Android to iPhone 6 Migration Isn’t Panning Out as Apple Expected
Apple's 2Q15 Earnings: Expect Falling Revenues but Healthy Margins (Part 2 of 5)
Apple’s share of smartphone OS market has declined sharply in the US
In the previous part of this series, we discussed why Apple (AAPL) expects a steep sequential revenue decline. However, despite this sequential decline, Apple expects a healthy 20% revenue growth year-over-year. Part of the reason for Apple’s optimism is the prediction that iPhone 6 sales should remain robust. However, the latest data points show that this might not be the case.
According to a recent report from Kantar Worldpanel, Apple’ share in the US smartphone operating system (or OS) market has declined from 48% in December 2014 to 39% in February 2015. Meanwhile, Google’s (GOOG)(GOOGL) Android OS share has increased from 48% to 56%. Microsoft (MSFT) and BlackBerry (BBRY) remain smaller players in this market, as the chart below shows.
Switch from Android to iPhone 6 not happening as expected
During the conference call to announce its fiscal 1Q15 earnings, Apple’s management mentioned that only 16% of its customers have upgraded their old iPhones to the iPhone 6 and the iPhone 6 Plus, which means the majority of customers have yet to migrate. Apple also mentioned that it’s seeing momentum from users who are buying iPhones for the first time. It specifically mentioned that the current iPhone lineup is experiencing the highest Android switch rate in the last three years.
However, a report from Consumer Intelligence Research Partners suggests that more Android switchers came from international markets rather than the US. The report mentioned that only 19% of iPhone customers in the US reported switching from an Android phone in the December quarter. This switch nears expectations, as the report also mentioned that 16% to 26% of Android users have switched to an iPhone in the US in the past ten quarters.
So there’s nothing to suggest that consumers are switching from Android to the iPhone 6 in a big way. To gain diversified exposure to Apple, you could invest in the iShares US Technology ETF (IYW). IYW invests about 21% of its holdings in Apple.
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