The iPhone is beating back Android

We all know that Google’s Android operating system is leading in market share when it comes to new smartphones around the world but the latest earning reports from AT&T and Verizon show that Apple’s iPhone is quickly closing the market share gap.

AT&T just had a record-breaking quarter for smartphone sales with 9.4 million sales in a three-month period. Of those sales, a mind-boggling 7.6 million of those sales were an iPhone. While I’m sure a lot of AT&T customers picked up a brand-new iPhone 4S, don’t forget how powerful a marketing weapon AT&T had by being able to offer the iPhone 3GS for free with a new, two-year contract.

Verizon Wireless also reported that it sold more iPhones than Android phones over the holiday season. For 2011, Verizon still sold more Android phones than iPhones (15 million to about 11 million) but when you consider the sheer amount of Android phones Big Red released at various price points, the difference isn’t that great. Also, the Verizon iPhone wasn’t even available all of 2011.

Sprint has yet to report its most-recent quarterly earnings but I wouldn’t be surprised to see if it had similar iPhone-heavy results. T-Mobile doesn’t offer the device, so its smartphones will bolster the numbers of Android and Windows Phone. With these kinds of sales figures in the United States, it’s no surprise that Apple had such a record-shattering quarter.

The interesting thing is that the iPhone’s success may actually be a short-term drag on the carriers because these devices involve heavy subsidies which eats at the margins. In the long-term, the iPhone is supposed to bring in more revenue over the life of the contract than what it costs to subsidize but it’s not out of line for CNET to ask if the iPhone is like a drug for the carriers.

Still, carrier capex and margins concerns are things that we normally wouldn’t care about but we may be starting to see the impact in the form of higher prices for consumers. Ever since the iPhone 3G came in at a consumer-friendly $199, that was the price that many consumers expected for a high-end smartphone. We now don’t bat an eye when a new 4G LTE smartphone lands with a $299 price tag because the carriers are sick of providing such a high subsidy. It will be very interesting to see if the next iPhone (presumably with 4G LTE) will launch with the $199 entry-level price.

Could this be a momentary blip spurred by the new iPhone and holiday season? Perhaps but it’s not like the iPhone wasn’t going against some killer Android devices during this period. Apple’s jam has always been about making as much profit as possible on its devices so that it could pile up cash while others killed their margins to get market share. But with iOS and the iPhone, Apple may have the best of both worlds.

  • Just the calm before the “Android” storm….

  • TRDRACER21

    it sold that many and still cant beat android in shares!!! and look at the tablet market ANDROID is gonna take the lead by end of this year guarantee…

  • Q1 2012 sales will be telling

  • Izdanny Danno

    Meh android is still growing faster, soon windows phone is gonna take a good peice of the pie when windows 8, and the new nokia handsets hit at&t and verizon CANT wait!! But i splurged and got a samsung omnia 7 (wp7)

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