Industry Analysis Written by Christopher Frost pdf

Android, Inc. – A Brief 2011 Industry Analysis
Written by Christopher Frost, Patricia Brown, Amanda Cabrera
Edited by: Cristina Miklas, Sarah Caldwell
Background
Like a modern day Hewlett Packard, Android Inc. began as a true start-up firm. It was founded
in late 2003 by Andy Rubin, a co-founder of Danger, with three former communications
executives (Android, 2011). Rubin had scored a modest success the previous year with the T-
Mobile Sidekick. As a follow up, Rubin wanted to develop a platform that could be used in
mobile devices. The four members worked in secret until Google acquired the company in
August 2005 (Android, 2011). This made Android a fully-owned subsidiary of Google and led
to speculation that Google was planning to make its own phone.
While Google was quietly buying up phone-related patents, Apple launched the iPhone with
AT&T and made history. After a long wait, this prompted Google and 34 other companies to
form the Open Handset Alliance (Android, 2011). The stated intention was to develop open
standards for mobile devices; however, the real purpose was for all of the jilted bridesmaids to
develop a challenger to Apple’s successful iPhone. It brought in hardware vendors like HTC and
Samsung, along with telecom providers like T-Mobile and Sprint. Google’s contribution was the
open-source Android platform which it provided to everyone free of charge. A year later, the
first Android phone, the T-Mobile G1 hit the market.
STEEP Analysis
Technical
Both Apple’s iOS and Android’s platform were developed from UNIX; however, Apple’s
operating system is proprietary. Apple only licenses iOS for use with Apple hardware, like the
iPhone or iPad, and it tightly controls anything that goes out with Apple’s logo.
In contrast, Android has been freely distributed to vendors and is an open-source platform.
Android provides the source code and SDK, or instructions, to developers so anyone can modify
or change the operating system however they want. This openness has been Android’s greatest
strength; however, it also means that Google has little control over what their partners do with
the platform. When the T-Mobile G1 came out with a stock version of Android 1.0, it was
initially dismissed as an unfinished product. In contrast to the polished iPhone interface, PC
Magazine noted “serious problems with accessibility and usability (Chen, 2008).”

Android’s fortunes started to change in late 2008 when HTC released the Hero. Unlike previous
Android phones, HTC used its own user-friendly Sense interface with Android operating in the
background. After HTC’s success, these vendor-customized user interfaces became the norm for
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Android. On the marketing side, Motorola launched a media blitz with its Droid Does campaign
which highlighted many of the Apple iPhone’s deficiencies. It poked fun at Apple’s restrictive
policies on which apps could be in the Apple App Store.
In June 2009, Apple boasted a catalog of over 100,000 apps compared to the Android market
which had only 10,000 apps (Gibbs, 2009). However, application developers had been
mumbling about Apple’s requirements and an approval process that took months. By contrast,
an application developer could create an account and start publishing apps in the Android Market
in the same day. Because of its ease of use, developers began to develop versions of popular
applications for the Android Market as well as the Apple App Store. By the end of 2009, the
number of apps in the Android Market had more than doubled. More importantly, the number of
Android handset exploded from 2% of smartphone sales to 8% within just a year (Bernstein
Research, 2011).
To take advantage of its momentum, Google drove a very rapid rhythm of improvement for the
platform, with one new release every 3.5 months, on average (Bernstein Research, 2011). Each
release took the name of a dessert – 1.5 was Donut, 1.6 was Éclair, 2.0 was Froyo, 2.1 was
Gingerbread. This constant stream of improvements allowed Android to quickly patch bugs and
address shortcomings as it quickly matured as a phone OS. With each release, Android became a
more polished and professional operating system. However, the pace of iterative development
also caused issues for Google’s partners.
Application developers had to write and maintain multiple versions of their applications so they
could work on the different versions. There was also the issue of vendor and carrier
modifications on top of the Android platform, which delayed and complicated product upgrades.
While Apple just had one flavor, Android had a wide range of versions that it had to support and
fragmentation was making it difficult to support existing Android products. In response,
Android changed its release policy in spring 2011 to bundle fixes into larger annual releases and
promised to better coordinate with partners (Costa, 2011).

Android has expanded from its beginnings as a phone operating system into a variety of different
products as an embedded OS. Barnes and Noble used Android as the basis for its popular Nook
and Nook Color e-readers while Samsung and Toshiba use it for their tablets. Logitech made a
TV box called the Revue and Sony made a TV with Android as its basic operating system. Even
a washing machine, dryer, and microwave have been made using Android (Raphael, 2010). In
the mid-90’s, Sun Microsystems promoted Java as “computing everywhere.” With Android and
widespread wi-fi connectivity, Google could make anything an Internet-ready device.
Consumers could soon turn on lights or control appliances remotely through an Android home
control system.
Legal
It takes years to create an operating system from scratch. That’s why in creating its own
platform, Android used the Open Source community to its advantage. Android based itself on a
freely provided Linux kernel under the terms of an Open Source license. Then, it combined that
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with freely available Java code from Sun Microsystems, and built its own programs on top of
that.
Historically, Google has treated patents and royalties as an afterthought. According to the chief
IP officer for a patent consulting firm, “Like many young companies, they [had] an attitude of,
‘Let’s generate revenue first and ask questions later (Burrows, 2011).’” This rush to innovate
has had consequences for Android’s partners. Three of Android’s partners – HTC, Samsung,
and Motorola – have each been hit with patent lawsuits in the past year. In some ways, this is
normal in the tech industry; however, Google - with few patents and lots of enemies - finds itself
in a bad position. “This is an arms race,” says Christopher Marlett of MDB Capital Group,
“Other companies have more bombs… [and are not] afraid to use them (Burrows, 2011).”
When Oracle purchased Sun two years ago, Oracle sought to recoup lost revenues from the
Android system. Over the past year, Android and Oracle have been locked in a court case where
Oracle initially sought 6 billion in damages. Although that has come down below 2 billion,
Oracle is also seeking a per unit license for Android’s use of Java classes. If this happens, the
Android system wouldn’t be free anymore and future licenses would carry a set fee for the
embedded Java. Google would have to choose whether to eat the costs and continue offering

Android for free or pass along the costs to its vendors.
Recently, Google has made bolstering its patent portfolio a high priority. Although it lost out on
its bid to buy Nortel patents, it purchased 1000 patents from IBM and launched a surprise $12.5
billion bid to take over Motorola Mobility which holds over 17,000 patents (Spangler, 2011).
According to a blog post by Google CEO Larry Page, “Our acquisition of Motorola will increase
competition by strengthening Google’s patent portfolio, which will enable us to better protect
Android from anti-competitive threats from Microsoft, Apple, and other companies.” The
effects of this acquisition were soon felt as Google loaned three of its recently acquired Motorola
patents to HTC. And HTC turned around and used those three patents in a lawsuit against
Apple.
Socio-Cultural
According to Tsukayama (2011), we are entering the post PC era. That’s because form-factor
diversity has enabled computing in more contexts. Flash memory has eliminated computing
downtime. Wi-Fi and mobile broadband networks permit continuous connectivity and cloud
services support computing across multiple devices. These technological innovations fuel social
change, and vice versa. As people conduct more of their lives online—shopping, banking,
entertainment—we require more computing in more places. The rise of social networking
requires real-time connectivity to manage our relationships (Tsukayama, 2011).
The smartphone is changing how everything is done. It can be used not only as a method of
communicating with others, but as a form of entertainment. With banking, games, music, social
networking, movies, and email, an individual’s entire life is virtually tucked into their tiny
phone. Businesses have to find new ways to compete, sometimes looking at how to improve an
app for a phone before they revamp a website for the computer. Even the US government is
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trying to adjust to changing technology, as they are considering using smartphones as a method
of electronic voting in upcoming elections. (ScienceDaily, September 2011)
Cell phones are the one item you generally never leave home without. Eight in ten American
adults own a cell phone of some kind, and they are used for more than just making phone calls
these days. Consumers are doing more research and selecting their phones based on the features
it provides and the potential applications that come with it. Their expectations are changing

because their awareness of mobile services is growing. With the addition of Internet options,
games, music, cameras, ring tones, and applications, cell phones have become a form of
handheld entertainment for all ages.
Some 87% of smartphone owners access the internet or email on their handheld, including two-
thirds (68%) who do so on a typical day. When asked what device they normally use to access
the internet, 25% of smartphone owners say that they mostly go online using their phone, rather
than with a computer. (Smith, 2011a) Nielsen recently revealed that the amount of data used by
the average smartphone user has risen a whopping 89% over the past 12 months (Leggatt, 2011).
Smartphones continue to grow in popularity. According to Nielsen’s May survey of mobile
consumers in the U.S., 38 percent now own smartphones. And 55 percent of those who
purchased a new handset in the past three months reported buying a smartphone instead of a
feature phone, up from 34 percent just a year ago. Android continues to be the most popular
smartphone operating system, with 38 percent of smartphone consumers owning Android
devices (Nielsen, 2011).
There is especially a rise for smartphones among minority groups. Over the past six months, 42
percent of white users who bought a mobile phone opted for a smartphone, while 60 percent of
Asians/Pacific Islanders, 56 percent of Hispanics, and 44 of African Americans made the same
choice (Whitney, 2011).
The largest percentage of smartphone consumers are currently between the ages of 25-34.
Consumers that are currently above the age 45 are slower to adapt to newer cell phone
technology simply because they grew up without needing cell phones, computers, and other
technology that is common today. As time goes on, and technology progresses, the aging
population will never know a time when cell phones were not a part of their existence. The low
usage by consumers age 45 and up will be adjusted as the overall population ages.
Political
Some analysts believe that Android could be as dominant in mobile as Microsoft was on the
desktops in the 1990’s (Burrows, 2011). However, this dominance exposes Android to the same
concerns about privacy issues, monopoly control and anti-trust actions that Microsoft faced in
the 1990’s as well.
One early example arose from Android’s collection of location information. Because GPS is not

always reliable or available, Android smartphones can also use low-power wi-fi to determine a
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rough location. It then uses this information in its location-specific products, like Maps, Local
Search, and Places. According to a Google spokesperson, “The benefit of such a method is that
it quickly finds a device's location … and all the data collected… is entirely anonymous
(Reisinger, 2011).” As a preemptive response to European regulatory authorities, Google
announced that it was going to include an opt-out feature for its collection of wireless location
data (Reisinger, 2011).
This September, Google’s executive chairman, Eric Schmidt, testified to a Senate Judiciary
subcommittee over charges by Yelp that Google cooked the results of location-based search
items to favor Google-related sites (Greene, 2011). “The Internet is the ultimate level playing
field,” said Schmidt, “We focus on loyalty not lock-in.” He denied any bias in the results,
avoided an imitation of Bill Gates’ infamous tantrum, and said that Google had learned from
Microsoft’s battles with the Department of Justice and that “one company’s past need not be
another’s future (Greene, 2011).”
Economic
A promising trend for Android is the explosive dual growth of both mobile communications and
mobile Internet use. Interestingly, the biggest growth is seen in developing economies like
Egypt or the Philippines where landline communications had long languished.
In 2001, the Philippines only had 4.5 million customers using landline phones compared to 16
million who used cell phones. Since then, the number of landline customers is almost unchanged
while there are now 86.2 million mobile customers out of a population of almost 100 million
people (Economist Intelligence Unit, 2011). And out of all those customers, Internet World Stats
found that 29.2% of them use the Internet – mainly from a mobile device (2011).
Tomi Ahonen, a former Nokia executive, think smartphone sales could reach billions of units
annually before 2015, "If we take today's top smartphones… that kind of phone will cost $10 to
sell profitably in 10 years. That means that anyone on the planet [who] can afford a $25 phone
today…can easily afford what we consider a top smartphone of today…as a new device in far
less than 10 years (Arthur, 2010)." As more of those customers upgrade their phones over the
next few years, there are a range of extremely cheap Android clones from Chinese manufacturers

like ZTE and Huawei that will be tempting choices.
Industry Analysis
Rivalry Among Existing Firms
Apple. According to Bernstein Research, Apple has “reached the critical mass required to a
strong high-end dominant player (2010, p.132). Currently, Apple’s share of the smartphone
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market is 19%, compared to Android’s 38% of the global market (Dow Theory, 2011).
However, Apple has a devoted following of early adopters willing to pay a premium and its
iPhones continue to be the individual leading handset. Because of its launch with Verizon this
past spring, Apple’s iPhone grew faster than Android in Q2 of 2011 (Channel Insider, 2011b).
And with Sprint’s upcoming announcement of the iPhone 5 this fall, Apple will soon sell its
iPhone through 3 of the 4 leading carriers in the US. Its tablet, the iPad, is the indisputable king
of tablet computers and the Apple TV has been winning over more customers lately.
Android. From 2009 to 2011, Android has grown from a 3 percent share to a 48 percent share
of the smartphone market (Burrows, 2011). With Android’s creator, Andy Rubin, proudly
pointing out that Android is being activated on more than 500,000 phones and tablet each day
(Channel Insider, 2011b). While Apple might be a premium solution for early adopters, Android
has staked a commanding position as a value brand. “Nearly two-thirds of respondents feel that
it’s not possible for Microsoft, RIM, HP, and Nokia to reverse momentum relative to Google and
Apple (Eddy, 2011).”
Blackberry. Research in Motion (RIM) had the grandfather of smart phones with the
Blackberry. Since the late 90’s, corporations flocked to the Blackberry for its robust enterprise
e-mail solution and high call quality. However, RIM failed to innovate as Apple came out with
the iPhone. Michele Pelino pointed out that, “[Blackberry is] entrenched in that enterprise
environment and now that environment is going … to other OSs and devices (Boulton, 2011).”
Recently, RIM has pinned its hopes a new line of phones coming out in 2012 with its new QNX
operating system; however, Jack Gold notes that, “the next 6 to 12 months are critical for RIM
(Boulton, 2011).”
Palm. Like Blackberry, Palm is another legendary name is the smartphone industry. Palm
launched its Pre just as the first Android handsets gained acceptance in the market. Palm’s

webOS garnered great reviews, but the hardware was plagued with problems. In fact, Android
gained a lot of Palm’s customers as many of the Pre phones were returned and traded for
Android phones. Plagued with a long history of cash flow problems, Palm was purchased by HP
in 2010 to supplement their consumer electronics division.
The next year, HP put a significant marketing push into Palm products. The HP TouchPad was
HP’s answer to the Apple iPad and Samsung’s Galaxy Tab 10.1; and had plans to release a
related Pre 3 smartphone with AT&T. However, sales were disappointing. With retailers, like
Best Buy, sitting on half a million units of TouchPad’s in inventory, HP abruptly killed the
TouchPad only 48 days after the product launch. Then, it slashed the price from $399 to $99 in a
fire sale and announced that it was getting out of the consumer electronics business. The ensuing
fallout destroyed HP’s distribution network overnight. Although webOS might be floated as an
independent platform, it would be difficult to have partners sign on if HP is involved.
Microsoft / Nokia. Microsoft has been a player in the smartphone market since the 90’s. It
pioneered Android’s model of licensing the software to a host of hardware vendors; however, its
Windows Mobile initiatives never gained much traction. Like Android, Microsoft had to deal
with fragmentation across its different vendors. When it tried to make its own hardware, the
result called the Kin was pulled after only an embarrassing 47 days on the market (Channel
Insider, 2011a).
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Nokia enjoyed a lion’s share of the global phone market with its antiquated Symbian OS;
however, Symbian is a limited operating system and wasn’t designed to compete with Apple or
Android. It was designed a decade ago to work on dumb phones and Nokia’s market share had
been plummeting as customers traded in their “dumb phones” for smartphones.
In February, Nokia announced plans to license Microsoft’s upcoming Windows Phone OS for all
of its handsets. It was a coup for Microsoft’s marketing efforts; however, its market share
continued to decline after the announcement from 7.7% to 5.9% (Channel Insider, 2011b).
Microsoft hopes to reverse the trend with its upcoming Mango release which will correspond
with Windows 8 and Xbox releases, but both Microsoft and Nokia have an uphill battle in the
months ahead.
Threat of New Entrants

Because creating an operating system is such a resource-intensive endeavor, there is a large
barrier to entry and it takes a long time to launch a competing product. At the moment, there are
no new operating systems in the works. However, firms are looking for ways to take advantage
of the revenue-generating opportunities – to the detriment of Android.
Even though Android is freely distributed, that doesn’t mean that it doesn’t generate revenue.
Android serves as a launchpad into Google’s ecosystem of Apps, Books, and Movies. From
2009 to 2010, the Android Market saw an 862% increase in app sales with annual revenue of
$102 million (Krause, 2011). It accomplished that by expanding its library of apps from 20,000
to 250,000. Despite that impressive percentage increase, it’s still a small piece of the 2 billion
dollar app market dominated by Apple with an 86% share.
To increase app sales, Google radically revamped its Android Market in summer 2011 to better
promote paid applications. Although prolonged arguments with the music industry prevented the
launch of an iTunes-like music service, Android expanded its Market to include downloadable
books and movies. As the parent company, Google has invested heavily in Android. That’s
because Google derives a great deal of its revenue through ad traffic from its search results. By
putting Android on millions of new smart phones, Google increases its search results
exponentially.
The Android platform’s greatest strength lies in its ability to be customized, but carriers and
vendors have seized on that as a way to generate their own revenue. In the spring of 2011,
Amazon launched its own Appstore for Android. As a running promotion, Amazon gave away a
different paid application every day. This effort cracked Android’s monopoly on paid
applications and deterred revenue that would have gone to Android. At the time of this analysis,
Verizon was also setting up its own App store to compete with the Android Market and others
are in the works.
Another important revenue source is ad-traffic from search results. Android’s parent company,
Google, makes money off its Android phones since it is delivered with a full suite of Google
products. However, other players are breaking into this market. One of Android’s hardware
vendors, Motorola, signed a recent agreement with Microsoft to embed Bing as the search engine
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for its Android phones. Through ad traffic generated by Bing, Microsoft makes money off a

“Google phone”. Also, Facebook and Google are encroaching on each other’s territory with
Facebook moving into search and Google moving into social networking. And through its
Facebook application on Android, Facebook can provide services that directly compete against
Google.
Bargaining Power of Buyers
In the United States, the largest bulk buyers of smart phones are actually the pre-paid cell phone
companies like AT&T, Verizon, Sprint, and T-Mobile. In exchange for two year commitments,
these companies provide their customers with a subsidized smart phone. Although the end
customer’s contribution is commonly from 99 to 199 dollars, the American carriers normally
absorb 500 to 600 dollars of the initial cost (Ferragu, 2010).
As sales of the Hero and Droid took off in 2009, Google saw a chance to change the way that
people bought cell phones by releasing its own pure-Android handset, the Nexus One. Google
had HTC manufacture the phone and offered it through an online store. There, customers would
be able to buy the phone and comparison shop among the various carriers. Using the Nexus One
as leverage, Android and Google wanted to interact directly with the end consumers and break
the power of the cell phone companies (Lahiri, 2010).
Unfortunately on launch day, the only carrier with an agreement was T-Mobile. Verizon and
Sprint dragged their feet and later decided not to participate. Since the phone was offered
without a subsidy, customers had to pay the full price upfront. If they signed up for T-Mobile
service, they would receive a rebate, but the rebates were done by check and not credited
upfront. Worst of all, service agreements had not been worked out. There were no service
centers where people could return defective handsets and no phone support where users could
call in with problems. Google had only set up a help site of Frequently Asked Questions and a
discussion forum.
Google’s attempt to change the way Americans buy phones failed. The fallout was a public
relations nightmare as Google had to turn to the cell phone providers and its manufacturer, HTC,
for help with returns and unhappy customers. As a result of the Nexus One direct-sales fiasco,
Google abruptly got out of the cell phone manufacturing business. It closed the Nexus One
online store and had to soften its stance with the cell phone companies. This also greatly
strengthened the cell phone providers’ bargaining position.

This shift in power showed up when three of the four carriers backed a payment system called
Iris that would compete against Android’s upcoming Google Wallet service (Yin, 2011).
Although mobile payments have been increasingly common in Asia, they have been unheard of
in the US. With Android’s support for Near Field Communications (NFC), it will be possible for
users to pay at participating vendors simply by swiping their phone. In not backing Android’s
payment service, the carriers kept an important future source of revenue for themselves and away
from Google.
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As early as 2007, there had been talk of Google buying a telecom company. Because of the
immense cost in building a national telecom company and maintaining thousands of miles of
fiber, there is a very large barrier to starting a new telecom. Although there are a number of
small regional carriers like MetroPCS or Cricket, these companies pay the large carriers for
bandwidth and tend to have pre-paid customers with unsubsidized phones (Lahiri, 2010). This
forces Google and Android to deal with the big four telecoms in the US market.
Recently, Sprint became a preferred partner for Google: replacing its voicemail with Google
Voice, carrying the Nexus S, and participating with Google Wallet (Mui, 2011). And Mui
speculates that Google could buy Sprint for less than $10 billion from its $26 billion in cash
reserves (2011). However, buying a telecom company would instantly alienate Android’s
existing telecom partner relationships and endanger Android sales with those companies. With
the Motorola Mobility purchase still pending regulatory approval, it is highly unlikely that
Google would jeopardize that deal by making a bid for Sprint. Instead, it is trying to make
conciliatory gestures to both its hardware vendors and cell phone carriers.
Bargaining Power of Suppliers
Unlike Apple or Palm, Android is completely dependent on outside vendors to create its Android
handset. It has partnered with HTC, Samsung, LG, Motorola, and a number of smaller
manufacturers to bring Android phones, tablets, and other devices to market. “Android has cut
the cost of building a phone by 90 percent,” says Shay Benchorin, director at Mentor Graphics,
“Making products at a tenth of the price is a no brainer (Dempsey, 2010).”
The handset market is very attractive for electronics manufacturers. Over the last 10 years
handset vendors have posted double-digit operating margins compared to just 2% for PC

manufacturers. As a matter of fact, mobile phone gross margins have historically been around
30 to 35 percent - halfway between the margins of laptops (around 10%) and leather handbags
(around 70%) (Bernstein Research, 2011). That’s why consumer electronics giants like Dell and
Sony keep trying to break into the market with their own variations on Android devices.
However, two of the largest vendors – Samsung and HTC - have hinted at designing their own
operating systems to replace Android. Together, they produce a quarter of the Android handsets
in the world. Even though Android has made them wealthy, it has also exposed both firms to
lawsuits and headaches coordinating version releases. When Google recently purchased
Motorola Mobility for its patent portfolio, it publically reassured its partners that it would treat
Motorola no differently than any other vendor. Months later, it is still unclear whether Google
will keep the Motorola handset business, spin it off on its own, or sell it to another vendor. If it
keeps Motorola, Google might follow Apple’s model and have a channel for producing its own
“pure Google” device – free of vendor interference.
Threats of Substitute Products
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Before the end of 2010, smartphone sales were dwarfed by PC sales. During the first three
months of 2010, 85 million PCs were sold worldwide, compared with 55 million smartphones.
At the time, even the most optimistic analysts forecasted that the PCs would continue to outsell
smartphones until 2012. Instead, in the last three months of 2010, 94 million PCs were sold –
and 100 million smartphones (Arthur, 2011).
Now, IDC reports that PC shipments are expected to grow by only 4.2% in 2011, down from
their February forecast of a 7.1% market increase (Gaudin, 2011). That’s anemic compared to
consumer PC shipment growth of 18.9% in 2007 or 21% in 2009. In his recent Washington Post
article, Topolsky (2011) admits that technological companies are now focusing their futures on
tablets, smart phones and software and Google expects searches from mobile phones to exceed
searches from PCs before 2013 (Arthur, 2011).
Laptop computers are becoming increasingly overlooked as smartphones become cheaper to
purchase, and an easier method to access the internet with. Ogg (2011) contends that Laptops
will continue to get faster processors, and marginally thinner but the rise to alternatives to
traditional PC’s, tablets, will continue to march on. Even in 2015, when about 82 million US

consumers will own a tablet, more US consumers will own laptops (140 million).
So while the era of the primacy of personal computers in their traditional form is fading, they are
not disappearing entirely. They’re just taking on a different form (Ogg, 2011). Microsoft is
fighting back with a marketing push for its new Windows 8 operating system. PC vendors are
hoping that consumers will upgrade their PCs to faster, newer models that it will take to run
Windows 8 smoothly. PC’s will not completely get wiped out. There will still be several
hundred million PCs sold worldwide for several years because people will still need PCs for
certain tasks, however, many tasks done with personal computers can be carried out with a
decent-sized touch screen and a good internet connection.
Conclusion
Over the next year and a half, Android as a platform will continue to be popular with
manufacturers. Despite partners’ apprehension about intellectual property claims, Google took a
substantial step toward tackling with that with its recent purchase of 1000 strategically important
patents from IBM and outright purchase of Motorola Mobility. Also, partners like HTC and
Samsung have seemingly come to accept Android’s spotty intellectual property issues as a price
of doing business. This is illustrated by HTC paying Microsoft $5 for every Android handset
and Samsung settling with Microsoft for an undisclosed amount.
The upcoming release of Android 4.0, or Ice Cream Sandwich, should resolve the fragmentation
issues seen between the phone version and the tablet-specific version. A bigger challenge will be
the erosion of Google’s ability to make money off Android. Amazon recently announced its
Amazon Fire tablet which will use its own highly customized version of Android. However, it
won’t have the Android Market or use Google other mobile products. As more partners like
Verizon and Samsung further develop their own specialized front-ends, Android will have less
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and less control over its own ecosystem. This is especially true in the tablet market which is still
dominated by Apple’s iPad devices.
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