i don't necessarily think it's bad for apple/iphone. my take for a while now has been that iphone/android on mobile devices will be similar to mac/windows on desktops. that is, apple will have very successful high-end products that are about 5% of the market, whereas android/windows is more readily available and not as high quality, but occupies the other 95% of the market.
that sounds bad for apple, but remember, the smartphone market right now is still tiny. most people still have dumbphones. within a couple years that will not be the case. everyone will have a phone with some sort of "real" OS on it. even if apple has only 5% of that market, it will still potentially sell more iphones than it does today.
i think apple is happy occupying the high-end niche (at least, they have always been happy there with their mac products). the real battle is: who will take the other 95%? right now, it looks good for android...