An Android slowdown? Don't count on it



Has Android peaked? After several years of frenetic growth, several analyst firms are predicting an Android slowdown. Moreover, Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and BlackBerry maker Research In Motion (NASDAQ:RIMM) are each preparing serious attacks on the house that Google (NASDAQ:GOOG) built. But before writing Android off there are a number of factors to consider, including phablets, tablets and other wildcards.

First, let's look at some numbers: comScore's latest statistics show that Android's U.S. market share appears to have plateaued at around 50 percent. After years of dramatic market share gains, Google's smartphone market share in the United States declined for the first time in April, from 51 percent in March 2012 to 50.8 percent in April 2012. While that's obviously not much of a decline--and it coincides with an overall slowdown in postpaid net adds--it's still a data point worth noting. Indeed, asymco analyst Horace Dediu did just that in a post titled "Trouble with the robot?"

"The concern has to be that rather than seeing the net adds growing–as they have for two years with only two contiguous months of decline--Android net adds have been falling for four months," Dediu wrote.

Dediu isn't the only analyst warning of an Android slowdown. IDC said Android will "reach its peak this year," and Google's global smartphone market share will fall from 61 percent this year to 52.9 percent in 2016.

Similarly, research firm CCS Insight recently offered a look at the factors pulling against Android: "Manufacturers' inability to see ahead into new platform releases and hardware requirements is slowing their efforts to bring Android variants to new and current devices," the firm wrote in a note for clients. "Developers face a dilemma: to fully optimize for new Android application programming interfaces (APIs) they risk compromising compatibility with higher-volume low-tier devices."

Indeed, just seven percent of Android devices currently on the market run Android 4.0, dubbed Ice Cream Sandwich, the latest version of the operating system; Android 4.0 was introduced more than a year ago. CCS Insight noted that Google's hardware requirements have effectively split Android between the high end (4.0, or Ice Cream Sandwich) and the low end (2.3, or Gingerbread).

Rivals no doubt see now as the time to strike. Apple will hold its Worldwide Developer Conference next week, where it is expected to announce plans to remove Google from its iOS mapping service, as well as systemwide Facebook integration. Not to be left out, Microsoft has scheduled a Windows Phone event for June 20 where it will likely detail Windows Phone 8, which already appears to already have the backing of Verizon Wireless (NYSE:VZ) and Leap Wireless (NASDAQ:LEAP). And RIM has promised to release BlackBerry 10 later this year, and hopes to capitalize on possible weakness among Android vendors with the promise of supporting Android applications on BlackBerry 10.

So is this the end of Android? I'm not convinced. Consider the Samsung Galaxy Note, which ushered in the market for "phablets" (a combination of phones and tablets). The Note sports a 5.3-inch screen and, by most guesses, was destined for a small group of users who could tote such an unwieldy phone. But Samsung surprised just about everyone with massive Note sales; Samsung announced in late March it sold 5 million Notes since launch and expects to sell an additional 10 million Notes this year. The success of the Note, and other huge-screen phones, caused ABI Research to predict that "phablet" sales will grow to 208 million units in 2015.

The success of the Galaxy Note highlights all the elements of Android that make the platform so powerful. Since Android is open source, manufacturers can do whatever they want to it--including build gigantic phones. Samsung likely couldn't have built the Note with Microsoft's Windows Phone platform due to Microsoft's more stringent hardware requirements. RIM could have offered a large-screen BlackBerry, but it wouldn't have enjoyed the support of the vibrant ecosystem of third-party developers that currently build for Android. And Apple generally doesn't throw products into the market to see what sticks, as Samsung appears to do.

Thus, the Note is a shining example of why Android has generated so much support from vendors--it allows them to find opportunities (like people who want colossal phones) and then take advantage of those opportunities. Sometimes that works in Google's favor (as in the Note, which carries Google's services) and sometimes it doesn't (as in the Amazon Kindle Fire, which doesn't carry Google's services).

To be clear, I'm not arguing that Android will emerge the winner over the likes of Windows Phone and iOS. But I do believe Android still has room to grow, if Google and Android licensees play their cards right. The U.S. release of Samsung's Galaxy S III could reignite Android's market share in the United States. Moreover, Google likely will unveil more Android innovation during its upcoming Google I/O conference later this month. And then there are Android tablets, sales of which Google could goose with the release of low-cost Nexus tablets.

Google's Android is still very much in the game, and I see little reason to count it out. +Mike Dano

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