Growing Competition

By Reuters  |  Print this article Print

Apple is expected to unveil its next-generation iPhone at its WWDC with new features such as multitasking, a better screen, and a front-facing camera. But can Apple's iPhone hold onto its momentum amid increasing competition from Android-based smartphones in a market that grows more crowded by the day?

The iPhone, introduced in 2007, arguably created the modern smartphone industry. The template pioneered by the iPhone -- a roughly 4-inch slab with a touchscreen interface offering quick access to thousands of applications -- has become the standard for Web-surfing handsets.

But the market has since grown thick with competitors, particularly slick smartphones based on Android.

"Android is the only real contender to the throne," said Rodman & Renshaw analyst Ashok Kumar.

"Nokia's position continues to fade, RIM has yet to make traction on the consumer side, and Microsoft could end up being too little, too late."

Nokia's Symbian mobile operating system is the global market leader and RIM's platform is No. 2, but both are losing market share, according to Gartner data.

The iPhone's global share surged to more than 15 percent in the first quarter, making it No. 3. Android was No. 4 with close to 10 percent of the market, a huge increase from the previous year and gaining, Gartner data show.

Milanesi said the iPhone has done well internationally, particularly in Europe, but still has plenty of room to grow in Asia, where competition is fierce and smartphone preferences can vary widely from market to market.

The iPhone is available in around 90 countries and on more than 150 carriers. Apple sold a record 8.75 million iPhones in its latest quarter. That accounted for 40 percent of revenue, with margins estimated at roughly 60 percent.

Many on Wall Street expect the iPhone to arrive at Verizon no later than 2011, and perhaps as early as this fall. Apple is not expected to announce a Verizon iPhone on Monday.

AT&T has come under withering criticism from iPhone users over its network quality, although Jobs said this week he expects to see improvement this summer.

AT&T said Wednesday it will stop offering an unlimited pricing plan for new subscribers to its mobile data services, which could help improve the speed of its network in some areas by cutting down on network-clogging downloads.

Piper Jaffray analyst Christopher Larsen said the timing of that announcement, days before Apple's event, was no coincidence. It could help the carrier keep its exclusive iPhone deal for longer.

How Apple chooses to price its newest iPhone, as well as the older models, will be closely watched, given Apple's enviable margin profile. The latest model iPhone, the 3GS, starts at $199 with an AT&T subsidy, with the older model 3G priced at $99.

Many doubt there will be any surprise announcements on Monday, but with Apple one never knows. The rumors include a Web-based version of iTunes, and a new version of Apple TV.

(Editing by Edwin Chan and Richard Chang)