Apple, Google, and Microsoft Battle over Smartphones

In the tablet space, Apple rules the roost. In the smartphone space, the battle rages on. The key players: Apple’s iPhone product, Google’s Android OS, and Microsoft’s Windows Mobile OS.

The WSJ reports that smartphones are driving the handset market, with global sales of mobile handsets surging 17 percent in the first quarter. Smartphones sales increased 49 percent in the same period on a year-over-year basis.

But Microsoft trails Apple and Google in the handset space. Handsets running Windows dropped from 10.2 percent to 6.8 percent in Q1, while Android’s market shared surged from 1.6 percent to 9.7 percent, and iPhone’s shipments grew from 10.5 percent to 15.4 percent (source: Infoworld).

With the stock market in the doldrums, now may be a good time to reassess prospects for these three tech leaders.

Microsoft Corp (NASDAQ: MSFT)

Windows Phone 7, targeted for next holiday season, may help Microsoft make headway for smartphone market share. But for now, its market share is shrinking in mobile.

In its latest earning report, Microsoft reported that revenues from its Xbox and Windows Mobile OS edged up 2 percent to $1.7 billion. But the mobile product was not highlighted in its earnings report.

“Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox LIVE and our emerging cloud services,” said Peter Klein, chief financial officer at Microsoft. “Our record third-quarter revenue along with continued rigor on cost management resulted in exceptional EPS growth.”

Comments: This is not a good investment play right now for Microsoft, particularly in the mobile space. The stock is showing some support in the $25-$26 space but nothing stands out on the technical side to recommend it right now. Also important to note, the group’s CEO and CTO J Allard is leaving the company. Although admitting it lost out in the mobile product cycle, the company now plans to build its own phone. This may be one for you if you are a “believer,” but it may be too late for Microsoft even if you believe that if they build it, they will come.

Apple Computer Inc (NASDAQ: AAPL)

Selling 8.75 million iPhone units in their second quarter and still growing, Apple is only recently seeing competition from Google’s Android.

The data:
8.75M units (a .57 percent unit growth over 8.7M units in Q1F10, a 131 percent unit growth over 3.79M units in Q2F09)

Apple’s CEO Steve Jobs touted the company’s results: “We’re thrilled to report our best non-holiday quarter ever, with revenues up 49 percent and profits up 90 percent […] We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year.”

Comments: Apple is golden in the mobile phone space and is ready to launch a new version of the iPhone (4.0) soon. They are also expanding sales channels globally. The stock is expensive, but its growth prospects with the iPhone and iPad justify its high price. Your only opportunity to buy may be now during the market selloff. Expect the stock to soar higher during a market rebound.

Google (NASDAQ: GOOG)

Gartner research recently reported that US Android Sales grew a whopping 707 percent over the last year. That’s a figure to make anyone sit up and take notice.

Over 5.2 million Android handsets were sold in the first quarter of 2010, up from 575,000 a year ago. All that advertising appears to have paid off for Google.

Meanwhile, the company announced its new developer platform for Android 2.2. (Apple is holding its developer conference today.)

“The growth of the Android ecosystem continues to exceed our expectations,” said Andy Rubin, VP, Engineering. “Every day, 100,000 new people start using Android-based handsets. There are now more than 180,000 active Android developers who have contributed over 50,000 apps to the Android Market. Froyo [the developer platform] is another step toward making Android an even better platform for developers, enterprises and consumers.”

Comments: Applications will be key to smartphone sales and Google knows that apps market, but Apple may be king. Only time will tell. Both stocks are rated a buy, but Google is selling a bit lower, with aPEG ratio of less than 1. Still, at a share price of over $490, the stock may be a bit rich for most investors.

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