Even though Apple led other technology stocks in the fast adoption rate by its operating system, Google has surpassed Apple in terms of total market share. Google’s “Android” operating system has the clear lead.
According to research firm International Data Corporation (IDC), during the third quarter of 2012, of the 181 million smartphones shipped, 75.0% were running Google’s operating system. This represents a 91.5% growth in market share for Google. (Source: “Android Marks Fourth Anniversary Since Launch with 75.0% Market Share in Third Quarter,” International Data Corporation web site, November 1, 2012, last accessed December 16, 2012.)
The best way to look at the growth of Google versus competing technology stocks is from a quote by Ramon Llamas, research manager at IDC for mobile phones, discussing Android’s growth since 2008 compared to other technology stocks: “In every year since then, Android has effectively outpaced the market and taken market share from the competition.” (Source: “Android Marks Fourth Anniversary Since Launch with 75.0% Market Share in Third Quarter,” International Data Corporation web site, November 1, 2012, last accessed December 16, 2012.)
With 136 million smartphones using Google’s operating system shipped during the third quarter, Google experienced a major achievement and reached a new record level. Apple is, by far, a distant second, with only 14.9% of third-quarter market share for shipments.
This is not news to Google’s management team. The chairman for Google, Eric Schmidt, stated that the growth for Android is reminiscent of the growth in market penetration rate of Microsoft Corporation (NASDAQ/MSFT) back in the 1990s. (Source: “Google Chairman Says Android Winning Mobile War With Apple,” Bloomberg BusinessWeek, December 12, 2012.)
The strategy amongst these technology stocks couldn’t be more different. While Apple charges a premium because it makes money from the software, Google essentially gives away its operating system. In return, Google gains valuable information that it can use for marketing purposes. It is clear that Google will remain a major force amongst technology stocks for many years to come.
Chart courtesy of StockCharts.com
As my readers already know, I have indicated through my technical analysis that Apple was a good short candidate when it was trading at approximately $560.00. (See “Will Apple Shares Continue to Fall?”)
The technical analysis for Apple remains bearish. There is clearly no strength at this point, as any upward move in the price is met with large numbers of sellers. Technical analysis will tell you that lower highs and lower lows are a key trait to a bearish chart. Another technical analysis indicator is that the price remains below its 200-day moving average (MA).
The 50-day MA is now below the 200-day MA, yet another bearish technical analysis indicator. Remember that when looking at technology stocks through technical analysis, I am not making a judgment on the actual products; technical analysis merely indicates what other investors are doing with their shares in these technology stocks.
Chart courtesy of StockCharts.com
Google had a massive run from July to October. In technical analysis, Fibonacci retracement levels can be a good guide in indicating where a stock might find support. When looking at these two technology stocks, clearly, the technical analysis shows us that Google is, by far, the stronger of the two.
Google bounced up off its 61.8% retracement level, a key technical analysis support level. In addition, it held its 200-day MA, yet another important technical analysis indicator. The stock is also above its 50-day MA. In addition, the company’s software continues to gain market share.
When looking at technology stocks, one needs to take a step back from the products and understand what other investors are doing with their funds. This is where technical analysis can help guide entry and exit points.
Both technology stocks are great firms and will continue to do well for many years. However, investors need to be aware that one cannot simply buy technology stocks and forget about them. Adjustments need to be made to take advantage of overly optimistic or overly pessimistic sentiment in the market. This is where technical analysis can help in the adjustment of one’s portfolio.