple as its R&D department.

  4. ken1w:

    What you are saying may be technically correct, but in reality, it is not so.

    At this point, all those Samsung, Moto, HTC “brands” have blended into one big commodity market. What carriers have done over the years was turn them into builders of commodity handsets, branded by carrier logos, screens, crapplication collections and features to the point that it was impossible to tell who actually made the phone.

    Android was a ray of hope for manufacturers because it came right after Apple successfully turned the old model upside down and eliminated the carrier branding (and feature control) from their iPhone. Other than the tiny generic “AT&T” text in the corner, there is no way of telling that iPhone is on AT&T network in the US. Unfortunately, Google was never interested in doing what Apple did, so carriers immediately bounced right back into the old modus operandi. They advertise their own ‘Android’ phones, and, with the possible exception of Moto’s Droid, people don’t really know, or care who made their Android phone. All they know is it is an Android device on Sprint. or T-Mobile. Or even AT&T.

    So, for all intents and purposes, “Android” is the de facto brand of mobile phones today. Samsung, HTC, Moto, Nokia, they are all now amalgamated in this generic group of handset manufacturers.

  5. @ Predrag

    (Nokia does not use Android, as far as I know.)

    My point is that, as a strategy, it would be a very clever one to first intentionally allow Android to become the de facto OS for the rest “mobile world” (well, at least in the U.S.), just as you said. One way Apple encouraged this outcome is by keeping iPhone exclusively on ATT. As long as Apple sold iPhones almost as fast as they were manufactured while using only ATT in the U.S. market, it did not hurt current iPhone sales to follow this strategy. You can’t sell something faster than you can make it.

    In the meantime, Android phones are collectively successful, in large part because there is no Verizon iPhone. However, no single brand is really profitable compared to Apple with iPhone. But Android’s collective success helps remove Apple’s actual competition, such as Palm, RIM, Nokia and brands that use Microsoft, as viable threats to iPhone (again, at least in the U.S.). All without Apple lifting a finger; Google did all the dirty work by creating Android and giving it away for free. And as you said, the rest of the mobile world became more and more dependent on Android, because it became the only viable option for competing with iPhone.

    And THAT type of “competition,” where Google make no direct profit and the handset makers are making mostly indistinguishable “commodity” phones, is one that Apple probably feels quite confident it can manage to its own benefit, and the benefit of the iOS platform.

  6. Android’s success? Google spends a lot of money developing Android, but they don’t charge for licensing it. Their Nexus1 flopped, so their new Nexuss will be sold at a loss. The other handset makers who use Android are all either losing money or hovering around break-even. And they’re all spending untold millions on advertising and promotion. Is it really a “success” to have a lot of profitless phones? Google is only doing this to keep their search and maps in the mobile arena so they can stick profitable ads on them.

    Somebody needs to do a better job competing with Google in search and maps. How about Apple?

  7. The extended exclusivity agreement with AT&T was the cost of getting Apple’s foot in the door. Once the iPhone became popular, Apple was able to leverage that in the international markets. So the U.S. got the iPhone first, but paid the price.

  8. @ken1w
    Agreed – in the sense that Android is a mobile OS, Android :: smartphones as Windows :: PCs. Windows PCs are sold by HP, Dell, etc. Android phones are sold by HTC, Samsung, etc. This is just an observation. It is not necessarily inherently good or bad. In this example, Google and Microsoft largely drive the merits of their OS-based ecosystem.

    Apple has its own very successful approach. No one has shown that the Android (or Microsoft) approach is inherently superior. Nor has anyone proven that these alternatives are necessarily mutually exclusive. I do not see any reason that Android and iOS cannot successfully co-exist.

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