Apple's iPhone operating system software stumbled in the third quarter, losing year-over-year quarterly market share for the first time, as Google's Android mobile operating system pulled further ahead, according to a Gartner Research report released Wednesday.
During the quarter, Google's (GOOG) Android captured an astounding 25.5% of worldwide market share for smartphone operating systems, up from 3.5% a year ago. Apple's iOS market share, by contrast, dropped to 16.7% in the third quarter, down from 17.1% last year. In all previous quarters, the iOS has posted year-over-year growth, according to Gartner.
Apple (AAPL) was not alone. All other mobile operating systems, from market leader Symbian to Microsoft Windows (MSFT) lost ground as Android sucked up market share to leap to the No. 2 spot over Research in Motion.
"Any platform that fails to innovate quickly -- either through a vibrant multi-player ecosystem or clear vision of a single controlling entity -- will lose developers, manufacturers, potential partners and ultimately users," Roberta Cozza, a Gartner analyst, said in a statement.
While Apple has a number of those qualities, its iPhone was until earlier this year only available through Apple's online store or its exclusive carrier AT&T (T). However, Apple has broadened its iPhone distribution to a number of retailers, from Best Buy (BBY) to Target (TGT) to Amazon (AMZN). Android, though, is seeded inside a multitude of smartphones from numerous manufacturers, giving it much wider distribution.
Overall, the mobile phone industry grew 35% over the previous year, shipping 417 million handset devices in the quarter. Smartphones, which account for 19.3% of the total market, soared a staggering 96% in the period.
"This is the third consecutive double-digit increase in sales year-on-year, indicating that consumer demand is healthy," said Carolina Milanesi, research vice president at Gartner, in a statement. "This quarter saw Apple and Android drive record smartphone sales. Apple's share of the smartphone market surpassed Research In Motion (RIMM) in North America to put it second behind Android while Android volumes also grew rapidly making it the No. 2 operating system worldwide."
The three leading mobile phone manufacturers -- Nokia (NOK), Samsung and LG -- all posted declining market share in the third quarter. Market leader Nokia saw its global market share fall to 28.2% in the quarter from 36.7%, even though its unit shipments rose.
Generic Phones Double Their Share
Stealing away market share from a number of these industry titans were "white-box" manufacturers out of China and other parts of Asia, which allow their customers to slap on their own labels onto the devices. The rise in the white-box manufacturers propelled the "other" category of phone makers to nearly 137.8 million units in the quarter, a 33% global market share. That's up from 16.1% from a year ago.
"In the third quarter, white-box manufacturers continued to expand their reach outside of China into markets such as India, Russia, Africa and Latin America," Milanesi said. "We firmly believe this phenomenon will not be short-lived as we still see a continued need for non-3G devices. Although we have seen acceleration in sales this quarter, we expect an even bigger volume in the fourth quarter of 2010."
During the quarter, Apple surged past Research In Motion to grab the No. 4 spot in market share for mobile device makers. The company took a 3.2% slice of the market, up from 2.3% a year ago. Research in Motion's phones garnered 2.9% of market share in the quarter, up a hair from 2.8% in the previous year.
Research in Motion's BlackBerry sales will likely get a boost in the fourth quarter, but it's difficult to say whether that will be enough to lift it back into the No. 4 spot again. AT&T, the exclusive carrier of RIM's iPhone-like Torch smartphone, dropped the price from $199.99 to $99 with a two-year contract earlier this week, according to a Reuters report.
Potentially adding more steam to BlackBerry sales are indirect retailers, with Amazon.com selling the Torch for as little as 1 cent, according to Reuters.
Gartner's report noted that the BlackBerry Torch aided Research in Motion's U.S. sales during the quarter, in large part due to AT&T's marketing campaigns.
Small Cap Investing
Learn now to invest in small companies the right way.View Course »