Google to Push Android Deeper into Asia

Stepping up its rivalry with Apple and Nokia, Google outlines plans to court developers and put its operating system on lower-priced phones in China and India

Google (GOOG) plans to push its Android mobile software in India and China, and is exploring ways for developers to make more money from applications, stepping up competition with Apple (AAPL) and Nokia (NOK).

To attract programmers to its Android operating system, Google may offer tools that help them sell subscriptions, virtual goods, and other items from within applications on mobile phones, Andy Rubin, vice-president of engineering at Google, says in an interview.

The company also aims to put its Android operating system on lower-priced phones made by Huawei Technologies (2049:TT) and LG Electronics (066570:KS) in parts of Asia and Europe, where it's taking on Nokia, the mobile market leader. "The down-market opportunity is about to happen," Rubin says. "It's actually quite a revolution."

Android is part of Google's strategy to get more of its software on mobile devices, creating new avenues to sell advertising—its main source of revenue. The total mobile-ad market will grow to $13.5 billion in 2013 from less than $1 billion last year, according to research firm Gartner (IT) in Stamford, Conn.

Google, based in Mountain View, Calif., lags behind Apple in mobile apps, which are a growing platform for ads and help attract consumers to devices. Android users have about 65,000 apps available, less than a third of the more than 200,000 Apple programs.

ANDROID'S GROWTH

Google is taking steps to accelerate Android's growth. Expanding in new markets such as Korea helped drive up the number of users who activated Android devices to 160,000 a day in June, from 100,000 in May, the company said. Sixty-nine percent of Android-based phones sold in the first quarter were in the U.S. "We are definitely in the hockey stick," said Rubin, referring to Android's growth pattern. Gartner predicts that Android will leapfrog Apple's operating system, iOS, by 2012 to become the world's second-most-popular mobile operating system behind Nokia-supported Symbian.

Google also is increasing incentives for app developers. It's exploring ways for programmers to make more money from their software, such as by making it easier to accept payments within the apps or sell subscriptions, Rubin said. That provides a way for consumers to purchase new game levels, virtual weapons, and monthly subscriptions to digital magazines. Apple added similar features to the iPhone in 2009.

Android developers mainly make money from ads placed within their apps or from one-time fees. That makes it harder for them to earn as much as their Apple counterparts. Of the $4.4 billion that consumers will spend on app downloads this year, Apple's App Store will receive at least 77 percent of the revenue, according to Futuresource Consulting in Dunstable, England. Android Market will collect 9 percent. Natalie Harrison, a spokeswoman for Cupertino (Calif.)-based Apple, didn't return a call seeking comment.

While businesses like eBay's (EBAY) PayPal already offer in-app payment tools for Android developers, dealing with multiple companies increases the complexity, Rubin says. Since starting its in-app payment tool on May 19, PayPal has had more than 1,000 developers download it, says Osama Bedier, a vice-president at PayPal. Most of the developers came from China.

HELPING HANDSET MAKERS

Google is also helping handset makers like Huawei in China and LG in South Korea offer cheaper Android-based smartphones, Rubin said. Huawei, the biggest maker of wireless equipment for carriers in China, unveiled four Android phones and an Android-based tablet in February.

Smaller Chinese manufacturers, which make up about 10 percent of the global phone supply, are also adopting Android, seeking to gain share with lower-priced devices. Many of these manufacturers rely on Taiwan-based MediaTek, which supplies chips for ultra-cheap phones sold in Asia, Africa, and South America. The company has joined the Open Handset Alliance, the group that promotes Android, Google said. MediaTek-based devices may cost carriers as little as $70 apiece, said Carolina Milanesi, an analyst at Gartner. Today, the cheapest Android phones cost carriers about $200, while low-cost Symbian devices run about $170, she said.

As more lower-priced phones come to market, more carriers will offer the devices to consumers for free. That could boost the adoption of Android, especially in emerging markets like India and China. That adoption will give Android a leg up on Nokia. While the Espoo (Finland)-based company holds only a fraction of the U.S. market, it is the leading phone maker globally. "As Android develops, the main vendor who is going to feel the pressure is Nokia," Milanesi says.

In the first quarter, more than 41 percent of smartphones shipped worldwide were powered by Symbian, the software used on most Nokia handsets. Almost 16 percent used Apple's operating system and 10 percent ran Android, according to consulting firm ABI Research in Oyster Bay, N.Y.

Nokia says it has the brand and products to maintain its market share in Europe and Asia. "Nokia has developed locally relevant solutions that consist of affordable mobile phones and applications, designed and built from the ground up to meet the specific needs of customers in emerging markets," spokeswoman Laurie Armstrong says.

Kharif is a reporter for Bloomberg Businessweek in Portland, Ore.

Apple's iPad Wins Corporate Converts at Wells Fargo, SAP

The tablet computer, designed for video and book-reading, is making inroads at companies as varied as SAP and Mercedes-Benz

Wells Fargo (WFC) spent two years studying the iPhone before letting bankers use the device at work. Apple's (AAPL) iPad, released in April, took just weeks to get cleared.

This time around, safeguards against security breaches are stronger from the start, according to Megan Minich, a senior vice-president at the San Francisco-based bank. Her colleagues used two of the first shipment of 15 iPads to demonstrate financial products at an investor conference in May. More are on the way, Minich says. "We've got a bunch ordered that we can't get yet," she says in an interview.

Apple, known for courting consumers with sleek designs and easy-to-use software, is making inroads with corporations that say the iPad can make workers more productive without putting sensitive customer information at risk. SAP (SAP), Tellabs (TLAB), and Daimler's (DAI:GR) Mercedes-Benz are using the tablet-style computer for tasks as varied as accessing work e-mail, approving shipping orders, and calling up on-the-spot auto-finance options.

Apple Chief Executive Officer Steve Jobs announced the iPad in January, touting its ability to deliver games, video, music, Web access, and digital versions of books and magazines. Yet companies say it's widely applicable at work, too. "This iPad thing has taken the world by storm," says Ted Schadler, vice-president and principal analyst at Forrester Research (FORR) and author of Empowered, which explores how employees use new technologies. "It came in as a consumer product and very quickly the people who actually bought them were businesspeople."

BUSINESS "EXPERIMENTATION"

Last month, Apple said it sold 3 million iPads within 80 days of its release. The company may sell 9.7 million iPads in 2010, says Shaw Wu, an analyst at Kaufman Brothers in San Francisco. More than half—52 percent—of 770 smartphone users surveyed by Zogby International said they would most likely use a tablet device like the iPad to do work. The study, commissioned by Sybase (SY), was released Mar. 23. "A lot of businesses right now are in experimentation with these devices," says Dan Shey, practice director for enterprise at ABI Research, which is based in Oyster Bay, N.Y.

Many companies may keep their distance from tablet-style computers, which boast smaller screens and won't let businesspeople switch back and forth between tasks as quickly as bigger machines. Apple rivals including Hewlett-Packard (HPQ) and Cisco Systems (CSCO) are getting into tablets, too—so the iPad maker's lead may narrow.

For now, workplace adoption of the iPad stands to benefit Apple while undermining rival makers of computers that run Microsoft's (MSFT) Windows operating system. Many companies initially chafed at letting employees use iPhones for business amid concerns that it may not keep corporate data secure. That resistance ebled after Apple in 2008 released a version of iPhone software with beefed-up security and better support for corporate e-mail. Similarly, a growing number of companies have begun letting employees use Apple's Macintosh computers in addition to, or in place of, Windows-based PCs. Apple spokesman Simon Pope declined to comment, referring instead to remarks by Jobs, who said on May 31 that "customers around the world are experiencing the magic of iPad."

With their smaller screens, inability to multitask, and lack of keyboards, tablets may not soon replace bigger computers for many work-related tasks. The iPad's display, for example, is 9.7 inches (25 centimeters). By 2015, less than one-fourth of personal computers sold will be tablet-style, Forrester says.

COMPETITION'S COMING

As popular as the iPad may be for businesses now, it may soon face competition from rivals including Hewlett-Packard, Dell (DELL), LG Electronics (066570:KS), and Samsung Electronics (005930:KS), which plan their own tablet computers. Cisco said on June 29 it too will release a tablet that will be able to handle high-definition videoconferencing and may be available in early 2011.

Some companies may also be reluctant to entrust their data to the iPad after a breach on the AT&T (T) website revealed the e-mail addresses of as many as 114,000 iPad users. Apple takes pains to keep its products secure in part by carefully vetting the applications that can be downloaded onto it. Still, the process is "not foolproof, it will be subverted eventually," says Mikko Hyppönen, chief research officer of Helsinki-based security firm F-Secure.

Reservations aside, Wells Fargo saw early on how quickly the iPad might take hold among business clients the weekend the device was released. Finance executives of large companies—those that generate more than $50 million in revenue—accessed corporate Wells Fargo accounts with iPads, says Amy Johnson, a Wells Fargo vice-president who works on the company's online portal and mobile strategy. A finance official or account representative could use a mobile device like the iPad to approve multimillion-dollar wire transfers, she explains.

Johnson used one of the iPads bought by Wells Fargo to demonstrate financial products during a May 13-14 conference. She says she now carries the iPad with her everywhere.

VERSATILE TOOL

The same goes for Rob Enslin, North America president at SAP, the world's largest maker of business-management software. Enslin says that when he travels, the only device he carries besides a Research In Motion (RIMM) BlackBerry is the iPad. "It's allowed me to almost run a paperless office," says Enslin, who uses it to access business applications, briefing documents, customer information, and other data.

SAP, based in Walldorf, Germany, also works with clients to put its products on mobile devices including the iPad. Tellabs, for instance, collaborated with SAP and Sybase on an iPad application that lets managers more quickly approve shipping of customer orders. "We also have three or four different applications lined up behind this that will help us with better inventory control," says Jean Holley, chief information officer at Tellabs, based in Naperville, Ill.

Other companies using the iPad at work include Daimler's Mercedes-Benz. Sales representatives in 40 U.S. dealerships in late May began using iPads on showroom floors to order on-the-spot financing options for customers, says Andreas Hinrichs, vice-president of marketing at Mercedes-Benz Financial. In October, Mercedes-Benz had released an application for the iPhone that lets customers manage accounts and make payments. Up to now, customers have made $5 million in car payments through the application, Hinrichs says. The company now is considering doling out iPads to all of its 350 U.S. dealerships.

At Wells Fargo, Minich is waiting for an iPad after her boss made off with the one she expected to be assigned to her.

King is a writer for Bloomberg Businessweek in San Francisco