Apple Sells More iPhones by Dominating Apps

December 2nd, 2011 by Trefis Team
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According to a recent report, Apple (NASDAQ:AAPL) and Google’s (NASDAQ:GOOG) Android market share in total apps downloaded in the U.S. was 83% for Q3 2011. [1] This is much more than the smartphone subscriber share of 71% that these companies form together. This goes to show that consumers downloads more number of apps from Apple and Google ecosystem compared to Research in Motion’s (NASDAQ:RIMM) and Microsoft’s (NASDAQ:MSFT) ecosystem. We believe the availability of apps could also play an important role in influencing the number of downloads. For example, Apple had around 350,000 apps in its ecosystem as of January 2011, which is by far the most number of apps for a smartphone operating system. [2]

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Apple going strong in the apps business..

According to another report, Apple owns about 85 to 90% of total mobile app spending. This is likely to be still more than 70% of mobile app revenue share for the next three or four years. [3] Although Android is the dominant smartphone operating system in terms of market share, it is dwarfed by Apple in the app downloads business.

..Helps in creating a halo effect

Although apps’ accounts for only around 2% of our $500 price estimate for Apple stock, it plays in important role in creating a halo effect around other more valuable businesses for Apple. For example, the abundance of apps and the seamless user interface is an important factor for a consumer while choosing a smartphone. Hence it helps create more iPhone sales for Apple, which is an important driver for its stock at more than 50% of the stock value according to our estimates.

Our price estimate for Apple stock is about 35% above market price.

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Notes:
  1. Android Phones and iPhones Dominating App Downloads in the US, Nielsen, November 29th, 2011 [↩]
  2. Apple press release, January 22nd, 2011 [↩]
  3. Apple blowing away Android with up to 90% of app revenue, GigaOm citing Piper Jaffray as the source, November 21st, 2011 [↩]