Microsoft vs. Apple 2015: The Battle For Second Place Is On

By Markets Fool.com

According to recent data from research firm Gartner, it doesn't appear much will change in 2015: The PC market should continue to stabilize, the growth in tablet sales will wane, and smartphones will once again dominate device sales. So, who will be running the nearly 2.5 billion devices expected to be sold this year?

Continue Reading Below

Google's Android OS is the dominant operating system today, and it's expected to garner an even bigger slice of the pie this year and next -- no surprise there. What may come as a bit of a shock is the battle going on between Microsoft and Apple for No. 2 on the OS list. In large part because of the aforementioned PC market, Microsoft boasts the No. 2 position among OS providers across devices. In fact, as per Gartner, Microsoft CEO Satya Nadella's emphasis on all things mobile will help distance Microsoft even further from its longtime rival.

Just the facts
Despite the headlines screaming "tablets are dead," sales of tablets are expected to grow 8% in 2015, totaling 233 million units, according to Gartner. Based on Gartner's estimates, tablet sales should ramp up even further in 2016, growing an estimated 11% to 259 million devices. While certainly not anywhere near phone sales of over 1.8 billion units last year, and an expected 1.9 billion this year, there's room for Microsoft's Surface Pro 3 and Apple's iPad tablets to gain some traction.

In total, worldwide device shipments will near 2.5 billion units this year, says Gartner, up about 4% from 2014. Android will be the OS of choice for over half all those devices this year and next, which leaves Microsoft and Apple battling for second. Turns out, it won't be much of a battle after all. Microsoft already holds a commanding lead over iOS and Mac OS combined sales, and it appears the gap will widen going forward.

According to Gartner, a whopping 355 million units -- PCs, tablets, mobile phones, and various "hybrids" combined -- will be sold this year running Microsoft Windows and Phone OS. That compares to 279 million Apple iOS and Mac devices, a larger difference than 2014. If PC sales were exploding, it would be easy to explain Microsoft's growing OS market share: There's no denying its PC market dominance. But with PC sales flat to down, and Apple's smartphone sales through the roof, how is it that Microsoft can solidify its position as the No. 2 OS on the planet? Depth, and breadth.

The challenge
As Gartner put it, "The smartphone market is becoming polarized between the high- and low-end market price points," which sums up the challenge Apple faces going forward. As iFans are quick to point out, Apple's declining OS market share position hasn't negatively affected revenues, and they're right. But the "polarization" between high- and low-end devices means future growth opportunities are becoming limited in mature markets. Microsoft's willingness to target emerging regions with low-cost units will likely stretch its OS lead over Apple.

Continue Reading Below

It's no wonder rumors are swirling about Apple possibly releasing a smaller, lower-end smartphone to fill the growing gap between iPhone-like premium units with a cost averaging $477 last year, and the basic smartphone market with an average selling price of about $100. Of course, Apple has long pooh-poohed the notion of "lowering its standards," but with the direction the computing market in general, and mobile devices in particular, are heading, maintaining the status quo may become more difficult going forward.

Microsoft, on the other hand, has made it clear it's following Google's path in bringing as many mobile devices as it can to as many consumers as possible. The recently announced $29, Internet-connected 215 smartphone model is an extreme example of Microsoft's plans to get its OS into the hands of users in Africa, Asia, and the Middle East, but the objective is clear.

Will the widening gap between the No. 2 and No. 3 OS providers spell doom for Apple? No. Its position as the high-end provider of tech devices is too entrenched to suddenly topple. At the same time, it's easy to see why Microsoft is adhering to Nadella's "mobile-first" mantra: Getting its OS into the hands of as many global users as possible, no matter the device, is an ideal entree to its suite of other products and services. For now, Microsoft and Apple are simply taking two different paths to reach the same conclusion: success.

The article Microsoft vs. Apple 2015: The Battle For Second Place Is On originally appeared on Fool.com.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Gartner, and Google (C shares). The Motley Fool owns shares of Apple, Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.