Commentary

The Two-Man Smartphone Race

Iphone

There's little question the iPhone is ascendant. Nokia was overtaken by Apple as the world's leading smartphone maker by volume in the second quarter, with 20.3 million iPhones shipped in that time period, compared to 16.7 million for the Finnish phone giant. The number of iPhones shipped was up 142% from a year ago, while Nokia's smartphone total fell 34%. A wireless changing of the guard is underway.

Separately, the signature Apple device continues to drive new subscribers for AT&T, despite the carrier's losing its exclusive hold on the iPhone earlier this year. In the first full quarter since Verizon began selling the Apple device, AT&T today said it had 3.6 million iPhone activations in the second quarter, with a quarter of those customers new to the carrier. The device was also key to AT&T's landing 331,000 new contract subscribers.

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But it's not all about the iPhone. In its quarterly earnings report, AT&T also highlighted that sales of Android and other smartphones doubled from a year ago, making up 40% of smartphone sales. That gain reflects AT&T's push to diversify its product line in advance of losing its iPhone exclusivity by embracing Android.

Along with models like the Samsung Infuse, Motorola Atrix and HTC Inspire, AT&T will add its latest Android phone when it launches Google's Nexus S on Sunday. So the carrier is clearly benefiting from the demand for both the iPhone and Android-powered devices. The same goes for rival Verizon Wireless, which is expected to show gains from its first full quarter selling the iPhone.

Verizon, ironically, helped popularize Android devices with its anti-iPhone marketing blitz behind the Motorola Droid in 2009. Now the crossover of the iPhone and Android phones across the two largest wireless carriers is only likely to increase. Will Verizon get the Nexus S next?

What it adds up to increasingly is a two-man race between Apple and Google in the smartphone world, with Microsoft as yet unable to pose a serious threat as a third contender with its rollout of Windows Phone 7 devices. We'll have to wait till next year, when the first Nokia devices running the Microsoft platform hit the market, to see if Microsoft's alliance with Nokia and its Windows Phone "Mango" update will change things.

For now, the iPhone and Android have the smartphone landscape pretty much to themselves, with plenty of room for growth still ahead.

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