Apple vs. Android

MKTG/267

IBS Center for Management Research

Android Vs iOS: Mobile Operating System Wars in 2010

This case was written by Adapa Srinivasa Rao, under the direction of Debapratim Purkayastha, IBS Center for Management Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

2011, IBS Center for Management Research. All rights reserved.

To order copies, call +91-08417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: [email protected]

www.icmrindia.org

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MKTG/267


Google and Apple are playing a chess game, and everyone else is playing catch-up.1

- Scott Schwarzhoff, vice-president of marketing, Appcelerator2, in 2010.

Its a software platform war. The fight is over who will create the most powerful ecosystem of developers, users, and mobile devices. Indeed, the reason the fight has gotten so nasty is because

history tells us that in such a fight, one platform typically dominates the market (see Microsoft vs.

Apple and IBM, eBay vs. Yahoo Auctions and Auction Universe, Google vs. Yahoo and

Microsoft).3

- Fred Vogelstein, Wired Magazine4, in 2010.

INTRODUCTION

On May 10, 2010, The NPD Group Inc.5 (NPD), a leading market research company, said that

Android, the mobile operating system had overtaken the iOS, the default operating system of the

iPhone, Apple Inc.s (Apple) mobile phone, in the US market for the first quarter of 2010.6 The

Android operating system, owned by the Open Handset Alliance7 (OHA) and backed by Google

Inc. (Google), had moved into the second position with a market share of 28% next only to the

BlackBerry OS (BBOS) of Research in Motion Limiteds8 (RIM) BlackBerry smartphone devices,

NPD said. However, RIMs operating system still commanded a 36% share in the US market. The

growth of Android was considered unprecedented in the field of mobile operating system. Android

had achieved the feat by replacing iOS in the US market within two years of its launch in October

2008. Many analysts said Android would replace iOS, which till then, had been considered the best

mobile operating system. Google launched its own mobile operating system which was to be

distributed to mobile handset manufacturers free of cost to control the smartphone business.

Googles entry into the mobile operating system market became imminent with many people all

1 Olga Kharif, Googles Android Gaining on Apple via Developers, http://www.bloomberg.com, June

24, 2010. 2 Appcelerator is a technology company headquartered in California, USA. It helps Web developers create

Mobile, Tablet, and Desktop applications. 3 Fred Vogelstein, Letter From Silicon Valley: Doing the Math on Android vs. Apple, www.wired.com,

July 28, 2010. 4 Wired is an American technology magazine and online periodical. It reports on issues like the effects of

technology on culture, economy, and politics. 5 NPD Group Inc., headquartered in Port Washington, USA, is a leading market research company. 6 Android Overtakes iPhone, www.smh.com.au, May 11, 2010. 7 Open Handset Alliance is a consortium of mobile operators, software companies, and handset

manufacturers. It was established in November 2007 with 34 members led by Google with the motto of

developing open standards for mobile devices. 8 Research in Motion Limited, headquartered in Waterloo, Ontario, Canada, is a mobile phone company

noted for its BlackBerry range of smartphones. For the fiscal year 2009, its revenue was US$ 11.065

billion.

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over the world starting to browse the internet on their mobile phones. Many analysts were initially

skeptical about the Androids chances of success. They said Android would be a wasteful

investment for Google, which did not have much experience in developing operating systems to

compete with giants like Apple and RIM. James Faucette, an analyst at Pacific Crest Securities,

Inc.9 (Pacific Crest), said, For Google, Android is a cash drain. They are going to lose money on

Android as an operating system. They hope to make it up from the services that they are delivering

through their infrastructure and servers.10 But Android silenced critics by growing rapidly and

proving to be a viable alternative to Apples iOS.

However, in October 2009, Gartner Inc.11 (Gartner) predicted that the Android software would

overtake iOS by 2012.12 This new projection by Gartner raised expectations about Android.

Apples iOS had, till then, been the choice of millions of smartphone users all over the world as

well as third party application developers. As the operating systems used in mobile phones became

the main domain in the battle for dominance in the mobile sector, the growth of Android put more

pressure on Apple, which had been basking in success after emerging as the worlds biggest

technology company in terms of market capitalization, overtaking Microsoft Corporation13

(Microsoft).14

Androids rapid growth was attributed to many factors. The most important of these was the

advantage Android had over iOS by virtue of being an open source operating system. iOS, on the

other hand, was a closely guarded proprietary operating system used in the products of a single

firm. Many third party application developers started to prefer Android to iOS due to the flexibility

it gave to them in developing applications. Another factor attributed for the growth was the

adoption of Android by some major handset manufacturers like HTC Corporation15 (HTC) and

Motorola Inc.16 (Motorola) which, in turn, had tie-ups with some major telecom operators like

Verizon Wireless17 (Verizon). Android also gave operators some flexibility -- some of the services

like email could be customized to be offered by the operators themselves. This adoption of

Android by major handset manufacturers helped it become the operating system in many top

smartphones. The popularity of the Android software could be gauged from the fact that five of the

ten top smartphones for the year 2009 were running on it, overshadowing iOS and BBOS (Refer

to Exhibit I for top ten smart phones for the year 2009).18

9 Pacific Crest Securities Inc., headquartered in Portland, Oregon, USA, is an investment-banking firm that

provides financial advisory services to public and privately held technology companies. 10 Miguel Helft and Saul Hansell, Google Introduces an iPhone Rival to Whims, www.nytimes.com,

September 24, 2008. 11 Gartner Inc., headquartered in Stamford, Connecticut, USA, is a technology research and advisory firm. 12 Erika Jonietz, Droid Set to Take on the iPhone, www.technologyreviewonline.com, October 28, 2009. 13 Microsoft Corporation, headquartered in Redmond, Washington, USA, is one of the leading technology

companies specializing in software products. For the fiscal year 2009, its revenue was US$ 58.437

billion. 14 Charles Smith, Microsoft Dethroned as Apple Becomes Largest Tech Firm, www.ibtimes.com, May

26, 2010. 15 HTC Corporation, headquartered in Taoyuan, Taiwan, is a manufacturer of smartphones. For the fiscal

year 2009 its revenue was US$ 4.55 billion. 16 Motorola Inc., headquartered in Schaumburg, Illinois, USA, is a major telecommunications company. For

the fiscal year 2009 its revenue was US$ 22.044 billion. 17 Verizon Wireless, headquartered in Basking Ridge, New Jersey, USA, is a leading telecommunications

company and has the largest mobile telecommunications network in the US. 18 Top Ten Best Coolest Smartphones of 2009: Review of Reviews -- iPhone, Droid, Palm Pre, and

BlackBerry Bold 9700 Top List, www.wirelessandmobilenews.com, December 20, 2009.

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Apart from emerging as the top mobile operating system, Android was also being increasingly

being used in many tablet computers which were getting more popular by the day. Google said that

it was planning to introduce a full-fledged operating system for laptops and netbooks called

Google Chrome OS19 and that it had plans to merge both Android and Chrome to create a single operating system that could be used in multiple computing devices ranging from smartphones to

laptops. Apple, on the contrary, had different kinds of operating systems for its smartphones and

other computing devices, which could make the integration of two platforms cumbersome. Google

also launched its own smartphone branded as Nexus One so as to compete with Apple better.

But analysts said the battle between Android and iOS was far from over -- Android still could face

many challenges to its growth. iOS, since its launch in 2007, had grown to become almost

unchallenged in the smartphone market with its touch capabilities unrivalled by any other mobile

operating system. Many analysts said that despite its innovative features, Android was no match

for iOS where its touch capabilities were concerned. The same touch capabilities of Android had,

however, given it an edge over other mobile operating systems like Symbian20. The new version of

iOS called iOS4, which was released in 2010 was expected to give more competition to Android. Some industry experts said that many Apple fans might have postponed their purchase of Apple

products anticipating the release of the much more advanced iOS4 and this might have caused the

share of iOS to go down temporarily

BACKGROUND NOTE

Apple

Apple, initially called Apple Computers Inc., was established on April 1, 1976, and incorporated

on January 3, 1977, as a maker of personal computers. It was founded by Steve Jobs, Steve

Woznaik, and Ronald Wayne and headquartered in Cupertino, California, USA. Apples initial products were basic desktops like Apple I and Apple II which were mainly focused on the business

segment. The growth of the company continued till 1980 owing to the success of its initial

launches. But Apple then faced some stiff competition from other leading players in the market at

that time like International Business Machine Corporation21(IBM). Apple bounced back with the

launch of its Lisa computers in 1983 and Macintosh computers in 1984. The Lisa and Macintosh

computers were considered as milestones in the computing industry because of the introduction of

the Graphical User Interface (GUI) which made computing more user friendly. .

Despite introducing the groundbreaking user interface, the Lisa and Macintosh computers were a

commercial flop. Apple reached its nadir with the expulsion of Jobs in 1985 by its then CEO John

Sculley. Many analysts predicted that Apple would be wound up or sold off. It lost its position in

the personal computing industry to Microsoft which later emerged as Apples arch rival. However, Apples fortunes revived with the return of Jobs as its CEO in 1996. Upon his return, Jobs launched a new operating system called Mac OS X. Apple launched another important product, the

iMac, in the year 1998. The iMac was a good commercial success. After the success of the iMac,

Apple tried its luck as a maker of consumer electronics goods with the launch of its revolutionary

portable digital music player, the iPod, in 2001. With the iPod, Apple introduced the click wheel

which made the access of music files very easy. The iPod proved to be a resounding success and

Apple was reborn as a maker of consumer electronics goods. The company removed the word

19 Google Chrome OS is a Linux-based operating system designed to work exclusively with web

applications. It is based on the open-source Chromium OS. 20 Symbian is one of the operating systems used by Nokia for its mobile devices. As of 2010, it was the

largest mobile operating systems in the world and was run exclusively on ARM processors. 21 IBM, headquartered in Armonk, New York, USA, is one of the leading information technology

companies in the world. For the fiscal year 2009 its revenue was US$ 103.630 billion.

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Computer from its name and became Apple Inc. in January 2007, to mark its transition into a consumer electronics goods company. Apple entered the mobile phone market with the launch of

its iPhone in June 2007.22Like its previous products, the iPhone shook up the mobile phone market

with its new multi-touch user interface which facilitated many tasks on the mobile phone like

complete Internet access. .The iPhone rewrote the rules of the high-end mobile phone market with

its huge success. The killer feature in the product was its operating system, the iOS, which was a

complete mobile operating system unlike the operating systems available on other mobile phones

at that time.

Google

The roots of Google lie in a research project by two PhD students at Stanford University, Larry

Page (Larry) and Sergey Brin (Sergey) in 1996. Google pioneered a new technology called

PageRank which determined the importance of the website by the number of pages and the importance of the pages that linked back to the original site. This new technology was a shift from

the earlier method followed by other search engines which ranked the results by the number of

times the search terms appeared on the page. The primary domain of Google, www.google.com was registered in September 1997 and the company was incorporated in September 1998 at a

friends garage in California, USA.

In 1999, the company moved its headquarters to Palo Alto, California, which was the home of

several other technology companies. Google started to sell advertisements associated with search

keywords, though with some initial opposition from the founders, Larry and Sergey. Thus began

Googles reliance on search related advertising for its revenues. This business model of Googles was a huge success. From 2001, Google based its growth strategies on acquiring many small

companies. It added many other products to its product portfolio like Google Earth23 and

YouTube24. Apart from acquiring other companies, Google also launched its own products like the

free webmail, called Gmail in April 2004. Gmail was also well received by the web community due to the manifold increase in storage space provided by Google (initially one GB). The success

of Gmail made Google the undisputed leader on the internet, overtaking many other established

internet companies like Yahoo! Inc.25 (Yahoo).

Despite its dominant position on the internet, Google started facing competition from the mobile

phone companies which owned their own operating platforms. Due to the increase in mobile phone

penetration, people all over the world started using their mobile phones to browse the internet

rather than their personal computers. Google, therefore, had to make applications for its various

services to work on these various platforms. Developing applications for a variety of platforms

also proved to be cumbersome. Google decided to launch its own open source platform for mobile

phones, which would give the application developers the freedom to develop applications for

various mobile phones without depending on any handset manufacturer or service provider.26

Application developers had earlier had to depend on and adhere to the standards and conditions set

by the handset providers which owned their respective operating systems. Google expected that

this new open source platform would give it significant control over the mobile internet which was

gaining prominence. This step was also expected to relieve Google of having to develop

applications to different platforms.

22 Company Overview, www.google.co.in/intl/en/corporate. 23 Google Earth is a virtual globe, map, and geographic information application owned by Google. 24 YouTube is a video sharing website owned by Google. Users can upload, share, and view videos on the

website. 25 Yahoo! Inc., headquartered in Sunnyvale, California, USA, is an internet company which provides

services like search engine, webmail, online mapping, etc. For the fiscal year 2009 its revenue was US$

6.460 billion. 26 Geoff Duncan, T-Mobile Launching First Android Phone? www.digitaltrends.com, August 15, 2008.

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As of September 2009, the revenue of Apple was US$ 42,905 while that of Google was US$

23,650 (as of December). The huge gap in the revenues of the two companies could be attributed

to the success of some of Apples products like the iPod and the iPhone. Googles revenue, was on the other hand, mostly advertisement-based (Refer to Exhibit II for the key financials of Apple and

Google as of 2009).

A BRIEF NOTE ON ANDROID AND IOS

Android

Android was an open-source operating system for mobile devices owned and developed by OHA.

In its basic form Android was developed by Android Inc., which was later acquired by Google in

the year 2005.27 Google later started developing a full-fledged Linux-based operating system for

mobile phones based on its experience in developing applications for other mobile phone operating

systems. The objective of developing a new operating system was to come up with a mobile phone

operating system that would be flexible and upgradable easily multiple times. In November 2007,

the OHA was formed by several software and mobile handset manufacturing companies with the

goal of developing open standards for mobile devices.28 OHA later unveiled its product Android, a

full featured mobile operating system. Android was made open-source in October 2008, so that

private companies could develop their own applications and extensions and sell them. The first

version of the operating system, Android 1.1, was released in February 2009 and an update

Android 1.5 was released in April 2009. Another major upgrade to the software was made in

October 2009. The Android 2.2 was released in May 2010. A major feature of the Android

operating system was that multiple upgrades were released in the same year unlike other mobile

operating systems like iOS which were mostly upgraded once in a year. Over time, many handset

manufacturers embraced Android for their mobile phones. By February 2010, the market share of

Android increased to 6%.29Gartner predicted that Android would become the second most popular

mobile operating system overtaking BBOS and iOS by the year 2012.30

iOS

iOS was the default operating system for many of Apples products like the iPhone, iPod Touch, and iPad. When it was released in June 2007, it didnt have any name of its own and was simply called OS X, with reference to its parent software Mac OS X, which was used in the Macintosh range of personal computers made by Apple. Unlike some other mobile operating systems which

were being made open-source, Apples iOS was a tightly controlled proprietary operating system. At the time of its launch, even third-party applications were not supported. Later in March 2008,

Apple released a software development kit31 (SDK) for software developers to enable them to

develop applications for the OS X. At the time of the launch of the SDK, OS X was given a formal name -- iPhone OS which was again renamed as iOS in 2010. The new iOS became extremely popular among consumers due to its intuitive touch responsiveness. Many analysts said

that there was no other software which could respond to touch the way iOS did. Successive

versions of the iOS were later released for the iPhone 3G and the iPhone 3GS. Application

27 Gareth Beavis, A Complete History of Android, www.techradar.com, September 23, 2008. 28 A Short History of Google Android, www.brighthub.com/mobile/google-android/articles/18260.aspx. 29 Rachel King, Nokia, Symbian Still Lead Smartphone Market, Gartner Says,

www.zdnet.com/blog/gadgetreviews, February 23, 2010. 30 Matt Hamblen, Android to Grab No. 2 Spot by 2012, Says Gartner, www.computerworld.com, October

6, 2009. 31 The software development kit is a set of development tools which will facilitate the development of

applications by third party developers for an operating system, software package, video game console,

etc.

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developers took keen interest to develop applications for iOS due to its growing popularity among

high-end users who would be willing to pay for the applications. The number of applications

available for iOS had increased to 225,000 by June 2010 -- the highest for any mobile operating

system -- and the number of downloads from Apples App Store32,33 had reached five billion. As of February 2010, iOS had a market share of 8.7% in the smartphone market.34iOS 4 was released

in June 2010 for the iPhone 4.

THE SLUGFEST

The market for the smartphone operating systems had long been dominated by players like Nokia

Corporation35 (Nokia) with its Symbian operating system which enjoyed a dominant position.

Analysts attributed the dominance by a single player mostly to the lack of any serious competition

in the mobile operating system area (Refer to Exhibit III for market share of various mobile

operating systems). All this changed when Apple entered into the smartphone business to realize

its dream of emerging as a serious consumer electronics company. Apple was one of the few

technology companies which entered the mobile phone space with its iPhone and its own

proprietary operating system iOS. Some other companies like Google whose main focus was on dominating the internet space, entered the mobile space by launching their own mobile operating

system which could be used by other mobile phone companies in the market. It became very

important for Google to enter the mobile operating system market as many people were starting to

use the internet through their mobile phones.

As the competition in the mobile phone market increased, the race for becoming the top player in

the field of mobile operating systems too grew fiercer. The advancements in the area of mobile

hardware by almost all the major players made it difficult for mobile phone companies to

differentiate themselves from other players. Analysts said the war for the top spot in mobile

phones had therefore moved to the software front. The operating system used to run the mobile

phone became the main area for the mobile phone companies to differentiate themselves from the

others. While some players started developing their own high-end operating systems for their

mobile phones, other companies started relying on third party operating systems for their phones.

The iOS that Apple used in its iPhone and some of its other gadgets like the iPod Touch and the

iPad, was released in 2007 with the launch of its iPhone. iOS, which was highly touch responsive

when compared to existing mobile operating systems, was an instant success in the market and

started gaining quick market share. The number of applications which were available for the iOS --

considered one of the benchmarks for the popularity of any mobile operating system -- increased

and its market share also rose significantly. Though the market share of iOS was still negligible

when compared to market leaders like Symbian, the numbers attached to iOS gained significance

due to the lucrative high-end user base of iOS when compared to other mobile operating systems

(Refer to Exhibit IV for the competing platforms of Android and iOS).

OHA, which was led by Google, released its mobile operating system Android in February 2009.

Though it met with a lukewarm response at the time of its release, Android started to gain market

share as more and more handset manufacturers like HTC and Motorola began to embrace it for

their smartphones. Companies like HTC did not have their own operating systems and so adopted

32 Apples App Store is a part of the iTunes Store which allows the users of various Apple products like the

iPhone, iPod Touch, and iPad, to download applications. The applications available through the App

Store are developed using the iPhone SDK. 33 Apple Says App Store has Made Developers Over $ 1 Billion, www.appleinsider.com, June 7, 2010. 34 Rachel King, Nokia, Symbian Still Lead Smartphone Market, Gartner Says,

www.zdnet.com/blog/gadgetreviews, February 23, 2010. 35 Nokia Corporation, headquartered in Espoo Finland, is the worlds leading mobile handset company. For

the fiscal year 2009 its revenue was 40.99 billion.

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Android and made it popular. Even though the growth of Android was mild in the initial days of its

launch, it started to grow much faster than any other mobile operating systems later.36The success

of the HTC Hero smartphone, which first made Android popular, unleashed the potential of

Android.37Analysts said that the success of HTC Hero made Android one of the contenders for the

top position among the mobile operating systems, challenging iOS.

Further magnifying the struggle between the two mobile operating systems was the report by NPD

which said that Android had overtaken iOS in the highly competitive US smartphone market for

the first quarter of 2010.38But the US market was still dominated by BBOS with its market share of

36%. The report was based on the results of online consumer surveys which were conducted every

month but not on actual sales. Apple dismissed the report of NPD totally. Commenting on the

report, Apples representative Natalie Harrison said, This is a very limited report on 150,000 U.S. consumers responding to an online survey and does not account for the more than 85 million

iPhone and iPod touch customers worldwide.39Though Apple brushed the report aside saying it was incomplete, many industry observers opined that the threat to Apples iOS was real and happening. The report also gained significance as this was the first time that Android had

overtaken iOS. The strong sales of Motorolas Droid and HTCs Droid Eris models were cited as the reasons for Android overtaking iOS in the US market.40Motorolas Droid was one of the most successful smartphones powered by Android. According to one estimate, Droid had sold nearly

1.05 million units in the first 74 days of its launch in November 2009, when compared to 1 million

units of the iPhone after its first launch in 2007.41NPDs report was also in tandem with an earlier report by Gartner in 2009 which forecast that Android would be the second most popular mobile

operating system by 2012 after Symbian.42 Gartner forecast that Android would overtake iOS in

2009 itself, when Android was enjoying a market share of less than 2%.

COMPARING ANDROID AND IOS

Several factors were cited as the reasons for the faster growth of Android as compared to iOS. The

NPD report said that apart from being embraced by mobile handset manufacturers like HTC and

Motorola, it was the aggressive marketing by mobile operators like Verizon, which promoted

Android by giving attractive price offers for Android-powered smartphones that had led to the

success of Android. Google had tied up with Verizon in 2009 to face competition from Apple

which had exclusive tie-ups with operators like AT&T Inc.43 (AT&T).44 The tie-ups with operators

like Verizon helped in developing smartphones which were preloaded with Android applications.

This served to increase the market share of Android. Ross Rubin, NPDs executive director, said,

36 Rob Jackson, Android Growing Ridiculously Faster than All Other Mobile Platforms (In the US),

www.phandroid.com, March 10, 2010. 37 Katherine Hannaford, HTC Hero Wins Gadget of the Year and Phone of the Year at T3 Gadget

Awards, www.t3.com, October 14, 2009. 38 Android Overtakes iPhone, www.smh.com.au, May 11, 2010. 39 Scott Lowe, Android Overtakes the iPhone: Report Says Android has Surpassed the iPhone in U.S.

Sales, www.ign.com, May 11, 2010. 40 Android Overtakes iPhone, www.smh.com.au, May 11, 2010. 41 Peter Farago, Day 74 Sales: Apple iPhone vs. Google Nexus One vs. Motorola Droid,

http://blog.flurry.com, March 16, 2010. 42 Matt Hamblen, Android to Grab No.2 Spot by 2012, Says Gartner, www.computerworld.com, October

6, 2009. 43 AT&T Inc., headquartered in Dallas, Texas, USA, is one of the major telecommunications company in

USA. For the fiscal year 2009 its revenue was US$ 123.018 billion. 44 Stacey Higginbotham, Google Lines Up with Verizon to Fight Apple, http://gigaom.com, October 6,

2009.

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Carrier distribution and promotion have played a crucial role in determining smartphone market share. Carriers continue to offer attractive pricing for devices, but will need to present other data-

plans to attract more customers in the future.45

Despite having exclusive tie-ups with operators like Verizon in the US, Android being an open

source operating system was available to many other networks both in the US and all over the

world. iOS, on the other hand, couldnt be used on multiple networks due to Apples exclusive tie-ups with a single operator in many international markets. Analysts said that the exclusive tie-up

that Apple had with AT&T in the USA and in many other international markets was actually

stifling the growth of iOS when compared to other mobile operating systems which were available

with multiple carriers. It was expected that the market share of iPhone could actually double if

Apple started selling the iPhone through multiple carriers. Kathryn Huberty, an analyst at Morgan

Stanley46(Morgan Stanley), said, In the top six iPhone markets that are still exclusive, we believe that Apples market share could rise to 10%, on average, in a multiple carrier distribution model from 4% today. These six markets represented almost 70% of iPhone shipments in

C2Q09.47Some other analysts said that exclusive tie-ups with operators could actually facilitate better marketing support from the operators and Apple would benefit in the long run.48Apple had

extracted a lot of freedom from AT&T at the initial launch of the iPhone regarding the network

standards as well as preference in marketing of the iPhone. Apple was also expected to do away

with the exclusive tie-ups with some operators and thereby make the iPhone available to many

other operators by the end of 2010. Analysts said that this could increase the competition for

Android. Apart from the exclusive tie-ups with the operators in various international markets,

Apples iOS was not accessible to multiple smartphone and other computing device manufacturing companies as it was exclusively used for products made by Apple which was another limiting

factor for the growth of iOS. The chances of Apple making iOS available to other handset

manufacturers were also bleak. Some observers hoped that Apples new products like the iPad which also used iOS would not be restricted to a single operator. Only then might it result in the

proliferation of iOS among a wider user base.

Android was an open source operating system which gave third party developers more freedom in

developing applications unlike iOS which was a closed and well-guarded operating system. Apple

initially wanted its iOS to be a closed operating system where any online program could be run

only on its inbuilt web browser rather than having third party applications that could be

downloaded by the users directly.49 Though Apple later allowed third party developers to develop

applications for iOS, it placed a lot of restrictions on them. For example, third party developers

were restricted from discussing Apples SDK openly. Many analysts said that those kinds of restrictions on third party developers could pose problems for the future growth of applications for

iOS.50On the other hand, it was very easy for third party application developers to get their

applications approved for Android as it was an open source operating system.51Even though

Apples App Store had the largest application base for any mobile operating system in the world, the availability of applications for Android was growing at a much faster pace than that for iOS.

45 Android Overtakes iPhone in US, www.hindustantimes.com, May 11, 2010. 46 Morgan Stanley, headquartered in New York City, New York, is a global financial services firm. 47 Dan Frommer, iPhone Market Share Could More Than Double when Apple Drops AT&T Exclusivity,

www.businessinsider.com, October 2, 2009. 48 Five Top US Operators Pick Samsung Galaxy S Phones, http://economictimes.indiatimes.com, June

29, 2010. 49 Egan Orion, Apple Stifling Iphone Apps Developers, www.theinquirer.net, August 26, 2008. 50 Amy Vernon, Is the Android truly Open Source, www.networkworld.com, May 5, 2010. 51 Kevin Schram, Android Market Has 30,000 Apps [Android Apps Market Seeing Tons of Growth,

Outnumbered by iTunes Five To One], http://nexus404.com, March 16, 2010.

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The number of applications available on Android Market52 grew from just 10,000 in September

2009 to 27,243 in April 2010, which made Android Market one of the fastest growing mobile

application stores.53 The number of applications added to Android Market per month was also

growing at a phenomenal rate from just 1,558 in July 2009 to 9,330 in March 2010 (Refer to

Exhibit V for growth in the number of applications added to Android market).

Analysts said this growth of Android Market and Apples rigid approval process for applications on its App Store could pose serious problems for iOS as the number of applications available for

any mobile operating system showed the popularity of that operating system. The growth of

Android Market could also hit the profits of Apple as the mobile application market was expected

to reach US$ 15 billion by 2013.54,55The growth numbers for the new acquisitions for iOS and

Android from June 2010 to November 2010 in the US market also showed that consumers were

favoring Android over iOS. The number of new acquisitions for iOS was stagnating while it was

growing for Android (Refer to Exhibit VI for US smartphone operating system share from June

2010 to November 2010). Though Apple and RIM were reported to share 70% and 80%

respectively of their software application revenues with the developers56 the balance amount left

for handset manufacturers was said to have a major share in their revenues. Apple and some

analysts supported the rigid approval norms for applications for iOS stating that this would

facilitate and protect the customers from some unwanted, fraudulent, and low quality applications

being sold on its App Store. Steve Jobs, CEO of Apple, said Apple could not approve the sale of

fraudulent and porn related applications for iOS on their App Store unlike Android. There were

instances of customers suffering due to the posting of some fraudulent applications related to

banking, pornography, etc. on Android Market. Some analysts said that this lack of monitoring of

the applications sold on Android Market could prove detrimental to Android in the long term as

customers started to feel the pinch as most of the internet access on the mobile phones was through

applications rather than directly through the phones default browser.

Another reason attributed to Androids success was Androids unique focus both on the smartphone tasks and communications as well as on third party applications. In stark contrast,

other operating systems like Nokias Symbian focused exclusively on smartphone tasks. Ken Dulaney, an analyst at Gartner, said, Android has blended a focus on applications and tasks pretty

well.57 On the other hand, iOS was focused mainly on applications for its growth without much of a focus on smartphone tasks and applications. Another reason cited by the analysts for the greater

acceptance of Android by third party developers was the possibility of its being customized. When

Motorolas Droid was used, the mail application used in it was customized for the customers of Verizon. Though Google mail might be the underlying foundation for mail, it could be customized

as Verizon mail. The same customization was true for other services like social networking and

online search. Commenting on the customization that was possible with Android, Daniel Roth, a

columnist at the Wired Magazine, remarked, Those hoping for a new gadget to rival the iPhone

52 Android Market was an online store for the sale of applications developed by third party developers for

Android based devices. 53 Sarah Perez, Android App Growth on Rise: 9000+ New Apps in March Alone,

www.readwriteweb.com, April 6, 2010. 54 Sarah Perez, Android App Growth on Rise: 9000+ New Apps in March Alone,

www.readwriteweb.com, April 6, 2010. 55 Kevin Schram, Android Market Has 30,000 Apps [Android Apps Market Seeing Tons of Growth,

Outnumbered by iTunes Five To One], http://nexus404.com, March 16, 2010. 56 Jennifer LeClaire, Google Store Will Help Android Developers Earn Cash, www.newsfactor.com,

January 2, 2009. 57 Matt Hamblen, Android to Grab No.2 spot by 2012, Says Gartner, www.computerworld.com, October

6, 2009.

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finally understood that Google had something radically different in mind. Apples device was an end in itself a self-contained, jewel-like masterpiece locked in a sleek protective shell. Android was a means, a seed intended to grow an entire new wireless family tree.58

Apple, since the success of its iPod and iTunes, had built up its own ecosystem for the sale of software applications online. Following the tradition of the iPod and iTunes, which followed highly controlled access for their users, Apple had built up the iOS ecosystem based on applications for almost every specific utility rather than having the default phone browser to be used for accessing the internet. This was in contrast to Googles strategy of making most of its services available through the general built-in browser in the phone rather than specific applications for every kind of service. Some analysts said that this could prove detrimental to Android as many people had started feeling comfortable accessing many online services through applications rather than the phone browser. Some industry observers felt that it would prove to be very tough to change the habits of the users and this would give iOS the edge.

Another area where many analysts felt iOS could score over Android was the touch responsiveness of iOS. Having been exclusively developed to meet the multi-touch capabilities of the iPhone, iOS was considered as being far superior in this aspect. Though Android also supported multi-touch capability, analysts said that it could not rival iOS in its touch responsiveness. The problem was compounded by the fact that the hardware and software were not manufactured by a single player in the case of Android and this posed some synchronization problems.

THE FIGHT NOT LIMITED TO SMARTPHONES ALONE?

The fight between iOS and Android was not just limited to smartphones. Many other portable devices like tablet computers and netbooks were being developed by technology companies around the world, enabling consumers to access the internet on the go as well as facilitating other tasks like gaming, reading of ebooks, basic computing, etc. The demand for such portable computing devices was attributed by analysts to the low power consuming chips that these devices used and the extended mobility offered by such devices to consumers. Analysts opined that the future of computing rested on many such portable devices apart from mobile phones. Though iOS was also initially used in Apples iPod Touch apart from the iPhone, it was not considered as a reliable computing device as it did not have seamless internet access. iOS was later modified by Apple to be used on some of its portable devices like its iPad, The iPad, a tablet computer, was released as midway between a smartphone and a laptop to facilitate tasks like reading of ebooks, accessing the internet, and playing games. Some models of the iPad could access the 3G59 telecom networks and have seamless internet connectivity, allowing the consumers to download music, games, periodicals, etc. almost seamlessly. Soon after its release in early 2010, it was very well received by the consumers. Apple sold nearly two million iPads within the first two months of its launch.

60

Apple and some industry experts felt that the iPad would boost the fortunes of iOS and help it give tough competition to Android.

Responding to the iPad, OHA also started releasing tablet computers using the Android operating system. Notable among these were the Cisco Cius by Cisco Systems, Inc.61 (Cisco) and the Dell Streak by Dell Inc.62 (Dell).63,64Dell said it was planning to launch more such tablets in the near

58 Philip Elmer-DeWitt, Android vs. iPhone: This is Where the Pain Happens,

http://tech.fortune.cnn.com, June 25, 2008. 59 3G refers to the third generation mobile technologies which deliver high speeds of data connectivity

through the better and more efficient use of the spectrum. 60 iPad Sales Top Two Million, www.thesun.co.uk, May 31, 2010. 61 Cisco Systems, Inc., headquartered in San Jose, California, USA, was a consumer electronics, networking

and communications technology and Services Company. For the fiscal year 2009 its revenue was US$

36.117 billion. 62 Dell Inc., headquartered in Round Rock, Texas, USA, was a multinational information technology

corporation. For the fiscal year 2009 its revenue was US$ 61.101 billion.

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future to take a share in the ever expanding market for mobile devices. Though the sales of Android-based tablet computers was still not promising when compared to the iPad, analysts said that the expected launch of many new Android tablet computers would help increase the usage of Android.

Rather than being a niche market segment, tablet computers like the iPad and the Cius were

expected to cannibalize the market share of desktops and laptops. Market research conducted at

Barclaysplc65 (Barclays) predicted that there would be strong sales of 15 million for tablet

computers in 2010 and that it would rise even further to 18-25 million in 2011.66The rising market

for these tablet computers was expected to take the battle between various mobile operating

systems into unforeseen territories as these tablet computers mostly used mobile operating systems

which were light and simple. The use of comparatively smaller operating systems like Android on

tablet computers and netbooks was made possible by the advent of cloud computing67where much

of the processing and storage of data was done in some remote servers, which eased the pressure

on the actual computing devices. Some analysts even predicted that tablet computers could boost

cloud computing rather than it being the other way around.68

The thumping success of the iPad could prove to be detrimental for Android as it would take some

more time for Android tablets to catch up with iPad, said some analysts. They contended that

Apples experience in making bigger computing devices like laptops and desktops could give it an edge in the tablet space. Devices like tablet computers needed much more standardized operating

systems like iOS or Windows rather than a purely open source operating system like Android as

people demanded more reliability in their use and data security. Even though some tablet

computers were being released which worked on Android, Android was lagging behind iOS, they

said. Other industry observers felt that even though Apple had been initially successful in the

market for tablet computers, the bevy of cloud computing services which were expected to be

offered by Google could tilt the balance in favor of Android in both smartphones and tablet

computers.69

Google announced its plans to come up with a full-fledged operating system for netbooks and

other big computing devices like laptops and desktops called Chrome OS.70 Google co-founder Sergey also said they were planning to merge both the Android and Chrome operating systems

sometime in the future and to create a single major operating system which could be used in

multiple computing devices ranging from smartphones to laptops.71 Analysts said that the creation

of a single operating system by merging Android and Chrome OS could actually increase

competition for iOS as Apple used different operating systems for its laptops and desktops called

Mac OS and did not have any plans to converge them into a single major operating system. But

63 Cisco Cius: A New 7 inc Android Tablet, www.android-tablet.org, June 30, 2010. 64 Dell Launches Streak Tablet PC Across Europe, www.news.bbc.co.uk, May 25, 2010. 65 Barclays plc, headquartered in Tower Hamlets, London, UK, was British financial services firm with

international operations. For the fiscal year 2009 its revenue was 29.954 billion. 66 2011 Tablet Sales will Hurt Intel and Microsoft, www.android-tablet.com, July 9, 2010. 67 Cloud computing refers to internet based computing where the software, data storage, and processing

power are provided to the consumers on demand through the internet rather than directly on the device

itself. 68 Lucas Mearian, Apple iPad, Other Tablet PCs, to Drive Cloud Storage, http://news.techworld.com,

April 12, 2010. 69 Chrome, Android, and The Cloud, www.avc.com, September 2, 2008. 70 MG Siegler, Google Drops a Nuclear Bomb on Microsoft. And its Made of Chrome,

http://techcrunch.com, July 7, 2009. 71 Andrew Nusca, Sergey Brin: Google Android, Chrome OS Likely to Converge, www.zdnet.com,

November 23, 2009.

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some other technology analysts said that even though Apple had different operating systems, iOS

had actually been developed from the earlier operating systems of Apple used for desktops and

their seamless integration would not pose any problems in the future.

Google also released its own branded mobile phones into the market in order to have

control over both the hardware as well as the software of the phones entering the market. Google released its own handsets branded Nexus. The first of the Nexus series of handsets called Nexus One was released in partnership with HTC in January 2010.72While the core design and research and development were done by Google, the manufacturing of the smartphones was

outsourced to HTC. Google decided to sell these own branded handsets through its website -- a

direct channel. Analysts said Googles decision to launch its own brand of handsets rather than just supply its software was made to have the same kind of control over the design of both the

hardware and software that had contributed to Apples huge success. The manufacture of both

the hardware and software had given Apple complete control over much of the design of the handsets.

Another reason attributed for Googles decision to launch its own brand of handsets was the companys desire to have an impact on and control over how mobile internet evolved. This became necessary as more and more consumers mostly from the third world countries had started to access

the internet through their mobile phones as the penetration of personal computers was low in these

countries. Ben Schachter, an analyst at Broadpoint Am Tech Inc.73 (Broadpoint), said, If all of a sudden everyone is getting on the internet via their mobile device, Google needs to make sure it

has an influence on that. They need to make sure they have influence on how the mobile web will

develop.74 Industry experts said that the launch of its own handset would give Google access to valuable consumer data which could be used to sell advertisements to consumers at premium

prices.

The response to Googles handset offering was good from both analysts and customers. But many analysts opined that it was far from being a real iPhone killer. Commenting on the new handset, Joshua Topolsky, the editor of the prominent technology blog, Engadget75, said, The design and feel of the phone is better much better, in fact and it's definitely noticeably faster than Motorolas offering. But its not so much faster that we felt like the doors were being blown off ... dont get us wrong, the phone cooks but its not some paradigmatic shift for Android.76 Google was also expected to launch another handset under its Nexus series. The other challenge for

Google, analysts felt, would be with regard to the distribution of its mobile phones. Even though

selling of its own branded smartphones over its website was easy, it would be difficult to build its

own retail distribution network. Analysts felt that the online sale of handsets might not be

sufficient to meet competition from rivals. Some analysts said it was unwise for Google to enter

the mobile handset business as retailing of handsets was a very complex business that needed

special skills in supply chain management and distribution which was not easy for a software and

Internet company to master. The fundamental reason to which the success of Apple was attributed

was always its excellent marketing skills despite its technological innovations. Many analysts said

that it would not be possible for Google to match the marketing skills of Apple or its charismatic

72 Bobbie Johnson, Google Challenges iPhone with Launch of Nexus One Mobile, www.guardian.co.uk,

January 5, 2010. 73 Broadpoint Am Tech Inc., headquartered in Greenwhich, Connecticut, USA, is a technology research

firm. 74 Google Phone set for Launch: Video Emerges of New Nexus One Mobile Dubbed iPhone-Killer,

www.dailymail.co.uk, December 16, 2009. 75 Engadget is a popular weblog and podcast about consumer electronics. 76 Bobbie Johnson, Google Challenges iPhone with Launch of Nexus One Mobile, www.guardian.co.uk,

January 5, 2010.

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CEO Jobs. Responding to the competition from Android in the mobile phone space, Jobs exuded

confidence in Apples marketing skills, saying it wouldnt be possible for Google to overtake Apple. He said, Theres not a chance that Google will match or, at best, surpass Apples prowess in the mobile phone space.77

According to some analysts, another area where Android had taken a lead over iOS was 4G78. 4G

cellular services provided some exciting new services like online gaming, very high speed data

transfers, high definition video, etc. Android was already being offered on 4G networks. Android

entered the 4G space with the launch of HTC EVO which supported very high speed data through

4G.79 But Apples iPhone 4 released in 2010 supported only 3G networks. Many exciting services which needed very high speed data transfers like video conferencing were not available on iPhone

4. As Apple took a minimum of one year between the releases of its new versions of its operating

system, analysts said iOS might in fact be slow in the 4G race. The availability of Android on 4G

networks could also help Google to leverage on its cloud computing services as these services

needed very high speed data transfers. But the 4G technologies available in the market did not

meet the exact specification80of 4G like LTE of International Telecommunication Union81 (ITU)

and the real 4G was still considered to be some time away. Though the first generation of the

iPhone was not even 3G enabled, the second 3G enabled model quickly caught up in the 3G race.

Some analysts said that Apple could make the future versions of iOS 4G enabled and that it would

not affect the growth of iOS much.

COMPETITION SET TO INTENSIFY

In addition to competing with each other, there was the possibility of the two operating systems

facing competition from other new players entering the field. Some other players, which hitherto

had not had their own operating systems, had decided to roll out their own operating systems.

Samsung Electronics82 (Samsung), for instance, announced its own open mobile platform for its

high-end smartphones called bada in November 2009.83 Samsung said this would help application developers develop applications for its high-end smartphones. HTC also said that it

wanted to limit its reliance on third party mobile operating systems and to develop its own mobile

operating system or acquire any other existing mobile operating systems.84The market leader,

Nokia was also expected to launch an improved and upgraded version of its Symbian OS called

Symbian^3 to face the competition from the new operating systems that were entering the

market.85Apart from Symbian^3, Nokia and Intel Corporation86 (Intel) jointly announced a new

77 Quentyn Kennemer, Steve Jobs: Not a Chance for Google to Leapfrog Apple, www.phandroid.com,

May 24, 2010. 78 4G referstothe new range of cellular technologies like LTE and Flash-OFDM which provide very high

speed data speeds when compared to the 3G services. 4G was a successor the 2G and 3G families of

standards for cellular networks. 79 Ginny Mies, Sprint and HTC Reveal the EVO 4G Android Smartphone, www.networkworld.com,

March 23, 2010. 80 As per the norms issued by ITU a 4G technology should be able to support data speeds up to 1Gbps and

the minimum data transfer speed should not come down below 100 Mbps. 81 ITU is a global agency of UNO which regulates information and communication technology issues. 82 Samsung Electronics, headquartered in Seoul, South Korea, was a leading electronics company. For the

fiscal year 2009 its revenue was US$ 117.4 billion. 83 Samsung Launches Open Mobile Platform, www.bada.com, November 10, 2009. 84 Anuroop Kaiser, HTC Tempted by the Fruits of its Own OS?, www.technopedia.info, April 10, 2010. 85 Symbian Announces Symvbian^3 and Immediately Gives it Away, www.symbian.org/news-and-

media/2010/02/15, February 10, 2010.

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open source Linux-based mobile operating system called MeeGo which could be used in a variety of mobile devices like smartphones, tablets, and netbooks.87 This new platform announced

jointly by Nokia and Intel was expected to work smoothly with Intels own processors like their new range of ultra-low-voltage Atom processors, mostly intended for mobile internet devices. In

late 2010, there were also rumors that Nokia, with competitors catching up fast on its mobile

operating system, was mulling whether to offer Windows Phone 7 of Microsoft for its

smartphones. Some analysts felt that the Windows Phone 7 was a good operating system that was

in search of distribution and Nokia had the products, scale, and global reach, and hence the

arrangement could work.88

Many other handset manufacturers like Motorola and HTC which adopted Android initially, said

that they too were planning to launch their own operating systems.

WHO WILL HAVE THE LAST LAUGH?

More than 296 million smartphones had been shipped in the year 2010, according to Gartner. Out

of this, Symbian, Android, and BBOS were the three leading players with market shares of 37.6%,

22.7%, and 16% respectively.89While iOS was fourth in this list, it had emerged as the market

leader in the US market by the end of 2010. According to Nielsen90, the November 2010 data

showed that iOS had a 28.6% market share in the US followed by BBOS with 26.1% and Android

with 25.8%.91

A big challenge for Google was to see whether a common mobile operating system cutting across

the lines of handset makers would make sense in the long term or not. Analysts said this question

was gaining importance given the newfound interest due to the newfound interest by mobile phone

companies to develop their own operating systems instead of relying on third party operating

systems. Some analysts also pointed out that this new interest by mobile phones companies to

develop their own mobile operating systems could be attributed to their desire to differentiate

themselves from other mobile phone companies. They opined that a common operating system

didnt give much scope for the mobile phone companies to differentiate themselves as the basic features of the operating system would remain the same despite some cosmetic changes in the user

interface that could be made by the handset makers. Apple could have an edge in this respect as

iOS was uniquely different and would not be available with any other handset manufacturer.

Analysts said that in this case, this exclusivity rather being a disadvantage, could be beneficial to

Apple in the long run when the market for mobile operating systems consolidated and two or three

leading operating systems emerged.

Android still had a long way to go before reaching the top position among the mobile operating

systems, some analysts pointed out. iOS was dominating the US market and BBOS was also going

strong due to the high preference from corporate customers for BlackBerry smartphones. In

markets like Europe and Aisa, some other operating systems like Symbian were highly preferred.

Symbian still commanded up to 48% in Europe while Androids market share was still hovering

86 Intel Corporation, headquartered in Santa Clara, California, USA, is a leading technology company and is

the worlds largest semiconductor chip maker. For the fiscal year 2009, its revenue was US$ 35.127 billion.

87 ImadSousou, Welcome to MeeGo, http://meego.com, February 10, 2010. 88 Larry Dignan, Nokia and Microsofts Windows Phone 7: It Could Work, But Why Stop There?

http://www.zdnet.com, December 20, 2010. 89 Don Reisinger, Gartner: Android Market Share to Near 50 Percent, http://news.cnet.com,April 7, 2011. 90 Nielsen is a marketing and advertising research company headquartered in New York, United States. 91 Christina Warren, Android Nipping at iOS Heels in Market Share, http://mashable.com, January 3,

2011.

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around 5% in Europe.92Many consumers in Europe and Asia were actually ignorant of Android

despite being heavy users of high-end smartphones. Commenting on Androids weak performance in Europe, IDC analyst Francisco Jeronimo said, Consumers steer clear of Googles OS and sell-out is below everyones expectations. Consumers recognize the Google brand, but still do not understand what Android is.93As for Europe, another main reason cited for the weak performance of Android was the lack of availability of more number of handsets made by European handset

manufacturers.

Google was also planning a big push for Android in Asia, another market which was still

dominated by Symbian. To achieve this, Google said that it would attract third party application

developers by offering them special incentives. Google also said that it was planning to take

Android to the masses by installing it in many cheap handsets manufactured by Chinese handset

manufacturers. Commenting on Googles strategy for expansion in the emerging markets, the vice-president of engineering, Andy Rubin, said, The down-market opportunity is about to happen. Its actually quite a revolution.94 It was felt that this new strategy could bring about a manifold increase the number of handsets available with Android by breaking the price barrier as Android

had hitherto been available only on highly expensive smartphones which were not affordable for

many people with low incomes in the emerging economies. This was seen by analysts as Googles strategy to see Android installed on more devices and to create new avenues to sell

advertising.95Apple, which traditionally focused on the premium segment of the market, did not

seem to have the same kind of plans to make iOS more affordable to the masses. At the same time,

Apple also did not have any tie-ups with operators in emerging markets like India, which made

their devices expensive for the price conscious consumers.

Apple and Google were the two companies in the mobile operating system space that consumers

identified as innovators.96Industry observers felt that these two companies were at the very center

of the ongoing software platform war. Some likened it to a chess game that was being played

between the two companies with both vying to establish their respective platforms. According to

Gartner, the smartphone shipments would be around 468 million units in 2011 and would increase

further to more than 630 million in 2012. By then, Android and iOS would be the top two mobile

operating systems in the world. 97Some of them wondered which platform would eventually

dominate the market and which company would have the last laugh.

92 Gareth Beavis, Android Below Expectations in Europe: Analyst Slates Googles Early OS Growth,

www.techradar.com, December 7, 2009. 93 Gareth Beavis, Android Below Expectations in Europe: Analyst Slates Googles Early OS Growth,

www.techradar.com, December 7, 2009. 94 Olga Kharif, Google to Push Android Deeper into Asia, www.businessweek.com, June 30, 2010. 95 Olga Kharif, Google to Push Android Deeper into Asia, www.businessweek.com, June 30, 2010. 96 Why Does the Media Report on iOS vs Android Market Share When They Never Reported on iPhone

OS vs Symbian Market Share? www.quora.com/Why-does-the-media-report-on-iOS-vs-Android-market-share-when-they-never-reported-on-iPhoneOS-vs-Symbian-market-share

97 Don Reisinger, Gartner: Android Market Share to Near 50 Percent, http://news.cnet.com,April 7, 2011.

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Exhibit I

Wireless and Mobile News Top Ten Coolest Smart Phones of 2009

Rank Smart Phone OS

1 iPhone 3GS iOS

2 Droid Android

2 Palm Pre webOS

2 BlackBerry Bold 9700 BBOS

3 BlackBerry Tour BBOS

4 HTC Touch Pro2 Windows

4 Droid Eris Android

5 HTC Hero Android

6 Nokia E71 Symbian

6 BlackBerry Storm2 BBOS

6 myTouch 3G Android

6 Motorola Cliq Android

7 Samsung Memoir Samsung OS

7 BlackBerry Bold BBOS

Source: Top Ten Best Coolest Smartphones of 2009: Review of Reviews - iPhone, Droid, Palm Pre and BlackBerry Bold 9700 Top List, www.wirelessandmobilenews.com, December 20, 2009.

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Exhibit II

Financials of Apple and Google

Apple

(As of September 2009)

Google

(As of December 2009)

Revenue 42,905.0 23,650.6

Cost of Goods Sold 25,683.0 8,844.1

Gross Profit 17,222.0 14,806.4

Gross Profit Margin 40.1% 62.6%

SG&A Expense 4,149.0 1,983.9

Depreciation & Amortization 734.0 1,524.3

Operating Income 11,740.0 8,312.2

Operating Margin 27.4% 35.1%

Nonoperating Income 326.0 (160.7)

Nonoperating Expenses -- 229.7

Income Before Taxes 12,066.0 8,381.2

Income Taxes 3,831.0 1,860.7

Net Income After Taxes 8,235.0 6,520.4

Continuing Operations 8,235.0 6,520.4

Discontinued Operations -- --

Total Operations 8,235.0 6,520.4

Total Net Income 8,235.0 6,520.4

Net Profit Margin 19.2% 27.6%

Diluted EPS from Total Net Income 9.08 20.41

Dividends per Share 0.0 --

Source: www.hoovers.com.

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Exhibit III

Market Share of Various Mobile Operating Systems in February 2010

(figures in percentages)

Symbian44%

BBOS26%

iOS12%

Windows18%

Android0%

Others0%

34346

Source: Rachel King, Nokia, Symbian Still Lead Smartphone Market, Gartner Says, www.zdnet.com/blog/gadgetreviews, February 23, 2010.

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Exhibit IV

Competing Platforms

Symbian OS: Symbian OS was the main operating system of the handset maker Nokia. In

addition to Nokia, some other handset manufacturers like Samsung and Sony Ericsson also used

the Symbian OS in their handsets. It was also the most popular mobile operating system in the

world with a share of 46.9% in the total smartphone sales in 2009. In 2000, the Ericsson R380

became the worlds first phone to be based on the Symbian OS. Over time, the Symbian OS gained in popularity and by November 2006, 100 million smartphones running on the Symbian

OS had been shipped. Many new versions of the OS intended for various devices like the Nokia

S60, Nokia Series 80, Nokia Series 90, etc. were developed for different kinds of devices. By

July 2009, more than 250 million devices running the Symbian OS had been shipped. But the

release of the latest mobile operating systems by other companies increased the competition for

the Symbian OS. In 2008, Nokia purchased the former Symbian Software Limited which owned

the Symbian OS and established a non-profit organization called the Symbian Foundation. The

objective of setting up the Symbian Foundation was to create open source software which could

be used by various mobile handset manufacturers without their having to pay any royalty. The

Symbian Foundation was responsible for unification of the various user interfaces for future

development. By February 2010, the total open sourcing of the software was achieved and the

code was published under the Eclipse Public License which was available to all for free. A new

version of the Symbian OS called the Symbian^3 was expected to be launched by the end of

2010.

BlackBerry OS: BlackBerry OS (BBOS) was the proprietary mobile operating system

developed by RIM for its BlackBerry range of smartphones. BBOS was considered one of the

most advanced mobile operating systems in the world available for mobile phones. The unique

feature of the software was the support it provided for corporate email which was the main

feature of the BlackBerry range of smartphones. Even though they were proprietary software,

application developers could develop software for BBOS which were made available for

download through the RIMs very own BlackBerry App World. The updates for the BBOS too were available to customers for automatic updating. The new version of the BBOS 6.0 was

announced in April 2010 and was to be available for download in the third quarter of 2010.

Windows Phone: Windows Phone (Windows) was the mobile operating system owned and

developed by Microsoft. Windows was previously called Windows Mobile. Windows was first

released in the year 2000 and was then called as Pocket PC 2000. Another version of the Pocket PC series was launched in the year 2002. Later, Pocket PC was renamed as Windows

Mobile in the year 2003. The initial versions of Windows were mostly meant for portable palm

sized computers rather than for mobile phones. Some new versions of Windows followed,

focusing on the fast growing smartphone market. Windows was mostly supplied to other

independent mobile phone manufacturing companies like HTC rather than used in any of the

devices made by Microsoft as it was only a software company. As of 2009, Windows was the

fifth most popular mobile operating system but was steadily losing market share. Microsoft

announced the launch of a new version of Windows called Windows Phone 7which would be released by the end of 2010 to face competition from new mobile operating systems like iOS

and Android.

Compiled from various sources.

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Exhibit V

Growth in the Number of Applications Added to Android Market

Source: Sarah Perez, Android App Growth on Rise: 9000+ New Apps in March Alone, www.readwriteweb.com, April 6, 2010.

Exhibit VI

US Smartphone Operating System Share from June 2010 to November 2010

Source: http://www.androidtapp.com/apple-leads-smartphone-race-for-now-yet-android-attracts-most-

recent-customers/us-smartphone-operating-system-share-6-month-recent-acquirers/

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References and Suggested Readings:

1. Don Reisinger, Gartner: Android Market Share to Near 50 Percent, http://news.cnet.com, April 7, 2011.

2. Christina Warren, Android Nipping at iOS Heels in Market Share, http://mashable.com, January 3, 2011.

3. Larry Dignan, Nokia and Microsofts Windows Phone 7: It Could Work, But Why Stop There? http://www.zdnet.com, December 20, 2010.

4. Fred Vogelstein, Letter From Silicon Valley: Doing the Math on Android vs. Apple, www.wired.com, July 28, 2010.

5. 2011 Tablet Sales will Hurt Intel and Microsoft, www.android-tablet.com, July 9, 2010.

6. Cisco Cius: A New 7 inc Android Tablet, www.android-tablet.org, June 30, 2010.

7. Olga Kharif, Google to Push Android Deeper into Asia, www.businessweek.com, June 30, 2010.

8. Five Top US Operators Pick Samsung Galaxy S Phones, http://economictimes.indiatimes.com, June 29, 2010.

9. Olga Kharif, Googles Android Gaining an Apple via Developers, http://www.bloomberg.com, June 24, 2010.

10. Apple Says App Store has Made Developers Over $ 1 Billion, www.appleinsider.com, June 7, 2010.

11. iPad Sales Top Two Million, www.thesun.co.uk, May 31, 2010.

12. Charles Smith, Microsoft Dethroned as Apple Becomes Largest Tech Firm, www.ibtimes.com, May 26, 2010.

13. Dell Launches Streak Tablet PC Across Europe, www.news.bbc.co.uk, May 25, 2010.

14. QuentynKennemer, Steve Jobs: Not a Chance for Google to Leapfrog Apple, www.phandroid.com, May 24, 2010.

15. Android Overtakes iPhone in US, www.hindustantimes.com, May 11, 2010.

16. Android Overtakes iPhone, www.smh.com.au, May 11, 2010.

17. Scott Lowe, Android Overtakes the iPhone: Report Says Android has Surpassed the iPhone in U.S. Sales, www.ign.com, May 11, 2010.

18. Amy Vernon, Is the Android truly Open Source, www.networkworld.com, May 5, 2010.

19. Lucas Mearian, Apple iPad, Other Tablet PCs, to Drive Cloud Storage, http://news.techworld.com, April 12, 2010.

20. Anuroop Kaiser, HTC Tempted by the Fruits of its Own OS? www.technopedia.info, April 10, 2010.

21. Sarah Perez, Android App Growth on Rise: 9000+ New Apps in March Alone, www.readwriteweb.com, April 6, 2010.

22. Ginny Mies, Sprint and HTC Reveal the EVO 4G Android Smartphone, www.networkworld.com, March 23, 2010.

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23. Kevin Schram, Android Market Has 30,000 Apps [Android Apps Market Seeing Tons of Growth, Outnumbered by iTunes Five To One], http://nexus404.com, March 16, 2010.

24. Peter Farago, Day 74 Sales: Apple iPhone vs. Google Nexus One vs. Motorola Droid, http://blog.flurry.com, March 16, 2010.

25. Rob Jackson, Android Growing Ridiculously Faster than All Other Mobile Platforms (In the US), www.phandroid.com, March 10, 2010.

26. Rachel King, Nokia, Symbian Still Lead Smartphone Market, Gartner Says, www.zdnet.com/blog/gadgetreviews, February 23, 2010.

27. Imad Sousou, Welcome to MeeGo, http://meego.com, February 10, 2010.

28. Symbian Announces Symvbian^3 and Immediately Gives it Away, www.symbian.org, February 10, 2010.

29. Bobbie Johnson, Google Challenges iPhone with Launch of Nexus One Mobile, www.guardian.co.uk, January 5, 2010.

30. Top Ten Best Coolest Smartphones of 2009: Review of Reviews - iPhone, Droid,

Palm Pre and BlackBerry Bold 9700 Top List, www.wirelessandmobilenews.com,

December 20, 2009.

31. Google Phone set for Launch: Video Emerges of New Nexus One Mobile Dubbed iPhone-Killer, www.dailymail.co.uk, December 16, 2009.

32. Gareth Beavis, Android Below Expectations in Europe: Analyst Slates Googles

Early OS Growth, www.techradar.com, December 7, 2009.

33. Andrew Nusca, Sergey Brin: Google Android, Chrome OS Likely to Converge, www.zdnet.com, November 23, 2009.

34. Samsung Launches Open Mobile Platform, www.bada.com, November 10, 2009.

35. Erika Jonietz, Droid Set to Take on the iPhone, www.technologyreviewonline.com, October 28, 2009.

36. Katherine Hannaford, HTC Hero Wins Gadget of the Year and Phone of the Year at T3 Gadget Awards, www.t3.com, October 14, 2009.

37. Matt Hamblen, Android to Grab No. 2 Spot by 2012, Says Gartner, www.computerworld.com, October 6, 2009.

38. Stacey Higginbotham, Google Lines Up with Verizon to Fight Apple, http://gigaom.com, October 6, 2009.

39. Dan Frommer, iPhone Market Share Could More Than Double when Apple Drops AT&T Exclusivity, www.businessinsider.com, October 2, 2009.

40. MG Siegler, Google Drops a Nuclear Bomb on Microsoft. And its Made of Chrome, http://techcrunch.com, July 7, 2009.

41. Jennifer LeClaire, Google Store Will Help Android Developers Earn Cash, www.newsfactor.com, January 2, 2009.

42. Miguel Helft and Saul Hansell, Google Introduces an iPhone Rival to Whims, www.nytimes.com, September 24, 2008.

43. Gareth Beavis, A Complete History of Android, www.techradar.com, September 23, 2008.

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44. Chrome, Android, and The Cloud, www.avc.com, September 2, 2008.

45. Egan Orion, Apple Stifling Iphone Apps Developers, www.theinquirer.net, August 26, 2008.

46. Geoff Duncan, T-Mobile Launching First Android Phone? www.digitaltrends.com, August 15, 2008.

47. Philip Elmer-DeWitt, Android vs. iPhone: This is Where the Pain Happens, http://tech.fortune.cnn.com, June 25, 2008.

48. A Short History of Google Android, www.brighthub.com/mobile/google-android/articles/18260.aspx.

49. Company Overview, www.google.co.in/intl/en/corporate.

50. Why Does the Media Report on iOS vs Android Market Share When They Never Reported on iPhoneOSvs Symbian Market Share? www.quora.com.

51. www.androidtapp.com/apple-leads-smartphone-race-for-now-yet-android-attracts-most-recent-customers/us-smartphone-operating-system-share-6-month-recent-acquirers/

52. www.hoovers.com.

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Documents

Apple vs. Android