In a few short years, Google has accumulated 228 billion dollars in market
capitalization based on only two primary product offerings (only one being
revenue producing); search and advertising. During this period, they have
continued to hire the best and brightest in Silicon Valley.
With all this talent and money accumulated, everyone knew they were poised to do
something revolutionary and now we know what that is. Google will develop and
sell a direct advertising funded mobile phone OS, named Android.
Despite the media hype, fanned by those Stanford Grads who do
no harm, I do not believe this will have not have a negative effect on
Microsoft’s market share and may actually help Microsoft in the long run.
Today the mobile OS market is
primarily divided between six distinct product offerings:
- Symbian OS
- Embedded Linux OS
- Microsoft’s Windows Mobile
- Research In Motion’s (RIM) Blackberry
- Palm’s OS
- OS X – Apple’s IPhone OS
All the hype in recent news headlines is that Google and Microsoft
will be finally battling each other directly. However, what’s been lost in the
commotion is that according to Wikipedia and
despite the hype Microsoft may not be the biggest loser if Google succeeds in
obtaining significant market share in the smart phone OS market. Currently
Symbian OS has 72.4% worldwide market share; Embedded Linux has 13%; and
Microsoft’s Windows Mobile holds only 6.1%.
The Symbian OS, a proprietary operating systems owned by
Nokia, Ericsson, Sony, Panasonic, Siemens and Samsung, and Embedded Linux has a
larger risk of losing significant market share than Microsoft does because they
simply have more to lose and less product differential.
The fact that Symbian is owned by such technology
heavyweights and that they’ve had their roots planted firmly in the mobile phone
business for a number of years makes Google’s foray into the mobile OS market
quite a challenge. Additionally since Nokia is the largest investor
in Symbian, I would not expect Nokia handsets running the Google Mobile OS
anytime soon.
Google’s product offering will be a low cost, open
source, Linux based operating system coupled with an inexpensive smart phone
handset. Based on that product offering description, they will compete directly
with the Embedded Linux OS’s used by Motorola and others, which holds a solid
13% of the worldwide market share. I expect, they will have a large uphill
battle to make gains in that already maturing market.
Complicating matters is that Google is a complete green field
operation when it comes to developing, selling, and supporting shrink-wrapped
operating systems. Additionally, there is a potential huge downside risk if they
stumble just a bit in the next few quarters. It is important to remember, much
of their new found wealth is based on investor expectation and a few small high
profile mistakes could make their stock crash like a house of cards leaving them
only the search revenue, only 4 billion dollars of that 228 billion, to fund
development and support.
My prediction is that Microsoft’s platform market share will continue to
increase as Microsoft wisely lowers the OS’s cost to smart phone vendors in
order to compete. If Google manages their product roll out correctly, eventually
the only embedded Linux offering will be Google’s Android; this after a
protracted battle with Motorola et al. Then, Microsoft and Google will battle
for 2nd and 3rd place behind Symbian for the worldwide
market share. All the while, this will be a positive for consumers and
developers alike, because there will be a drive to improve the mobile products
capabilities, simplify existing features, add additional features, and lower
total cost.
