Apple & Samsung capture 103% of handset profits as rivals lose money - Page 2

 

1. If you truly didn't want to talk about the "accounting" in the article, then you would have never responded. This article is about accounting and all the numbers derived in that table were the result of business accounting.

2. He is not exactly right. He is right on how you calculate net income (adding profits and losses). He is wrong in how you calculate percentage of profit (it does NOT include losses).

 

Apple earned 70.3% of the profits. That's the bottom line. Is it important? Not really. But, you're both still wrong.

Would we be having this same discussion if the headline read: "Apple & Samsung capture 103% of market share as rivals lose ground"

 

Well, maybe - but it's still incorrect.  100% is 100%.  If Apple and Samsung hold 7 of 10 oranges and BB/Msoft hold 3, but lose 3...we don't have 13 oranges.  We have 10 oranges, all held by Apple and Samsung.

 

I kept the numbers simple for those not willing to take off their shoes to count that high...  ;-)

Uh, I meant "no here -- except you -- is talking about 'accounting'"....

 

As to your argument that "the numbers derived ...were on the basis of business accounting" and that therefore we must be talking 'accounting,' that is about as profound as saying that we must be actually talking about prose in the English language since the words we are using were derived on the basis of....

 

Moving along.....

Christ, I'm embarrassed for AppleInsider.

I don't think that the previous post was correct in saying "as long as it's a consistent measure of accounting" -- because I don't think accounting even attempts to say 100% of any market -- it measures what was spent or gained. You don't know what the amount of "profit" in a market is -- you only know how many purchases. Profits are also something that creative accountants try and remove from the balance sheet -- and it also depends on the balance sheet used for Wall Street and the one for the IRS -- and yes, companies for some time can have two. Wall Street can see the glory, and the IRS sees the hardship and reality gets stretched on a regular basis. So which "like" do we consistently go with? 103% sounds like creative certainty from a trade publication to me -- not even a useful number. It might be useful as a score of "who is winning" but it is, as you say, confusing. We are used to "market share" -- and that's a useful number because we'd get an idea of whether Samsung's pad is growing versus Apple's. Apple having the most profit is good for their stock -- but not for their control of the market and long term viability -- Wall Street sucks at really predicting how strong a company is, they are merely gambling chips and only suckers buy and hold based on P&E ratios -- but Apple's stock stays strong because they've got a lot of "suckers" and it's got to anger the traders that they make things and don't trade paper with suckers. Whenever I come across an article treating "profits" as if this were even remotely a fiction that anyone should depend on -- I feel dumber from having read it. The idea that anyone would school tallest skill or the rest of us on "the proper valuation for accounting" based on numbers that are at best -- consistent lies, is kind of absurd. Now these numbers can be explained, and they are consistent, but that only compounds the lie; they are bogus numbers. You don't know really what profit or loss any company makes on anything -- all you can hope to know is "what were their sales". With offshore accounts, overspending on subsidiaries widgets in tax havens, and the creative accounting of MBAs -- what fool believes these numbers anyway? I suppose fools who can come up with measures like 103% and then explain to everyone as if we are idiots. I'd like another yard of invisible cloth for my golden emperor's robes please.

 

"-except you-"

Just to make sure I wasn't going crazy, I looked back and saw at least 5-10 people talking about the "accounting". Maybe you made a accounting mistake when adding?

 

I digress. It's hard to convince someone they're wrong when they don't understand the subject to begin with.

 

I agree; The other vendors could not have sold "negative" amounts. However -- if the market sold 1, 2, 4 and 5 oranges from 4 companies, someone can have a negative profit. It's just that I think it's customary to treat these numbers as independent -- you certainly can't know what PROFITS are available to a market because profits or losses are based on per product per company -- it's internal to that company. I don't think there is any "Grand Accountant" that bothers with reporting profits across the market, so it is of course NOT an accounting figure. Market share is a useful figure, and then you could say profit and loss based on that -- while noting you "cannot really know a corporations real profit and loss." They even lie to themselves on these things because it's important to exaggerate to the IRS and underestimate to Wall Street. Only the CEO and a few other people may know the true profit/loss ratio on the products.

Lies, damn lies, and statistics

You're arguing in circles. "You can't have more than 100% profits because you can't have more than 100% profits".

In reality, a loss is simply a negative profit. When you total the profits (whether it's a conglomerate or a market, you add up the profits of all the components.

In case A, it's easy:
Business 1 $100
Business 2 $200
Business 3 $100
Total $400

In case B, it works exactly the same way, except that you're adding a negative number:
Business 1 $100
Business 2 $200
Business 3 -$100 (loss of $100)
Total $200

Percentages are calculated as "the part being considered divided by the total". If the part being considered is $200 and the total is $100, then it's 200%. Just the same as if you had sales of $100 in 2010 and $300 in 2011. The growth is greater than the previous total, so the sales grew by 200%.

Another circular argument. "Companies can't have more than 100% because they can't have more than 100%". That's not a logical argument (well, technically, it's an argument, but contains a fallacy).

Do the math:
1. The total profits of a market is equal to the sum of all the components.
2. Profits can be either negative or positive
3. There's absolutely no rule in business or accounting or anywhere else that says you can ignore companies that lost money. You add up ALL the companies to get a total.
4. Percentage is the part being considered divided by the total times 100.

While it is uncommon for the percentage of profits from one or two companies to exceed 100%, it's not at all impossible. If you simply follow the math rules, it happens - as in this case.

Your method leads to some other serious problems. If you're going to ignore the profits of HTC, Motorola, etc, why not the sales? So the entire market sales volume is just Apple and Samsung? That's the logical outcome of your method - since calculating percentages doesn't depend on what you are calculating.

You need to ask for a refund. If sales in 2010 were $100 and in 2011 sales were $300, then the sales increased by 200%. Percentages can easily go over 100%.


ROTLFMAO. Try to tell the SEC that net profits are different than total profits.

How many multimillion dollar conglomerates have you run? I have - and the way I described it is exactly the way it works in the real world.

And it's even more difficult to get someone to admit they're wrong, nowadays, even when they are presented with clear, irrefutable examples and proof.

 

That goes for anything and everything. 

I fundamentally disagree with you. We are not talking about holding companies but unique companies. If you had:

Company A: $100 profit
Company B: ($50) loss
Company C: ($50) loss

There was $100 profit captured in the industry. There was also $100 in losses but they don't negate the $100 in profit made by Company A. Likewise, you are claiming that Company A made ∞ of the profit. No, it made all of the profit at 100%

Your logic fails - this case is not the same thing.

Let's do it this way - since you seem to be confused about how to do basic math.

Let's take an example. For simplicity, we'll assume no overhead or fixed costs, but the results would be the same if you include them.

Company A
Sales $100 Cost of goods sold $90 Profits $10

Company B
Sales $200 Cost of goods sold $180 Profits $20

Company C
Sales $100 Cost of goods sold $110 Profits -$10 (loss of $10)

Now, it's pretty simple to understand that if you want to know the total sales for the market, you simply add them all up. Total sales $400.

Now, let's say you want to know the total cost of goods sold for the market. You add them up. Total COGS is $380.

Simple Accounting 101 says that the total profit is the total sales minus the total cost of goods sold - or $400 - 380. Thus, total profits is $20.

That's the same number you get if you add $10 plus $20 plus -$10.

If we do it your way and total profits are $30, then where did the extra $10 come from? Profits should be $400 - $380, so you magically created $10 out of thin air.

You're absolutely wrong. See my example in the previous post. However, instead of creating $10 out of thin air, you created $100 out of thin air. Congratulations.

 

Company A had 33.3% of market profit

Company B had 66.6% of market profit 

Company C had 100% of market loss (They had no profit) Saying that had negative profit is just asinine even if someone could argue its legitimacy with a masters of finance. If it is a loss, it isn't profit by the definition of the word.

 

profit |ˈpräfit|nouna financial gain, esp. the difference between the amount earned and the amount spent in buying, operating, or producing something

 

It would've also been helpful if they had indicated how they came up with Apple's handset revenue / profit numbers.

 

 

You're right, they seem to have included it all, which is incorrect.   Samsung's own press release gave us more detail:

 

"The IT & Mobile Communications – comprised of Mobile Communications, Telecommunication Systems, Digital Imaging and Media Solution Center businesses – posted operating profits of 5.44 trillion won on 31.32 trillion won in revenue for the period. Out of the total IM earnings, the handset-making unit claimed 27.23 trillion won in revenue in the October-December quarter."
 

Okay, so we know that the handset unit alone made ~$25 billion in revenue.  

 

The handset unit revenue was 87% of the total IT&M revenue. If the operating profit ratio is the same, that's .87 * $5 billion = ~$4.35 billion handset operating profit.

 

--

 

Also of interest:  if you believe IDC's figure of 111 million total Samsung phones of all types being sold in that quarter worldwide, that gives an ASP of $225 per handset, including all the highest and the lowest priced phones.

 

Contrast that to the last known-for-sure 2Q 2012 number from the California trial, where just the US figures for accused devices gave us $678 million / 2 million phones = $339 ASP... showing how much more higher priced phones sell in the USA.

Edited by KDarling - 2/6/13 at 11:32am

OFFS.

Profits can be positive or negative. If you don't understand that very simple fact, you shouldn't be discussing it at all.

Sorry. Still wrong.

 

Yes, total profits are $20.

 

But, if you want to see what percentage of PROFITS Company A brought in, you take *Company A Profit* / *Sum of all companies that took a profit*.

 

I don't know how much more clear I can make this.

 

Joe: Hey, what PERCENT OF THE PROFITS DID COMPANY A MAKE?

Jim: Well Company A had a profit of $10, Company B had a profit of $20 and Company C lost $10. Together they have $20 of net income BUT you are asking for PERCENTAGE OF PROFITS? Since A and B were the only ones with profit that would be 10/(10+20).

Joe: Ok, they made 33% of the profit. Great.

 

A company cannot make more than 100% of profits because profits added together add up to 100%.

 

But, like I said, you can't convince someone they're wrong when they don't understand the subject matter. I went to school, I passed the CPA, I do this for a living. I fundamentally understand the topic here. You are great at calculating net income as you keep showing us that OVER AND OVER AND OVER AGAIN. But, we are talking about profit percentages.

Profits and positive.

Losses are negative.

 

That's why they're called P&L statements (Profit and Loss)

I am absolutely right and you did not respond to my application of your fundamentally flawed math and principals. The reason you disregard losses in calculating % profit share across companies within an industry is to avoid division by 0 errors that your incorrect method allows. My guess is you ran your multi million conglomerate into the ground?

To reference a quote from person very near to my heart, maybe you should grab an accounting book before you embarrass yourself any further.

This is a silly argument of semantics.

 

If Apple acquired every Smart Phone vendor in the world then its profits i.e. INDUSTRY PROFITS, would be the same figure quoted in the article.

 

Logically, if Apple were then to divest all these vendors the industry profits shouldn't magically increase (because you exclude those with negative bottom lines). 

 

Industry profit must include all participants in the industry whether they are positive or negative. 

 

Thank you.

 

Everyone here is real good with math (I say that seriously) but they don't understand math from an applied standpoint... you know, when you actually take math out of the classroom and apply to to real-world situations.

 

Let's try one last time. Let's assume all these companies sell cell phones:

Company A made $10 profit

Company B made $10 profit

Company C made $10 profit

Company D made $10 profit

Company E lost $40.

 

Taken as whole, the cell phone market made $0 in profit. As a group, we can all agree here.

 

Using jragosta's math, we find:

Company A made 0% of the profits

Company B made 0% of the profits

Company C made 0% of the profits

Company D made 0% of the profits

Company E made 0% of the profits

 

Using real-world accounting principles that are used outside of this forum in every single application of this matter:

Company A made 25% of the profits

Company B made 25% of the profits

Company C made 25% of the profits

Company D made 25% of the profits

Company E made 100% of the losses

 

So, you all can toss out things like "if you know how to do math" or "this is fundamentally correct" or whatever have you but, at the end of the day, anyone that believes that 103% of the profits went to two companies is wrong. Flat out wrong.

If Apple acquired every other company, then their net profits would equal all profits per division (each acquired company) minus all losses per division.  If they calculated that net profits number, they wouldn't look at their profitable divisions, who made more in profits than their unprofitable divisions lost, and then say that their profitable divisions made more than the entire company made.  That's what you and jragosta are arguing for.

 

You're attempting to do math with numbers that cannot be added, subtracted, divided, or multiplied while still having a sensible outcome.

Note the use of the word DIFFERENCE. This means that it also registers negative values.

If you or anyone else thinks that percentage of profit can only be between 0 and 100% then you have to address how there can be a NEGATIVE profit. On top of that, do you et al. not think that a negative can be registered as a profit? It's you lost money your profit is 0% but that isn't what they are accounting for. They clearly show a NEGATIVE profit because of the DIFFERENCE.

Bottom line: you can't use a stict value for total profit for an industry unless you are willing to completely ignore negative profits because then all you're calculating is Nokia's profits as zero, a null value, for the quarter without accounting for any loss because "you can't be below ZERO percent just as you can't be above 100 percent" in this odd have your cake and eat it too mental gymnastics I'm seeing here.


PS: What is asinine is saying that something you colloquially use only in the positive form can't have a negative association when it's a measure of a difference. I thought we were making progress in society as it's been thousands of years since logic, the zero, and other basic things were first worked out but it appears we're making negative progress in society, also known as regressing.
Edited by SolipsismX - 2/6/13 at 12:09pm

I'll repeat. There's difference between accounting and arithmetic. Hope you got that.

 

Would the tax on a negative profit be +ve or -ve? :)

I notice that you conveniently ignored the part where profit was defined as a financial gain, a gain in then amount of the difference between what is earned and what is spent.

Um, no. The industry profit in your example is $0. Period. At least, that is what any investor who owns, say, an industry ETF would say. Or any halfway credible academic doing research at the industry -- as opposed to the firm -- level.

 

People passing off as accountants and lawyers and printers here don't appear to grasp that basic point. Perhaps understandable, because their clients are firms, not industries.

I am no accountant (or lawyer). But I wonder about this: Are there really formal accounting principles governing the total profits of an industry? 

 

I think not. If there are, can I see a reference? I am genuinely interested (but not at all interested in the debate here).

 

As much as some try to draw an analogy with a company comprising both profitable and non-profitable divisions, they are not the same thing. Such a company would have to file tax returns based on net profits. An "industry" does no such thing. Ergo ...

We're getting somewhere.

Now, go back to third grade. How do you calculate a percentage? You divide the part of interest by the whole.

So if the part of interest is $20 (company B profits) and the whole is $20 (you agree that this is the total profits), how can the percentage be anything other than 100%?

Wrong. Profits can be negative:
http://dictionary.reference.com/browse/negative+profit

Look at my post #54. Explain where the extra $10 came from.


OK. So you agree that you add up all the numbers to get total profits. That's progress.

So if we do the same thing in the example in this thread. Apple and Samsung together had more profits than the total for the industry. Right?

Or do you change the rules when it's convenient.

Wrong. I never made such an absurd claim.

Unfortunately, you failed math. Each company A to D made $10. Since the total profit was zero, the percentage is undefined ($10 / $0 is undefined).

 

Interestingly, they both start with "a" and have 10 letters.

 

When all else fails, attack the person instead of the argument.

 

Does it eat you alive knowing your still wrong? 

Surely, an accountant would understand that Net Income can be a negative number.

 

If Net Income is not equal to "Profit" what would an accountant say the latter means?

 

PS: An accountant would also know that that they are --more often than not -- called Income Statement or Statement of Operations.

You are, not your.

 

Man, it must be embarrassing to make what you think is a clever put-down, only to be defeated by your own poor command of the language. :-p

I am Applesupertramp and I am Steve

Let me ask you this. If company A had $100 in profits and company B had $100 dollars in losses, and these were the only two companies in an industry, then what percentage of the profits does company "A" have?

 

Close but not quite right:

 

 

Using jragosta's math, we find:

Company A made ∞% of the profits

Company B made ∞% of the profits

Company C made ∞% of the profits

Company D made ∞% of the profits

Company E made -∞% of the profits

 

The division by 0 causes jragosta's method to simply explode into the indeterminate.

You didn't even address his point. Use his example and do the math you're advocating.

Company A makes $100 in profits.
Company B has $100 in losses.

The industry net profit is $0.

You and jragosta are saying that in order yo determine Company A's share of the profits we make the following calculation:

Company profits/total industry profits = $100/$0 = infinity.

You are literally arguing for that to be possible and logical.

 

 

On the topic of 'attacking the person instead of the argument,' I thought I'd have you look again at the first of the two quoted posts above.

 

Re. the second post, and the question, "Does it eat you alive knowing your [sic] still wrong?  the answer is, 'No,' since I am quite comfortable with the content and substance of my argument. 

You're resorting to attacking a mistake in his grammar because you can no longer oppose his argument. Well, you could oppose it but you'd look like an idiot.