I think the spot that Apple wants to be is in the hands of people all over the world which is android's reach. The real competition is now getting on as many phones and android not being tied to a particular phone does that. I haerad yesterday that Blackberry may get the ability to run Android Apps, which is good for BB users.
On the other hand there is no real reason for Apple to compete with Android. They are earning great profits, they have happy and passionate raving fans as customers. Just like Mac, the iphone develops its own audience that can only grow albeit not as fast as the android. Again android is open source and there are no Wall Street pressure on that so they can innovate and experiment more.
See this funny pic http://www.flickr.com/photos/worldviewfinder/3384112680/
eMarketer estimates that after exploding from just 6% of the US smartphone market in 2009 to 24% in 2010, Android will continue to gain share through 2012, when 31% of all smartphone users will own a device running the Google OS. That same year Apple’s share of the market will hold steady at 30%, up only slightly from 2009.Read more at www.emarketer.com