Apple Should Be Nervous About This


Despite Apple's increase in shipments year-over-year, the mobile world is increasingly becoming Android-centric. Apple's best efforts may have increased the amount of iPhones in the world, but its OS market share has dropped and Google's Android has only grown.

Moving ahead, while falling behind
The latest smartphone OS data from IDC shows that Apple shipped 37.4 million iPhones in Q1 2013, an increase of 6.6% from last year. Meanwhile, Android shipments grew by 79.5%. Despite Apple's modest increase in iPhone shipments, the company lost about 6% of its market share from Q1 2012 to Q1 2013, while Android gained about 16%.

Apple and its investors should be nervous about this. There's no debating the company makes great products and has been one of the most innovative technology companies of the past two decades, but at some point these numbers will come back to bite Apple.

It's not that other competitors are pushing Apple out of its spot. Nokia shipped more than 20 million Windows Phones since it launched the OS on its devices, but Windows justnow took the No. 3 spot away from BlackBerry. Meanwhile, BlackBerry shipped over 1 million BB10 OS devices in the past quarter. Both of the increases in OS market share for Windows Phone and the amount of shipments for BlackBerry are good news for those companies, but it's not really impacting the Cupertino company. What's hurting Apple is that despite making great phones that people buy, Android is still moving further ahead.

Market share matters
Investors know that market share isn't the only consideration in assessing how well your company is doing. Revenue, profit margins, dividends, free cash flow and a host of other financials paint a fuller picture when they're all added together. But market share is a great metric for showing what customers want.

You've probably read a lot about Apple's need to update its operating system, and with the IDC's latest numbers this appears more imperative than ever. Android has amassed a global smartphone OS market share of 75% in the first quarter, and Apple's was 17.3%. It's worth noting that Android has many OEMs that boast the OS, so it's not just a one-man shop like Apple is. But that argument doesn't add up when you consider Apple's iPad dominated the tablet market with 60% market share at the beginning of 2012, and still had 40% this past quarter. That shows me the company is able to have a take-no-prisoners approach to a market, but that it's simply not able to do that with the iPhone right now.

One of the only ways to reverse this trend is for Apple to bring out a completely new iOS. Apple has some of the most amazing hardware, but to really make gains against Android, the iPhone maker is going to need to revamp its software in such a way that mobile users want to make a switch. This may be obvious, but until Apple does something about it, I don't see how it can make significant gains against Google's green machine. Premium hardware and solid -- but aging -- software isn't enough to take on Samsung and a host of other Android-touting companies. A change to the iOS needs to be made, and it needs to be made soon.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

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Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published