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IDC: iPad to stay very strong this year

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March 13, 2011

According to market research firm IDC, Apple's share of the media tablet market dropped to about 73 percent in the fourth quarter of last year due to the arrival of the Android tablets led by the Samsung Galaxy Tab.

Nevertheless, the iPad will still remain strong this year, and should maintain a 70 to 80 percent share IDC said, while Forrester Research puts the figure at 80 percent, and projects that only Amazon.com could mount significant competition via a Kindle that should be available in different colors.

With today's launch of the iPad 2, Apple hopes to continue its domination of the consumer media tablet market. Yet, Android tablets have established a small lead, driven by the Samsung Galaxy Tab, says a new IDC tablet study.

However, IDC didn't disclose how much of the remaining 27 percent was represented by Android tablets, but said that Samsung's Android 2.2-based, seven-inch Galaxy Tab (pictured here) closed out the year with 17 percent of the market on its own.

About 10.1 million media tablets were shipped during the fourth quarter, more than double the 4.5 million that were said to have shipped in the third, said IDC.

Despite Android's recent gains, IDC still expects that Apple's iPad and iPad 2 will maintain a 70 percent to 80 percent share of the fast-growing market in 2011, out of some 50 million total units expected to ship by the end of the year. Diverging from some analyst firms, such as RBC, which sees faster growth for Android tablets, IDC expects the iPad 2 to fend off challenges from a host of 10.1-inch Android 3.0 tablets due in the coming months, led by the now-shipping Motorola Xoom and soon to ship Samsung Galaxy Tab 10.1.

Nevertheless, Android tablets are still expected to own most of the remaining share, followed by the Research In Motion PlayBook and HP's WebOS-based TouchPad.

But IDC tracks the e-reader market separately from tablets, despite the fact that its tally includes multimedia-enabled color devices such as the Barnes & Noble Nook Color, which many see as a major competitor to media tablets. IDC says that despite the fast growth of multipurpose color tablets, the global e-reader market "picked up significantly in the fourth quarter."

Overall, the eReader market more than doubled in volume from the previous quarter, with more than six million units shipped, bringing the full-year total to 12.8 million units shipped, says IDC. The increase was pegged largely to "strong sales of Amazon's Kindle," as well as "significant gains from competitors such as Pandigital, Barnes & Noble, Hanvon, and Sony among others," according to the research IDC.

Forrester Research is even more confident than IDC that Apple will hold on to its tablet lead. In a study of the U.S. tablet market, Forrester projects that the iPad 2 alone will claim about 80 percent of the tablet market in 2011.

Apple's projected 80 percent share of the U.S. consumer tablet market through 2011 represents a 10 percent drop from its 90 percent share in 2010 when the first iPad sold 15 million units, says the study.

According to a March 10 analysis of the study, Forrester analyst Sarah Rotman Epps said that the new Android tablets, as well as the TouchPad and PlayBook, are "solid products with fatally flawed product strategies." In short, the devices are simply too expensive and can't compete with the Apple Store channel, writes Epps.

But some wireless industry analysts disagree. Amazon.com has a potential dark horse challenger to the iPad landscape, which is supported by a thriving, but closed ecosystem of tightly controlled hardware, software, and applications.

"We see here a market that's ripe for disruption and by Amazon in particular," Epps writes. "Amazon could create a compelling Android or Linux-based tablet offering and provide it as easy access to Amazon's storefront, including its forthcoming Android app store and unique Amazon features like one-click purchasing, Amazon Prime service and its recommendations engine if it wanted to."

With a rumored color media tablet version of Amazon's Linux-based Kindle, most likely switching to Android, Amazon could demand immediate attention in the marketplace, suggests Epps. Amazon could also offer users an alternative to the stringent rules Apple has created for ebook sellers and publishers that require in-application payments, she argues.

In addition, Amazon could also sell a tablet at or below cost, recouping its expenses by selling content. This model, Epps says, would be preferable to the model Motorola, Samsung, and others are currently using to sell their tablets via wireless carriers at a subsidized price.

In other market news, 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.

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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.

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Source: IDC Market Research.

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