The Smartphone Wars: Is Apple’s Dominance Over?
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The Fiscal Times
January 7, 2013

It wasn’t long ago that Consumer Reports was raving about the iPhone 5. An October 5 review called Apple’s latest device “a winner,” and “the best iPhone yet” – good enough to rank “among the best smart phones” in the magazine’s rankings.

Three months is an eternity in tech time, though – or at least long enough for Android-based competition to make the iPhone look like less of a winner. As Business Insider’s Henry Blodget noted on Friday, the iPhone fails to top Consumer Reports’ rankings for any of the three major wireless companies that carry it, potentially adding to the chatter that Apple has lost its edge.

Apple’s phone doesn’t fare poorly in the magazine’s scoring, but it trails the little-known LG Optimus G, released in November, and the better-known Samsung Galaxy S III among AT&T and Sprint offerings. On Verizon, the iPhone, which launched in the U.S. in late September, also has fallen behind offerings like the Motorola Droid RAZR HD and Droid RAZR MAXX HD, both of which came out in October, and Samsung’s hot Galaxy S III. The iPhone is tied for sixth place among Verizon phones, according to Consumer Reports’ scoring. The magazine lists the 32 GB and 16 GB models of the Galaxy separately, but CEO Tim Cook was certainly shooting for higher than fifth place with the iPhone 5.

Despite those rankings, U.S. phone buyers haven’t lost their taste for Apple. Research firm Kantar Worldpanel ComTech reported today that the Apple’s share of American smartphone sales has surpassed 50 percent for the first time. Sales of all iPhone models accounted for 53.3 percent of the market for the 12 weeks ending November 25, while Android sales dropped 10.9 percentage points to 41.9 percent. Based on the strong demand in the December quarter, Canaccord Genuity analyst Michael Walkley wrote in a note Monday that Apple could be on pace to sell 173 million iPhones in its current fiscal year, including more than 48 million in the last three months of 2012 – a total that would be a new high mark for the phone.

Still, Apple’s stock (NASDAQ: AAPL) has been mashed in recent weeks. Some investors, anticipating changes to the capital gains tax as part of the fiscal cliff, sold before year-end in order to lock in their huge gains before the tax went up. But more fundamental concerns have been creeping up too, causing shares to plunge. Analysts increasingly expect that Apple’s margins will get squeezed long-term as the market evolves and consumers worldwide look for lower-cost devices. The iPhone 5 may have sold well in the U.S. after its launch, based on the Kantar Worldpanel numbers, but Android phones still have a wide lead in overall market share and a larger share of subscribers own a Samsung phone than an iPhone, according to comScore. Of more near-term concern, analysts reported that Apple had cut back on its orders for the first quarter of 2013, a move initially interpreted that as a sign that demand for the phone may have been softer than expected.

That move by Apple may have been for a completely different reason: A new iPhone may be coming mid-year instead of the usual fall release. With the competition moving ahead of Apple in the eyes of reviewers like those at Consumer Reports, 2013 may well be the year that determines whether the iPhone’s stretch of dominance has come to an end.

Executive Editor Yuval Rosenberg oversees coverage of business, the economy, technology and Wall Street. A former web editor at WNYC, Fortune and Newsweek, he also writes on a wide range of subjects.