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March 8, 2011

According to market research firm comScore, Google's Android operating system is now the most-used smartphone OS in the United States. This represents a fast race to the top from a platform that didn't even exist a little over two years ago.

About 31.3 percent of all smartphones in the United States ran Google's Android OS in January, says comScore. That outpaced the 30.5 percent of American smartphone owners who use RIM's BlackBerry phones.

The near 'rocket rise' of Android began in late October 2008, when HTC's G1 phone went on sale for T-Mobile USA users. The platform really started to take off when the Motorola Droid went on sale in November 2009. Google's mobile OS began in 2010 with just a small 7 percent share of the smartphone market, but Android has grown by an astounding two percentage points each month since. And the trend continues.

Android was in fourth place as recently as May 2010, but it outpaced Microsoft's Windows Mobile in June. In November, Android overtook Apple's iOS, which runs on the iPhone, iPod Touch and iPad. It finally conquered the mighty BlackBerry OS in the first month of 2011, easily surpassing an operating system that had more than a 42 percent share of the U.S. smartphone market barely a year ago.

Today, about 350,000 Android devices are activated each day, and there are more than 170 smartphones and tablets running Android, according to Google.

Overall, most of Android's spectacular success can be attributed up to Google's open business licensing model. Google licenses its mobile OS for free, allowing wireless handset manufacturers to load the ready-made software onto their phones instead of paying a team of engineers to develop a proprietary platform.

Not only that, but they can also customize it and make as many modifications as needed as well. It's based on the open source concept, very much like the Linux operating system is.

So far, LG Electronics, HTC Corp, Samsung, Motorola and dozens of other mobile handset makers have jumped onto the Android bandwagon, and the overall ability and ease to focus exclusively on the hardware allowed device manufacturers to start bringing new phones to market much more quickly.

In fact, the time it takes smartphones to go from concept to store shelves has been halved thanks to "Android's new law," say some wireless industry observers that are close to Google.

Globally, Android beat BlackBerry last year, but it still trails Nokia's Symbian OS, according to Gartner. Nokia recently announced that it would drop its Symbian OS, which has been rapidly losing market share, for Microsoft's Windows Phone OS.

Nokia CEO Stephen Elop acknowledged that he had considered partnering with Google, but he said that Windows Phone offered more differentiation amid a sea of new Android devices.

At a press conference in London last month, Nokia CEO Stephen Elop and Microsoft's Steve Ballmer announced that Nokia will abandon its Symbian and Meego operating systems to instead adopt Microsoft's Windows Phone 7 OS. Windows Phone 7 will become the predominating operating system for Nokia smartphones from now on.

Most wireless industry observers agree that the strategy is a drastic one meant to fend off the growing momentum by mobile competitors Google's Android operating system and Apple's iOS.

"We think that this will make a three-horse race," Elop said during a press conference. "It's good for Nokia and it's good for Microsoft. It allows us to move faster than we could otherwise."

Elop and Ballmer explained their company's new tight alliance for mobile phones at today's analyst and strategy meeting that took place in London.

The partnership between the two companies goes much deeper than just an agreement to install Microsoft's OS on Nokia's smartphones. The two companies plan to build products and services together as well as share strategic plans with each other. The vision is to create a third ecosystem that can compete directly against Apple's iOS and Google's Android platforms in the mobile segment.

And regardless of whether they ever consummate their relationship with a true corporate merger in the traditional sense, it's very clear now that Nokia's and Microsoft's fates will soon be inextricably intertwined. If either company fails in its execution of strategy, it will hurt the other and vice versa, something that will likely upset investors in a very big way.

The partnership described by the two executives today is so close that it doesn't take much to wonder why the two companies didn't decide to simply merge from the start. Perhaps they are just testing the waters, but nevertheless, most at the meeting today agreed that it's a very close partnership.

Unlike traditional reseller deals, Microsoft and Nokia plan to combine some assets and collaborate on joint marketing initiatives, as well as share common development plans and build products together as a closely-knit team.

From Microsoft's perspective, the company will bring broader integration of software from all its different products as well as its Bing search capabilities and advertising platform, which Nokia can leverage on its own mobile devices. How the duo will achieve that is still unknown at this time.

Meanwhile, Nokia is the world's largest mobile handset maker, and it will bring its hardware expertise, its vast manufacturing and distribution scale, operator billing relationships and its Navteq maps and navigation business to the table.

Through this effort, the two companies expect that they will be able to drive more revenue into each other's coffers through mobile apps, more services, social-networking integration and gaming via Microsoft's Xbox broad product line.

But the mobile market is extremely different from the PC market, and it's very clear that Microsoft sees the value in Apple's model of owning both the hardware and the software of a mobile device. Microsoft has already demonstrated its willingness to move into the hardware business with the Xbox. And it has built a successful ecosystem around the product.

But the Zune, Microsoft's attempt to challenge Apple's iPod, has not been successful at all, showing that building hardware from the get go is not always the best strategy. Even acquiring hardware hasn't been an easily achievable path for Microsoft, as demonstrated by the acquisition of Sidekick maker Danger in 2008. The fruits of that acquisition was the Kin mobile phone, which was only on the market a few short months before Microsoft abandoned the project completely and focused instead on its Windows Mobile 7 OS.

The software giant has forged many partnerships in the past. Microsoft's core software business is predicated on strong relationships with key partners, such as Dell, Hewlett-Packard and a few others. And it's attempted to partner with other mobile handset makers in the past to get a stronger foothold in the mobile market, but with varying degrees of success.

Even as it pursued its own hardware strategy, Microsoft has continued to seek partnerships with other mobile-hardware makers. In 2009 Microsoft partnered with LG Electronics, which also planned to use the now defunct Windows Mobile platform as its primary platform.

While Microsoft has clearly been down this path before with other cell phone makers, Ballmer said the relationship with Nokia is unique, according to him. Elop simply agreed and explained that executives from Nokia and Microsoft were already working together to align a common strategy, but didn't comment on what it is and how it will work.

But Elop did admit that in the past, Nokia has considered using Google Android as its primary software for smartphones. However, he was quick to point out that the company decided against it because he and his team feared that they probably wouldn't have enough control over the development of the ecosystem. He said he didn't think that Nokia's assets would be valued enough and that eventually it would turn Nokia's products into commodities, something that surprised a few of the analysts in the room.

Elop said "The Google option is a valid option, but at the end of the day it felt a little bit like giving up and not enough like fighting back."

In the end, Nokia could face a similar problem in its new partnership with Microsoft. Windows Phone 7 will not be exclusive to Nokia, which means that Nokia's rivals Samsung, LG, Motorola and HTC will be able to use the platform as well-- no exclusivity here.

But Elop does believe that being beholden to Microsoft is less dangerous in terms of commoditizing Nokia's core attributes than a partnership with Google. While not everybody would agree with such a statement, he emphasized that Nokia has structured its deal with Microsoft so that it would have some control in the development of Windows Phone 7, and much more control than other hardware companies also using the software. So he believes that Nokia will be able to differentiate its product from competitors' products.

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Source: comScore.