Two Horse Race? A Mobile OS Executive Summary

Over the next few days I am publishing a long overview of the mobile operating system (OS) landscape.

Put simply, the smartphone business is starting to look a lot like a two horse race between Apple with its healthy profits and strong mindshare versus Google with its wide ecosystem and strong market share. Judging from Apple’s recent stock price performance, investors are starting to view this as a race that has already been run. The sentiment on the web is that both Apple’s iOS and Google’s Android have their own distinct strength and weaknesses, but there is a sense that Google is improving its weaknesses faster than Apple is. Apple is good at hardware, user interfaces and building complete products. It is not so good at the web and Big Data, things like maps and Siri. By contrast, Google is very good at doing things on the web, but is weak in user interface (UI), design and actually building products. Certainly, Google has made Android’s UI much better in recent versions of its OS.  And the capabilities of Google Search on Android are impressive, almost science fiction impressive. While the whole Apple Maps affair has underscored the perception that Apple has hit a brick wall.

Nonetheless, we think beneath the headlines, the situation is much more complex. First, Apple still makes a lot of money selling phones. More than all the other handset vendors combined. That and their $100+ billion cash hoard, give them a lot of room to improve.

Moreover, we think Android is much more vulnerable than it appears. The fragmentation of the Android OS along a number of axis is still is still a headache. And developers still struggle to make money with their apps on Android. A bigger problem is that Google risks losing control of Android. In the US, this problem can be summed up in one word – Amazon. The online retailer (and more) has assimilated Android and re-purposed it for its own ends. This process is even more pronounced in China where a half dozen web companies have taken a strategy similar to Amazon’s, releasing their own re-skinned versions of Android, capturing all the ancillary (i.e. search) revenue for themselves.

And beyond these two, there is still a search on among industry stakeholders (especially the carriers) for a “3rd way”. Both RIM and Microsoft hope to claim that title. From what we have seen of RIM’s new OS – BB10 –  it is too little too late. They have some interesting elements to their OS, but it is unlikely that they can offer anything new often to create organic consumer demand which would tip the balance. On the other hand, Microsoft has the resources to keep pushing its Windows Phone 8 (WP8). Six months ago, we argued that it would be a mistake to write them off, but WP8 increasingly looks like a long shot.  We will detail its problems later, but the biggest issue we see facing WP8 is Microsoft’s own organization structure which seems to have starved WP8 of resources and tied it too closely to Big Windows 8 for PCs.

We will conclude the series with a look at all the other contenders of which there are still a few, notably Mozilla’s Firefox OS (aka Boot 2 Gecko). Some of these are interesting, but all are challenged.

So while it is tempting to say that the race is over and Android has won, we think the race is just starting. Remember, that 95% of the cell phones used in the world today are feature phones. That means there is still a huge market to capture.

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