The reason this was (and still is) a risk for Apple is that smartphones have become a platform game--and platform markets tend to become winner-take-all.
When multiple platforms have significant market share, as they did in the 1980s PC market (Microsoft and Apple) and as they do in today's smartphone market (Apple and Android), developers will develop apps for multiple platforms. But once one platform gains the dominant share, as Windows did in the early 1990s, developers will gradually de-prioritize and then drop other platforms. This is why Apple got demolished in the 1990s.
So market share in the smartphone market is important.
And that's why it's great news for Apple--and bad news for Android--that, in the past year, Apple has clawed back a lot of share versus Android.
Android's share has also increased versus a year ago--it still leads the market with 48%--but Android's share gains appear to have stalled. Android's "installed base," moreover--the percentage of the overall US smartphone installed base, not just recent sales--is also 48%. (See chart at right.)
Apple's gains are the result of a few key factors, all of which demonstrate that Apple learned a searing lesson from its failure in the 1990s PC market:
First, in the U.S, Apple has finally broadened distribution of the iPhone to Verizon and Sprint, instead of just selling through AT&T
Second, Apple introduced a "low-price" version of the iPhone--the 3GS--which gives price-conscious consumers an Apple alternative (lots of Android phones are cheap)
Third, Apple broadened its distribution channels to major retailers like Walmart, Amazon, and Best Buy, which has given it access to consumers it might not otherwise have reached
Fourth, and critically, Apple's products now cost the same as high-end alternatives, instead of selling at a "premium price." In the 1990s, Macs were always more expensive than PCs. Some Apple fanatics were willing to pay these high prices, but most normal people weren't. This contributed to Apple becoming a niche player.
Tablets are a different market than smartphones, but they help expand the same basic development platform. If you include Apple's iPads, iPhones, and iPod touches in the global platform market share calculation, Apple's global market share looks better.
Now, lest Apple fans begin jumping up and high-fiving each other on this news, the Android-ubiquity risk is still one of the biggest risks facing Apple.