Posted by Greg Mills

Cannacord Genuity analyst Mike Walkley has noted that a high percentage of Android smartphone users abandon their chosen platform when they buy an iPad instead of any other tablet. Walkley anticipates that Apple will have roughly 250 million iOS users by the end of the year. He also figures that there is about an annual 40% “replacement rate” on existing iOS users buying another newer iPhone or iPad.

Used iOS devices often go to new users as a cherished hand-me-down, while rarely gathering dust in a drawer, somewhere. The used iOS device market is stronger with Apple products than any other brand. I have a collection of old junk cell phones, but my daughter quickly puts in her dibs on retired iPhones and my someday to be used iPad 1 will still make a great Christmas present for her.

Google’s Android may suffer from the “next best thing syndrome”. When Android was launched the handset industry was glad to have an alternative mobile OS to keep them in the game. Apple had sucked the air out of the room with iPhone. The vast number of Android handsets on the market with prices for all budgets may actually be the result of leftovers from Apple’s table rather than direct loyalty to Android.

While Apple has a modest 25% cut of the pie as far as smartphone handset sales are concerned, they take over half the profits of the entire industry. A more basic, lower priced iPhone, which can meet the “free with a two year subscription” price point, may or may not be in the product cue at Apple. Apple loves their great profit margins.

The perception of high quality in Apple’s products in the smartphone market creates an interesting paradox in the tablet computer market.

People who were too tight to pony up $250 or so for an iPhone are not so in love with their Android smartphones that they will buy an Android tablet, or for that matter any other platform’s tablet. RIM has also seen that even rabid BlackBerry users are buying iPad instead of the lame PlayBooks.

I submit that the iPad halo effect will bring a higher level of buyers to the iPhone as two year contracts expire on Android phones. Apple users are normally loyal for a lot of reasons that go well beyond the scope of this story.