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Google's Android Has Apple on the Ropes

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Apple may need a new game plan after Android devices outsold iPhones in the first quarter.

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A trio of reports released yesterday has kept the smartphone war between Apple (AAPL) and Android (GOOG) especially interesting. Another carrier hopeful for the Nexus One has dropped out of the race, frustrated AT&T (T) customers get some bad news, and first-quarter smartphone sales figures show a major shift.

Two weeks after Verizon (VZ) forfeited plans to support the Nexus One, Sprint (S) has also performed an about-face and left the Google smartphone at the altar. Sprint is no longer set to carry the Nexus One and is instead refocusing its future Android sights on HTC's upcoming EVO 4G, similar to how Verizon is hoping HTC's recent Droid Incredible will hit a home-run on the level of the Motorola (MOT) Droid.

Available in American markets for full price or subsidized on T-Mobile (DT) -- as well as for full price on AT&T -- the Nexus One was intended to be supported on several major mobile carriers in the States. But the process has been proven difficult as analysts had expected.

In-Stat analyst Allen Nogee told IDG News' Nancy Gohring in an article for PCWorld, "In Europe, where they use the same frequencies and technologies and users can just trade SIM cards, they can do that, but in the US it's not so easy." Gohring noted that Europe has also been difficult for Google since Vodafone (VOD) carries its device but only sells it in Vodafone locations, not through Google's site.

Despite mediocre sales numbers, the Nexus One earned back its expenses for Google -- see Google's Nexus One: Profitable? -- but the lack of choice in provider mutes any further substantial profit.

On the other hand, Google shouldn't be too unhappy with Android sales figures. A recent survey conducted by market researchers at The NPD Group has shown that Android devices outsold iPhones in 2010's first quarter. Commanding second place behind Research in Motion (RIMM) -- which leads with a 36% share -- the Android OS held 28% of unit sales and surpassed Apple's 21%. NPD's executive director of industry analysis Ross Rubin attributed much of Android's first-quarter success to carrier distribution and Verizon extending its buy-one-get-one promotions beyond BlackBerry devices.

And not only does Apple have to worry about losing new customers to Android devices, it now may have to scramble to keep from losing existing customers fed up with AT&T. A significant portion of existing and potential iPhone users were dealt a disappointing blow when Engadget uncovered court documents from 2007 which confirmed AT&T exclusivity until 2012. Although Engadget questions how concrete the terms are, the ubiquitous wish to see a Verizon iPhone in the near future has, nevertheless, been quashed.

With the rave reviews the Droid Incredible has been getting and the phenomenal features of the upcoming EVO 4G, Apple should have serious concerns over a rising number of Android converts in the coming months.

For Apple's sake, let's hope that iPhone prototype was just the tip of the iceberg.

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