Apple Inc. (AAPL), Google Inc (GOOG): Does This Rumor Confirm Cannibalization?

Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) are involved in a smartphone batle that gets more pitched each year. (In and out of a courtroom.) With the Android and iOS operating systems taking more than nine-tenths of the smartphone market, it really has become a duopoly, and both companies are finding their shares of the market in different ways.

Google Inc (NASDAQ:GOOG), for the most part, has been successful at getting Android penetration in the price points that Apple Inc. (NASDAQ:AAPL) has not  touched historically – the mid-range and “budget” range. Apple, meanwhile, has continued to own the higher-priced, premium market. We all read those market surveys that say that Android is dominating iOS in the market, but you never see the market breakdown by individual devices. For example, do we see any comparisons between the number of the latest iPhone model that have shipped in the last six months compared to the highest-priced Android smartphone – usually a Samsung Galaxy model? We do not, usually, and we’re sure there is reason for it.

But historically, Apple Inc. (NASDAQ:AAPL) has been known to discontinue older versions of iPhones as newer versions come out, and that seems to be the case again this time around when the company finally releases its iPhone 5S and a still-rumored budget iPhone – the one that will finally bring Apple to a wider consumer audience.

While Google Inc (NASDAQ:GOOG) still puts out a wide variety of Android devices across several price points, there is not much fanfare about devices being discontinued as new models are introduced – it just seems that Google attaches a newer fragment version of the current OS and makes sure those are not compatible with too many older versions and let the discontinuation happen on its own.

There does seem to be a big difference this time around when it comes to Apple Inc. (NASDAQ:AAPL), at least if the latest rumor is true. A Chinese website is reporting (interpreted through our friends at PhoneArena.com) that instead of retiring an iPhone 4 or 4S when the new iPhone launches, Apple may instead decide to discontinue the iPhone 5 – essentially using the S as a direct replacement in the market.

Why would this happen? If one thinks about this and looks to the most recent quarterly earnings report to see the sales breakout, one could see how this might make good business sense.