Today: iPhone's smartphone market share continues to slide as Android-based manufacturers succeed. Also: Tech stocks slow down as Zynga tanks following its earnings report.

The Lead: Apple's market share slips amid difficulties in Chinese market

Apple (AAPL) surprised analysts this week by announcing record sales of the iPhone during the second quarter of 2013, but reports Friday showed that the smartphone market's phenomenal growth kept Apple's performance from improving its market share, as rival Samsung and other Android-based manufacturers clocked better gains.

IDC tracked the second-lowest year-over-year growth for iPhone shipments in the past four years in the second quarter, and ABI Research reported that Apple's market share declined to its lowest level since the third quarter of 2009, early in the iPhone's history. Samsung, which missed analysts' expectations despite record profits in earnings released Friday morning, launched its Galaxy S4 last quarter and shipped more than twice as many smartphones as Apple, IDC reported.


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However, Samsung also lost market share, despite shipping 72.4 million smartphones in just three months, according to IDC: the Korean company's market share dropped from 43.9 percent in the same quarter a year ago to 30.4 percent. With both Apple and Samsung losing market share, smaller manufacturers that produce Android-based smartphones filled the gap: LG, which manufactured Google's (GOOG) latest Nexus smartphone and has its own offerings, moved from 3.7 percent of the smartphone market to 4.7 percent; and Chinese PC giant Lenovo moved from 3.1 percent to 4.7 percent. Below the top five vendors are a grouping of companies that accounted for more than 42 percent of the market, including Nokia, BlackBerry and HTC.

There is plenty of opportunity, as the worldwide smartphone market grew by 52.3 percent year-over-year, the highest such growth rate in more than a year, while smartphones outsold so-called feature phones for a second consecutive quarter.

"The smartphone market is still a rising tide that's lifting many ships," IDC analyst Kevin Restivo said in Friday's news release. "Though Samsung and Apple are the dominant players, the market is as fragmented as ever. There is ample opportunity for smartphone vendors with differentiated offerings."

Apple's issues in China may have been at the root of its slipping market share in the quarter: Apple's revenues in the Greater China region fell 43 percent sequentially and 14 percent year-over-year last quarter. accounting for $5 billion, or 13 percent of Apple's revenues. Meanwhile, Samsung has a decided advantage in the world's most populous country, using a wider range of offerings and greater familiarity to outperform the Cupertino tech giant.

"China is a very diverse market so you need to have very diverse products to serve different levels of customers -- and that's the weakness for Apple," Canalys analyst Nicole Peng Luping told Reuters.

Rumors have Apple releasing iPhones aimed at the lower end of the market, but that could be a double-edged sword, bring down Apple's legendarily high profit margins, which have been a favorite of investors.

Apple stock gained 0.6 percent Friday to close at $440.99

SV150 market report: Zynga tanks after dropping gambling effort as tech stocks slow down

After two straight days of solid gains, Silicon Valley tech stocks slowed down Friday in a ho-hum day for Wall Street, held back by a steep post-earnings drop for Zynga.

The San Francisco social-gaming company announced further degradation of its financial performance Thursday afternoon and said it would cease its attempt to obtain a real-money gaming license in the United States, which many analysts and investors believed to be the company's only hope for strong revenue growth. While some analysts went against the grain and said that Zynga's decision would be a good one for the company, allowing it to avoid long regulatory processes that could fail in the end, most reported that investors have little hope for gains from Zynga. "The company has eliminated much of the potential upside for the stock," Needham analysts concluded. Zynga shares declined 14 percent to $3.01.

Former close Zynga partner Facebook's giant rise Thursday did not extend to Friday trading, as the Menlo Park social network declined 1 percent to $34.01. Analysts continued to praise the company's Wednesday earnings report, however, with the company's ability to leverage mobile advertising seen as a blueprint for other companies. Gilead's Thursday earnings report had the opposite effect of Zynga's, sending the Foster City biotech giant's share to a 52-week high before closing with a 2.8 percent increase at $62.57.

Up: Electronic Arts (ERTS), Tesla, SolarCity, Advanced Micro Devices, Gilead, LinkedIn, eBay (EBAY), Yelp, Intuit (INTU), Intel (INTC), Workday, Apple, Oracle

Down: Zynga, Juniper, VMware, Pandora, Facebook, Hewlett-Packard (HPQ), Yahoo (YHOO), NetApp, Nvidia, Adobe (ADBE), Google, Netflix

The SV150 index of Silicon Valley's largest tech companies: Up 2.04, or 0.16 percent, to 1,278.76

The tech-heavy Nasdaq composite index: Up 7.97, or 0.22 percent, to 3,613.16

The blue chip Dow Jones industrial average: Up 3.22, or 0.02 percent, to 15,558.83

And the widely watched Standard & Poor's 500 index: Up 1.40, or 0.08 percent, to 1,691.65

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.