Sunday, June 6, 2010

Apple s iPhone vs. Google s Android: Battle may set computing future

Windows vs. the Mac OS. Internet Explorer vs. Netscape Navigator. The iPhone vs. Android.

The first two of those battles have defined computing over the past 25 years, shaping how consumers use their PCs and how they surf the Internet. Now many tech observers are predicting that the third battle will dominate the coming era, determining how consumers use whole classes of new devices from smartphones to tablet computers to Internet-connected televisions.

While many people still cling to their BlackBerrys, and a few to Windows Mobile devices, Google's Android in little more than 20 months has surged to become the strongest rival to Apple's iPhone and its companion iPad, outselling the iPhone in the U.S. for the first time in the first quarter of this year.

Apple will seek to bolster its position Monday at its Worldwide Developers Conference, where CEO Steve Jobs is expected to unveil the next version of the iPhone, with new features that may help it regain its advantage. Many also see the event as an opportunity for Apple to fire back at Google, whose representatives made a number of verbal gibes at Apple during its own developer conference last month.

Talking smack may be good fun, but both companies are well aware of the stakes. In recent months they've also engaged in dueling acquisitions, each purchasing startups specializing in mobile advertising and streaming media.

"It's probably going to be an even bloodier battle this

time around," said Tim Bajarin, a principal analyst at Creative Strategies, a consulting firm.

The two companies weren't always at odds. As recently as last summer, Google CEO Eric Schmidt still sat on Apple's board, and when Apple launched the iPhone in 2007, Schmidt was on stage to praise Apple's achievement.

But the battle started brewing not long after Google's move in fall 2007 to unveil Android, its smartphone operating system. Jobs and Apple were reportedly blindsided by the move.

As Jobs put it last week at the D: All Things Digital Conference, put on by a unit of Dow Jones, in describing how the two companies' formerly friendly relationship had soured, "They decided to compete with us (in mobile phones). And it got more and more serious."

But the magnitude of the budding rivalry started to become clear only in recent months, as the market for Android phones exploded. Google has rapidly polished the software, and phone manufacturers have responded: More than 50 phones made by more than 20 manufacturers in 48 countries now run the operating system, up from just three models a year ago. In the U.S., Android phones are on all four of the major carriers.

Consumers are starting to respond, too: According to the latest report from Gartner, an industry research firm, Android-based phones outsold iPhones in North America for the first time in the first quarter of this year. Compared with the year-earlier period, Android phone sales grew an eye-popping 707 percent.

And analysts think that Android is only getting started.

"In a couple of short years, they are going to be the No. 2 operating system in the world — with virtually no marketing," Will Stofega, a smartphone analyst with research firm IDC, said of Android, putting it ahead of the BlackBerry OS and Apple iPhone.

For many observers, it seems a familiar story, similar to what happened in personal computer operating systems in the 1980s. Apple's software was elegant, Microsoft's clunky. Many observers make the same comparison between the iPhone OS and Android's "rough edges."

But Microsoft allowed any personal computer maker to license and install DOS, then Windows, while Apple kept Mac OS to itself. Microsoft's strategy so trounced Apple's that by the mid-1990s, Windows was on the vast majority of personal computers in the world — and Apple was nearly bankrupt.

For its part, Google has been eager to play up the parallels, emphasizing how Android is "open" and the iPhone is "closed" and asserting that openness will eventually win.

At its recent developers conference, Google executive Vic Gundotra even brought his daughter into the fray, saying that she couldn't watch her favorite Nickelodeon videos on her family's new iPad because the site uses Adobe's Flash, and that she had to use Gundotra's Android phone.

"That's what openness means," Gundotra said, in a reference to Apple's shunning of Flash. "It's much nicer than just saying no."

But it's not at all clear yet whether the smartphone market — much less the emerging markets for tablets or smart TVs or other, new "smart" devices — will play out the same way as the personal computer market did. In fact, many analysts believe that while personal computers eventually boiled down to two primary operating systems, with one hugely dominant, the smartphone market is big and diverse enough to sustain four or five.

Apple still has its strengths. The more than 200,000 applications in its Apps Store outnumbers by far the number of applications available for Android, BlackBerry and Windows Mobile phones combined. And Apple has sold 85 million iPhone OS-based devices in the past three years, representing a sizable user base that Android has yet to approach.

Still, as much interest as the Android-iPhone battle is drawing, it's important to note that neither yet ranks among the top two smartphone operating systems worldwide. Symbian — largely linked to cell phone giant Nokia — still owns a commanding 44 percent share of the global market for smartphone operating systems. Research In Motion's BlackBerry operating system still leads among smartphones in North America and is No. 2 worldwide.

And Google has its vulnerabilities. While Apple is closely tuned to consumer demand, Google has had a tough time reaching smartphone customers. Google is soon to introduce the latest version of Android with many new features, but its effort to sell the Nexus One smartphone through the Internet was a self-acknowledged flop.

Google and its manufacturing partners "have done a great job, they've got a lot of fundamental advantages over Apple. The hardware has now eclipsed Apple's," Gartner analyst Ken Dulaney said. "But Apple continues to be successful because their message to the end user is clear and singular and very easy to understand."

The battle might not result in a clear winner and loser. After Jobs' return to Apple, the company figured out a way to succeed in the personal computer business without being the dominant player. Today, while still having a minor share of the business, the company's profits on its Macs are the envy of the industry and it is a leader in adopting new technologies and making more environmentally friendly machines.

Apple could end up playing a similar role in smartphones.

"We want to make better products than them," Jobs said at the D conference. "What I love about the marketplace is that we do our products, we tell people about them, and if they like them, we get to come to work tomorrow."

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