Android eating RIM's lunch in smartphone OS market

Rapid erosion of BlackBerry maker's market share should worry shareholders

Shares of BlackBerry maker Research in Motion (NASDAQ: RIMM) fell 87 cents, or 1.5 percent, to 56.05 after two studies released Monday show the company's share of the smartphone market to be in freefall. As reported in Network World, Google's Android mobile phone operating system was found in 44 percent of smartphones purchased in the U.S. in the third quarter.

That's up from 33 percent in Q2 and a mere 3 percent in last year's third quarter, according to market research firm NPD. More to the point, much of Android's gains in the market is coming at the BlackBerry manufacturer's expense. The RIM OS market share dropped to 22 percent in Q3 from 28 percent in the second quarter and 46 percent in last year's Q3. This allowed Apple, with a 23 percent share, to move into the No. 2 slot in the U.S. consumer smartphone market in Q3. Obviously this is an ominous trend for RIM and its shareholders. The company is fortunate that smartphone sales have nearly doubled from a year ago; otherwise it never would have had record device sales (12.1 million) in the second quarter, as it reported in September. But what happens when smartphone sales begin to level out in 2014 or beyond and RIM has less than 10 percent market share? That's where the company's headed unless it has an answer to Android. And we don't know yet if Windows Phone 7 will take market share from RIM. Since Aug. 31, RIM shares have climbed 31 percent through Monday's close, fueled in part by strong earnings and in part by another wave of acquisition rumors, the latest involving Cisco Systems. It's hard to imagine RIM holding onto those recent gains in the face of its obvious decline in the smartphone market. It's also hard to imagine a larger company buying a smartphone maker that is rapidly losing most of its once-impressive market share.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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