iOS Vs Android: There is no denying the fact that Apple Inc. (NASDAQ:AAPL) has quite a bit of competition from Google Inc (NASDAQ:GOOG)’s Android operating system. While both companies are fighting it out for the top spot in a number of market segments, consumers are taking the time to carefully consider their options.
Bernstein Research’s Toni Sacconaghi recently took a closer look at the struggle for supremacy, as noted in this article posted by Barron’s.
Before we go any further, let’s point out that Sacconaghi has a $725 price target on Apple Inc. (NASDAQ:AAPL) and an “outperform rating.”
He notes that “Android has gone from zero market share to “nearly 70%” of the smartphone world in five years, while Apple’s iOS operating system, has gone from 9% to 19% in the same time.”
As you can see, in the last five years the Google Inc (NASDAQ:GOOG) operating system has made major headway. While it has been able to significantly boost its market share, Apple has struggled to pick up as much steam.
On the other side of things, you have the tablet market. This is where Apple appears to have a stronghold while Google is trying to catch up.
To better understand why this is the case, Sacconaghi notes that Apple Inc. (NASDAQ:AAPL) is taking a different approach to each market. Here is some more information from the analyst:
“Ultimately, we see several differences between Apple’s approach to the smartphone and tablet markets. The iPhone left a price umbrella for other smartphone vendors to offer cheaper unsubsidized smartphones, even at the premium end. The subsidy model allowed Apple to earn gross margins well above 50% on the iPhone, compared to ~30% on non-subsidized hardware products (Mac, iPad, iPod). Other smartphone vendors using free Android software were able to price below Apple Inc. (NASDAQ:AAPL) for unsubsidized phones and still earn gross margins above 30%, especially on high-end smartphones. Apple did not leave a similar price umbrella under the iPad. In fact, the iPad was cheaper than tablets with inferior features when it was first released.”
The most important thing to take away from this quote is that Apple did not leave a “price umbrella under the iPad.” Instead, the company priced the tablet at the bottom of the market, even below tablets with inferior features.
It will be interesting to see how things play out between the Google Inc (NASDAQ:GOOG) Android operating system and Apple Inc. (NASDAQ:AAPL) iOS as 2013 wears on.
Do you agree with Sacconaghi’s assessment? Share your thoughts in the comment section below.
Check back here for more updates on iOS Vs Android.
DISCLOSURE: I have no positions in any stock mentioned.
For more news stories, visit these pages: