Smart Products

October 28, 2009

DROID Flexes Its Muscles; Nokia Loses Its Mo

The debut of Motorola’s DROID smartphone as a Verizon Wireless exclusive is stimulating a lot of predictable discussion about how well this latest Google (News - Alert) Android based handset stacks up to the iPhone. The equally predictable conclusion is that the DROID will likely be a hit with millions of subscribers, and will bring more defectors from T-Mobile and Sprint (News - Alert) over to Verizon Wireless, without in any way being an iPhone-killer.
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And that’s just fine with Google. Google is playing a numbers game with its royalty-free, open Android OS and the free applications and advanced features that it makes available first on Android phones. As long as handset makers keep designing new, always improving Android smartphones, and more wireless carriers around the world are willing to offer them to subscribers, Google will end up having a major advantage in rolling out its services to a significant share of future smartphone subscribers.
It has already reached its goals for 2009, with 12 Android handsets being offered by 32 carriers in 26 nations (according to the Financial Times (News - Alert) on October 26). The latest report from Gartner Research estimates that by 2012 half of the new handsets sold worldwide – some 500 million phones – will be smartphones and Android will be the OS for at least 18 percent of those smartphones. That’s a big enough footprint to guarantee a critical mass of early adopters for any new mobile service that Google wants to dominate. And if Apple still has sexier, sleeker, more fashionable smartphones that millions of subscribers can’t live without in 2012, that won’t disrupt Google’s strategy in the least.
But when two new smartphone operating systems zoom from zero market share to, let’s say 18 percent share for each new entrant, in less than 5 years, somebody has to feel the pain. What Apple and Android win, someone will be losing. It’s not likely to be RIM, which keeps coming up with better versions of the BlackBerry (News - Alert) to give confirmed e-mail junkies their fix and to win over some consumers with the practicality of a purpose-built device. Microsoft’s Windows Mobile is slipping, but frankly it doesn’t have very far to fall, having never made much of a dent in the broader smartphone market.
A clue to the real pain point comes with Nokia’s (News - Alert) recent announcement that it is delaying the launch of its N900 smartphone, perhaps by up to a month, in the critical pre-Christmas season. The N900 has been widely anticipated as Nokia’s latest attempt to demonstrate that it too can design a phone with enough of a “Wow” factor to create lines of customers willing to wait outside of mobile stores to get their hands on a hot new release. Until that happens, Nokia’s recent slip from 41 percent of the global smartphone market in Q2 of 2009 to just 35 percent at the end of Q3 will be just the beginning of a long and painful slide in profitability. The patent suit against Apple will start to look less like Nokia’s version of flexing its muscles and more like a sign of desperation as it fights a losing battle against two very smart phone operating system innovators.

Dr. Cronin is a Professor of Management in the Information Systems Department at Boston College. To read more of her articles, please visit her columnist page.

Edited by Michael Dinan