Apple reported stunning earnings today, exceeding even the most optimistic expectations. The company recorded GAAP EPS of $1.82, representing a 44% year-over-year growth. Apple sold 7.4 million iPhones in Q4 (that’s 44% more than Q3), barely keeping up with demand. The Apps Store continues to sing along with over 2 billion downloads and more than 85,000 applications for the iPhone and iPod Touch.

Apple's Q4 After Hour Stock Price

Apple's Q4 After Hour Stock Price

So what’s next?

There is no question Apple is the mobile industry’s sweet heart du jour. Even Mr. Ballmer could not deny that. But the competition is all gunning for Apple. Just to list a few:

March of the Androids.
The biggest threat to iPhone’s dominance is the slew of Android phones that are now coming into the market. This did not impact Apple’s past quarter that much because there were only a couple of devices in the market during that time (G1 and myTouch3G). But the game will change significantly over the 6 months as many more Android devices come into play. Motorola, HTC, LG, Samsung and others have all lined up their arsenals of Android phones to take on the iPhone. These devices have the potential to unseat the iPhone as they offer various points of differentiations: physical keyboards, higher resolution cameras, larger and higher resolution screens, built-in flash, differentiated user interfaces and ability to run background applications. Of course, some of them also run on CDMA networks, which for subscribers who are locked into CDMA networks may offer an experience close enough to iPhone to make them happy.

Our Take: Android currently has a lot of momentum with OEMs because there is no other real alternative for them. Windows Mobile 6.5 is still a rather old OS with new skin. OEMs need a new platform to fight the iPhone. But it remains to be seen that consumers will ultimately choose Android devices over the iPhone. Although many of the upcoming Android devices are innovative in their own rights, it is difficult for them to touch iPhone’s aura. Not only is Apple a great design and engineering company, but it is also a marketing genius. Consumers will opt for an Android device if they cannot be with AT&T for one reason or another, but for around the same price (Android devices aren’t cheap), we suspect most people would rather opt for the iPhone. The upfront cost of a smartphone is such a small part of the overall cost (including monthly plan cost). Even if operators drop the cost of Android devices to free, it may not have that big of an impact to iPhone sales. Apple is also clearly moving out of mobile operator exclusivity over time, so does not bode well for other phone makers.

Bucket of Blackberries.
Wall Street was largely disappointed by Research In Motion’s earnings in the most recent quarter, but the BlackBerry maker is in no way out of the game. In fact, it is still the biggest player in the enterprise space and the second largest smartphone maker in terms of market share, next to Nokia. Walt Mossberg recently reviewed the upcoming Storm 2 and gave it a relatively positive review. RIM will unquestionably continue to roll out more devices to fight the iPhone.

Our Take: RIM is walking the same road that Nokia is. It is in desperate need for a UI overhaul. While Storm 2 might be a step up from the original Storm, a UI that was designed for thumb wheel still does not work well for a touch screen device. Watch your back on your enterprise market, because Apple might eat that too. Oh, and stop rolling out devices that consumers can’t tell what the differences are.

Verizon’s iDon’t.
Verizon is the largest mobile operator in the US, and it has been front and center with fighting against the iPhone. Stuck without a blockbuster device, Verizon has been playing up its strength in network coverage. Its “Map for That” ad campaign has gone viral and has been pretty well-received (see below).

Yesterday, it started launching the “iDon’t” ad campaign, focusing on things that iPhone doesn’t do and things that its upcoming device will do. It’s expected Verizon’s upcoming device will be the Motorola Sholes, which features a large 3.7” display, Android 2.0, super fast processor, built-in flash for photos, thin profile and physical keyboard. Boy Genius Report has a full hands on review on it and it looks plenty promising.

Our Take: If the device is as good as BGR claims, we think a lot of Verizon customers will remain with Verizon with the new device. But let’s not get carried away; Apple is not going to stand still with the iPhone.

Microsoft’s Windows Mobile 7.

Windows Mobile 6.5 just launched, but we all know that it’s not the real deal. The big M won’t seriously get back into the game until Windows Mobile 7, when will it ship is still anyone’s guess.

Our Take: too little information to say yet. But let’s Microsoft is known to be tenacious. Apple, just watch your steps, ok?

The smartphone market is very fragmented right now, and it is bound to experience some consolidation over the next several years. Apple is in a strong position to become the dominant player as both Nokia and RIM lose share. Android is still unproven and Microsoft still hasn’t shown up to the party. Bottom line: Apple, you are look good, but you need to continue to work hard.

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