Apple's iPhone Success Is Bad News For Android, Windows, And Blackberry Phones

Apple has its smartphone mojo back.

A strong fourth quarter saw iPhone grab a larger percentage of the global market with its gain coming mostly at the expense of phones running Google's Android operating system, according to data from IDC. In the fourth quarter of 2014 Apple grew its share from 17.5% of the market to 19.7% while Android fell from 78.2% to 76.6%.

Source: IDC

The challenge for Apple is keeping up its momentum until it releases another phone. Much of the company's Q4 success came "due to the strong demand for Apple's new and larger iPhones and the reception they had within key markets," IDC wrote. The larger screen size on the iPhone 6 and the even bigger 6 plus phablet were clearly something Apple fans were waiting for, but going big was also the last obvious arrow in the company's quiver.

That's not to say the next iPhone won't have some sort of must-have feature that causes the company's user base to upgrade, but the easy moves have all been made.

It's Apple and Android

While Apple gained share over Android, the two phones thoroughly dominated the globe controlling a combined 95.7% of the market.

"Many of the same drivers were in play for Android and iOS to tighten their grip on the market," said Ramon Llamas, Research Manager with IDC's Mobile Phone team. "A combination of strong end-user demand, refreshed product portfolios, and the availability of low-cost devices particularly for Android drove volumes higher.

Apple and Android are sharing the top-end of the market while there are multiple phones from a variety of manufacturers using Google's OS in mid and low-priced phones.

"What will bear close observation is how the two operating systems fare in 2015 and beyond," added Llamas. "Now that Apple has entered the phablet market, there are few new opportunities for the company to address. Meanwhile, Samsung experienced flat growth in 2014, forcing Android to rely more heavily on smaller vendors to drive volumes higher."

It's worth watching, but in reality, the smartphone market has largely become a battle between these two companies. Apple and the various Android phone makers will trade share, but it's hard to imagine how any of the other players could take away meaningful market share.

Who's on third?

The battle for third has become Microsoft's by default. On the positive side, the company shipped 10.7 million phones in Q4, 2014, up from 8.8 million in the same period last year. Unfortunately, despite the volume growth, Microsoft actually lost market share falling from 3% to 2.8%.

There are some positive signs moving forward for Microsoft though as the release of Windows 10 will give the company a single operating system which will power its PCs, tablets, and phones. This should make the platform enticing to more corporate customers. That might help the company eek out a bigger market share, as the unified Windows universe will dramatically increase the number of apps available on its phones.

Microsoft has also largely left the top of the market alone focusing on mid-range and entry-level devices. It's possible the company could sway some top-end Android and iPhone customers if it releases a compelling flagship phone.

The other player in the race -- and we're talking limping horse that's right on the edge of being put down -- is Blackberry which not only saw a drop in shipments year-over-year, but lost market share as well. It's hard to put any positive spin on that news, but the company did release two new phones -- the Passport and the Classic -- later in the year and has ramped up its distribution in recent weeks.

"Instead of a battle for the third ecosystem after Android and iOS, 2014 instead yielded skirmishes, with Windows Phone edging out BlackBerry, Firefox, Sailfish and the rest, but without any of these platforms making the kind of gains needed to challenge the top two," said Melissa Chau, Senior Research Manager with IDC's Worldwide Quarterly Mobile Phone Tracker.

Microsoft could become a stronger number three and Blackberry could firmly establish itself as a niche player, but competing with Apple and Android any time soon is unlikely.

The next iPhone is key

By only making top-end phones (while letting old models serve as quasi mid-range devices) Apple has ceded a part of the market to Android and the lesser players. That leaves the company in a constant cycle of having to deliver on its next phone.

That said, Apple has consistently made the release of a new iPhone a big deal. Yes, the 5C was a bit of a misstep, but releasing the 5S at the same time eliminated the impact of that mistake.

Android is in a more enviable position because the Google OS has multiple manufacturers making phones for it. That gives fans of the OS a larger world of devices to pick from and makes it less likely they will leave the fold.

But, unless Apple truly releases a clunker -- perhaps a flip iPhone -- the wireless market is likely to remain firmly dominated by iOS and Android with everyone else fighting for scraps.

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Daniel Kline owns shares of Apple and Microsoft. He really misses his Blackberry. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). 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.

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