Apple Inc. (NASDAQ:AAPL) stock has lost more than 25% of its value in the last three months. The firm's continuing slide was reinforced today by the news that Android, the mobile OS from Google Inc (NASDAQ:GOOG), is installed on 75% of phones worldwide, and is pulling developers away from Apple.
One of the major attractions of Apple Inc. (NASDAQ:AAPL)'s hardware is the app store and support system available to users. As Android leeches more and more of the market from Apple, those developers are, according to an FT report published today, being pulled toward the Google Inc (NASDAQ:GOOG) operating system.
In trading today Apple Inc. (NASDAQ:AAPL) lost more than 1%. The company's stock now stands at just over $500, a price it last hit last March. Apple Inc. (NASDAQ:AAPL) has lost for 9 months. Total gains for the year are just under 25%, with all of that growth coming in the first quarter of the year.
Google Inc (NASDAQ:GOOG) stock is not really an alternative to Apple stock, Apple has direct exposure to the smart phone market, while Google simply uses its smart phone Operating system to guide users to its actual revenue generating services. Google stock is up over 8% so far in 2012.
There are problems with Android that are almost insurmountable for developers. The platform is constantly being modified and updated to suit different devices with different hardware and different manufacturers. This means an app that works perfectly with one Android device will not necessarily work well with another.
Apple suffers from this problem, but only in inter-generational terms. The original iPhone, for example, probably cannot play Angry Birds in Space. Android had this problem with phones released in the same year, with the same version of Android, and sometimes the same manufacturer. The complexity of developing for the platform makes the Apple Inc. (NASDAQ:AAPL) ecosystem a more attractive prospect.
There is also the question of revenue generation. Even though three quarters of the world's smart phones run Android, Apple Inc. (NASDAQ:AAPL) smart phones make up about half of the US Smart phone market. Android systems are more popular in developing countries because of their relative cheapness.
If a phone is purchased because of its relative price, however, revenue generation is more than likely to be lower. Developing world populations are much less likely to spend real cash on Farmville 2 in app purchases. Apple Inc. (NASDAQ:AAPL) app still have a higher ARPU, because of how expensive the phones are.
The current trend, and it has been leaning this way for some time. Is toward a system where premium smart phones battle in the upper echelons of society and in the developed world, while cheaper smart phones, probably Android systems, become the regular devices across most of the world.
This trend will not affect where the money is really going however. It will be years before Google Inc (NASDAQ:GOOG) ARPU, from developing world customers, becomes influential on the firm's bottom line. Developers are aware of this trend too, they will not flee from Apple Inc. (NASDAQ:AAPL) because the third world uses Android.
Apple has probably lost the poorer eighty percent of the world's population because of their pricing, but Apple Inc. (NASDAQ:AAPL) is not in the business of generating market share. It is in the business of making money, and it's just fine at that.