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Market shares collapse with 'brutal speed' in cyclical smartphone industry

post #1 of 67
Thread Starter 
A closer look at market shares in the highly competitive smartphone industry shows sales trends can be reversed in an instant, and companies that once dominated could quickly find themselves on the verge of collapse.

In the December quarter, Apple's iPhone captured 20.9 percent of the smartphone market, up from 13.9 percent in June. It was the launch of the iPhone 5 that caused Google's fast growing Android to reverse and actually lose market share at the end of 2012.

Needham


That led analyst Charlie Wolf of Needham & Company to ask on Monday why smartphone market shares can collapse with "such brutal speed." While Android has grown and dominated platform market share, only Apple has been able to hold its 20 percent share. Meanwhile, previously dominant platforms like BlackBerry, Nokia's Symbian and Microsoft's Windows Phone have become minor players.

The most important reason for these changes, Wolf believes, is the fact that carriers have "exceptional influence" on the phones customers buy. He said this strategy has worked particularly well for Android, because Google offers carriers and their retail staff incentives to push the brand.

"If the carrier decides to punish or simply ignore a brand, it can rapidly die, as we've seen in the case of BlackBerry and Nokia," Wolf wrote.

Another key factor in a sometimes chaotic market is the fact that many smartphone users replace their handset every year or two years. In comparison, PC owners typically keep their investment for four years, while TV sets last seven years or longer.

In addition to more opportunities for customers to switch brands, those brands are not "protected" when they are sold in carrier stores, where all products are essentially sold side by side. The only major vendor that has a means to prevent this is Apple, which sells iPhones through its own retail stores.
post #2 of 67

This is news!? Trotted off as insight?

post #3 of 67

I like this post because it reverses the trend as of late to post information about competitors that isn't disparaging.

 

And it's actually pretty subtle about what it says, so that's nice.


Originally Posted by AppleInsider View Post
The most important reason for these changes, Wolf believes, is the fact that carriers have "exceptional influence" on the phones customers buy. He said this strategy has worked particularly well for Android, because Google offers carriers and their retail staff incentives to push the brand.

 

And so, uh, there's… not gonna be any sort of, uh… inquiry into this, is there? 1oyvey.gif

 

So who's lying? The telecom employees who said they don't get anything for pushing Android or this guy who says they do?

post #4 of 67

I'd love to know more about this. Seems carrier employees do push Android on people that come in for iPhones quite a bit. I just figured they were fandroids, perhaps I assumed incorrectly ;p

 

 

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post #5 of 67

That chart is scary looking. I think it is important to understand that a chart showing sales of iPhone verses Galaxy S(x) would look substantially different. Anyone who was considering an iPhone in comparison to an Android phone would perhaps consider the Galaxy S as the only other suitable choice.

 

The chart above is out of balance with all low end crappy Android devices not just the other premium device that could compete with iPhone.

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post #6 of 67
ohhhh, beware apple shares could drop at any moment!!!..
. apple is doomed! i say! doooooommmmmmmed.. /Facetiousness

....and yes this Isn't news with respect to Apple, because Apple shares stay the same , unless of course you are stockbroker shorting the stock, to suck out some more wealth by making sure that the stock is around 400 dollars...
post #7 of 67
I think it might be more accurate to say that the carriers can greatly magnify/accelerate the rise and fall of a smartphone (or any phone). That is, Blackberry and Nokia didn't crash and burn because the carriers woke up one day and decided they just didn't like those guys. They crashed and burned because their products were not keeping up with the competition. The carriers can accelerate a decline (or rise) because of their large volume purchases.

One other thought -- it really does seem that there are two markets here. One is a market for mobile computers that happen to have a cellular radio. I think that's the market that iOS, Windows Phone, and *some* Android products compete in. Then there's the market for super feature phones, which is what Symbian was and some Android phones are.

I think a mistake that some investor types make is to presume that Apple is competing in the highly fickle phone market rather than competing in the much more stable computer platform market. That would explain the low P/E that Apple has traded around since the iPhone became the driver of earnings -- investors are imagining that these profits could disappear tomorrow. They imagine that customers could change mobile computing platform as easily as they change toothpaste brand. (I think those folks are wrong).
post #8 of 67
Yes, there are huge differences in sales model between Apple and the carriers. Inside a carrier store the customer is presented with a huge array of phones. But most of the phones can not be played. Some will display promotional video on them. So essentially the customer has no idea of which phone to choose. The customer has to rely on the sales representative in the store. What is the most effective sales pitch for the sales rep.? Price!

Apple is completely different. Apple is completely honest. The customer can play with the products. The customer can ask all kinds of questions and they will be answered by professional staffs.

Note, this looks like a sales pitch. However, I do not work for Apple. I am just a long time Apple products user.
post #9 of 67

Illustration of this for the Windows Phones is still to be documented ....

post #10 of 67
1) It's funny how some jack off troll in a previous thread yesterday was saying how Apple was losing marketshare to a few select Android vendors. I'm sure he'll be back once the iPhone 5 reaches EOL.

2) These things only ever gauge "first sale," to use that term lightly, but I see iPhones have a long life after they stop being used by their initial owner. It would be interesting to see how many are actually being used as opposed to just sales of new devices. This might account for the excessively high iPhone activations on Verizon and AT&T.

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post #11 of 67
Quote:
Originally Posted by AppleInsider View Post

A closer look at market shares in the highly competitive smartphone industry shows sales trends can be reversed in an instant, and companies that once dominated could quickly find themselves on the verge of collapse.

In the December quarter, Apple's iPhone captured 20.9 percent of the smartphone market, up from 13.9 percent in June. It was the launch of the iPhone 5 that caused Google's fast growing Android to reverse and actually lose market share at the end of 2012.

Needham


That led analyst Charlie Wolf of Needham & Company to ask on Monday why smartphone market shares can collapse with "such brutal speed." While Android has grown and dominated platform market share, only Apple has been able to hold its 20 percent share. Meanwhile, previously dominant platforms like BlackBerry, Nokia's Symbian and Microsoft's Windows Phone have become minor players.
.

Classic misinterpretation of the data.

First, look at every line except Apple and Android. The changes are smooth and consistent. The market itself doesn't change that quickly.

There are only 2 data points where Apple changed quickly - the release of the iPhone 4S and the iPhone 5. In both cases, their share dropped a bit in the quarter before the release and then jumped after the product release. If you smooth those two points, you see that there are no drastic changes.

Android, of course, does just the opposite of what Apple does. In the months when Apple's customers are holding off their purchases, Android's share looks higher. When Apple gets a surge of orders from their new product, Android's share drops.

In the end, there's nothing in this market that's unusual - except that the dominant player only has a single (major) product and updates the product relatively infrequently. So the conclusion should be "Apple sales drop before new product launch and jump after new product launch." Hardly news to anyone.

Other than that, everything is a smooth, obvious trend.
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post #12 of 67
Imagine what this would look like if Apple did not have Google on the board and Google have such a head start on the OS?

Would Google still be where it is today, or playing catchup?
post #13 of 67
Originally Posted by jragosta View Post
Classic misinterpretation of the data.

First, look at every line except Apple and Android. The changes are smooth and consistent. The market itself doesn't change that quickly.

 

I think one of the problems here is that the chart starts in 2009. It ought to start pre-iPhone.

post #14 of 67
Notice Apple never was #1. All those stories that Android has knocked off iOS from the top is pure bunk.
post #15 of 67
Quote:
Originally Posted by jragosta View Post


Classic misinterpretation of the data.

First, look at every line except Apple and Android. The changes are smooth and consistent. The market itself doesn't change that quickly.

There are only 2 data points where Apple changed quickly - the release of the iPhone 4S and the iPhone 5. In both cases, their share dropped a bit in the quarter before the release and then jumped after the product release. If you smooth those two points, you see that there are no drastic changes.

Android, of course, does just the opposite of what Apple does. In the months when Apple's customers are holding off their purchases, Android's share looks higher. When Apple gets a surge of orders from their new product, Android's share drops.

In the end, there's nothing in this market that's unusual - except that the dominant player only has a single (major) product and updates the product relatively infrequently. So the conclusion should be "Apple sales drop before new product launch and jump after new product launch." Hardly news to anyone.

Other than that, everything is a smooth, obvious trend.

 

 

I disagree on the issue with a smooth downtrend, and you can't include March. 

 

Android is more consistent as it has more phones that launch a new OS at different times. I also think Apple buyers are more aware to upgrades if not directly, the know a fanboy that is telling them to hold off. 

post #16 of 67
Why is the year 2014 in that MarketShare graph?

The graph itself is already blurry, rMBP users care to comment on what they see, if anything? Possibly the same as these analysts; blur.
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post #17 of 67
Quote:
Originally Posted by Tallest Skil View Post

I think one of the problems here is that the chart starts in 2009. It ought to start pre-iPhone.

That would be a different chart indeed but this chart is about Android's rapid adoption which is why it starts when Android was introduced.

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post #18 of 67
I read awhile back that Google gives the carriers a tiny kickback from the ad revenue earned on Android phones. While the amount was pretty small at the time, under $10 million, its more than enough to cover Verizon/AT&T CEOs and VPs bonus checks.

Mobiles Phone stores' salemen are like used car salesmen, except they are teenagers, with even lower ethical standards.

I say that as some who's good friend managed a Verizon store for 5 years, from the stories he told me.
post #19 of 67
Originally Posted by mstone View Post
That would be a different chart indeed but this chart is about Android's rapid adoption which is why it starts when Android was introduced.


Still, it would be nice to put the declines of other companies into perspective in that regard. Who was hurt most by Apple and Android and how sharply were they hurt.

post #20 of 67
Quote:
Originally Posted by PhilBoogie View Post

Why is the year 2014 in that MarketShare graph?

The graph itself is already blurry, rMBP users care to comment on what they see, if anything? Possibly the same as these analysts; blur.

2012/4 means 4th quarter of 2012. You are right it is blurry.

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post #21 of 67

The chart above supports Gruber's argument against Reuter article. Here is what Reuter wrote (as fact):

"The marketing chief’s rare attack on a rival, on the eve of the Galaxy S4’s global premier in New York, underscores the extent of the pressure piled upon a company that once stood the undisputed leader of the smartphone arena, but ceded its crown to Samsung in 2012."

 

For which Gruber argued, intelligently:

"..developed three bad assumptions:

1. Apple’s lack of serious competition would, or at least might, result in an overwhelming market share advantage for the iPhone...
 
...Assumption #1 is bad because the iPhone never had a market share lead, or even close to one, whether you count only “smartphones” (where the iPhone sits around 20 percent worldwide) or all phone handsets (where the iPhone, as a premium product being compared to $20 candybar dumb phones, has never had more than single-digit market share)."
 
 
In essence, Reuter never do their homework while Gruber did.
post #22 of 67

I want to see this chart updated once Apple releases unique hardware, fixes to must have apps (Maps/Siri) and updated UI. [UI update that is not drastic, but polished while adding a few user refinements such as more apps available to the lock screen like the camera is as discussed on a previous thread.  http://forums.appleinsider.com/t/156523/blackberry-ceo-calls-apples-iphone-user-interface-outdated/40]

post #23 of 67
Quote:
Originally Posted by Tallest Skil View Post

Still, it would be nice to put the declines of other companies into perspective in that regard. Who was hurt most by Apple and Android and how sharply were they hurt.

It should not be that difficult to imagine if you assume the other smartphones all have pretty smooth curves. 

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post #24 of 67
Originally Posted by mstone View Post
It should not be that difficult to imagine if you assume the other smartphones all have pretty smooth curves. 


See, that's the thing. Can we assume that?

post #25 of 67

Where the hell are all these android phones, I only know 3 people with an Android and 1 of them has just replaced his S3 with a 4S. Everyone else owns an iPhone except for 1 mug with a windows phone but he'll be back.

 

We need a graph of people who extolled the virtues of Android's open system and cheap customisable phones to then realise that it's a plastic piece of s*** that does a load of stuff that you simply don't ever use. Compare that against people who had an iPhone and was lured away because of specs, screen size and/or a defect in their brain.

 

I bet more defected iPhone users return to ownership than the other way around.

post #26 of 67
Quote:
Originally Posted by Tallest Skil View Post

Originally Posted by mstone View Post
It should not be that difficult to imagine if you assume the other smartphones all have pretty smooth curves. 


See, that's the thing. Can we assume that?

This one is US so Nokia is not very much.

Smartphone market sharepicture-44.png

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post #27 of 67
Quote:
Originally Posted by Evilution View Post

Where the hell are all these android phones, I only know 3 people with an Android and 1 of them has just replaced his S3 with a 4S. Everyone else owns an iPhone except for 1 mug with a windows phone but he'll be back.

 

We need a graph of people who extolled the virtues of Android's open system and cheap customisable phones to then realise that it's a plastic piece of s*** that does a load of stuff that you simply don't ever use. Compare that against people who had an iPhone and was lured away because of specs, screen size and/or a defect in their brain.

 

I bet more defected iPhone users return to ownership than the other way around.

 

Get out more into the real world. Maybe you'll meet more than 3 people.

post #28 of 67
Originally Posted by mstone View Post

This one is US so Nokia is not very much.
picture-44.png

 

Looks to me like what jragosta said isn't right, then. Before the iPhone and Android, companies DID swing up and down regularly. iOS and Android have simply taken over those roles (and chart behavior).

post #29 of 67
Quote:
Originally Posted by Tallest Skil View Post

I like this post because it reverses the trend as of late to post information about competitors that isn't disparaging.

 

And it's actually pretty subtle about what it says, so that's nice.

 

And so, uh, there's… not gonna be any sort of, uh… inquiry into this, is there? 1oyvey.gif

 

So who's lying? The telecom employees who said they don't get anything for pushing Android or this guy who says they do?

 

Well, it's not just this guy, but it's also not just Google--Samsung's budget says they do this on a big scale: they spend more on salesperson incentives alone than the entire marketing budget of Apple plus Coca-Cola combined! Which is Android's benefit, but isn't coming from Google's pockets (and may in the end bite Google as Samsung's power grows).

 

http://www.asymco.com/2012/11/29/the-cost-of-selling-galaxies/

 

This doesn't mean every person in every store gets paid an incentive by Samsung. Just that it happens on a large scale.

 

(As for incentives to the carriers themselves, I guess simply offering a discount on the handsets counts. We've certainly heard the Apple doesn't give iPhones to carriers on the cheap.)

post #30 of 67
Quote:
Originally Posted by Spacepower View Post

I read awhile back that Google gives the carriers a tiny kickback from the ad revenue earned on Android phones. While the amount was pretty small at the time, under $10 million, its more than enough to cover Verizon/AT&T CEOs and VPs bonus checks.

Mobiles Phone stores' salemen are like used car salesmen, except they are teenagers, with even lower ethical standards.

I say that as some who's good friend managed a Verizon store for 5 years, from the stories he told me.

 

I'd be interested if you (or anyone) could provide a link or something with substance to that incentive claim.  Either way I'd bet the 'incentive' amount is far less than Apple's strategy of providing a substantial disincentive to carriers- 'if you sell one of my iPhones to a customer- you owe me $300'  Carriers make up for the losses they take selling iPhones over the long run by the locked in contracts.  Since those are a fixed price (Android users pay the same monthly rates as iPhone users) it is actually a tremendous advantage for Apple (not in number of sales, but in profit margins).  Essentially Android users who pay high monthly rates to help carriers offset iPhone subsidies are really helping Apple users buy their expensive phones.

 

Most carriers last quarter that sold 'record numbers' of iPhones last quarter posted record profit losses because of it (which is okay, they'll make it up over the next few years with a contract).  With the android phones they make the same contract profits but don't have to eat the initial kick in the teeth losses.  If you're a carrier of course you are going to push your team to sell phones that you make more money on.  My guess would be there is an incentive to the salespeople, but it comes from the carriers themselves.  I believe Google actually provides a disincentive themselves and charges carriers to sell their phones rather than giving them money- its just compared to Apple's disincentive, Google's disincentive looks comparitvely much better. 

post #31 of 67
Quote:
Originally Posted by Tallest Skil View Post

Looks to me like what jragosta said isn't right, then. Before the iPhone and Android, companies DID swing up and down regularly. iOS and Android have simply taken over those roles (and chart behavior).

Note that's Apple's massive drop was because they had completely stopped producing the original iPhone in the 4th quarter. They only sold 270k units as they were gearing up production of the iPhone 3G. We've continued to see small drops when the device is rumoured to be replaced by a new iPhone, which is interesting because you just don't get the same thing with this mobile OS comparison to Android because there are new Android models every month. it's all based around when the iPhone is released and is reaching EOL, which is just another in a long list of Apple having control of the market.

Also, it should be noted that the emergence of the iPhone made the entire smartphone market come alive which included adding life to the stagnant incumbent's sales. It was short lived but it happened for no reason than the iPhone made the category worthwhile for the average person to look into.

Finally, as mstone notes that graph for the US market it should be noted that Android's gain was mostly against Symbian in the feature phone category, not against the proper smartphone.
Edited by SolipsismX - 3/18/13 at 10:42am

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post #32 of 67
Apple launched 4S in 2011. Samsung launches S4 in 2013. Their copy machine is not only late, it's dyslexic. /s
post #33 of 67
Quote:
Originally Posted by Evilution View Post

Where the hell are all these android phones, I only know 3 people with an Android and 1 of them has just replaced his S3 with a 4S. Everyone else owns an iPhone except for 1 mug with a windows phone but he'll be back.

We need a graph of people who extolled the virtues of Android's open system and cheap customisable phones to then realise that it's a plastic piece of s*** that does a load of stuff that you simply don't ever use. Compare that against people who had an iPhone and was lured away because of specs, screen size and/or a defect in their brain.

I bet more defected iPhone users return to ownership than the other way around.

There are plenty of places on Earth where you can buy an Android phone, unlocked, for $160. That's where Android gets most of its colossal market share. You might not see them... but they're out there.

Take India and China for example. Two countries with over a billion people each... and the iPhone there costs 3 to 4 times more than an Android phone.

And people wonder why Android has 70% worldwide smartphone market share... and Apple only has 20%

I'm from the United States... and I, too, see iPhones everywhere. But that's not the case across the globe.
post #34 of 67
Quote:
Originally Posted by Tallest Skil View Post

Looks to me like what jragosta said isn't right, then. Before the iPhone and Android, companies DID swing up and down regularly. iOS and Android have simply taken over those roles (and chart behavior).

Look at the scale. They adjusted the scale to make it look impressive, but the swings were under 2% - other than Apple's. And Apple's swing was caused by exactly the same thing I cited above - they were changing from one phone to another and people stopped buying before the switch and bought in mass after the new ones came out.

It supports what I said - the market share swings are fairly steady and slow except when Apple does a product changeover.
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post #35 of 67
Quote:
Originally Posted by Tallest Skil View Post

Originally Posted by mstone View Post

picture-44.png

 

Looks to me like what jragosta said isn't right, then. Before the iPhone and Android, companies DID swing up and down regularly. iOS and Android have simply taken over those roles (and chart behavior).

After examining this chart in more detail, it seems to indicate that Nokia must have had around 80% of the smartphone market prior to the release of iPhone since Win and BB together only account for roughly 20%. Also they were both still on the rise as iPhone came to market so it looks like initially iPhone took market share mostly from Nokia.


Edited by mstone - 3/18/13 at 11:23am

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post #36 of 67
Quote:
Originally Posted by Frood View Post

Quote:
Originally Posted by Spacepower View Post

I read awhile back that Google gives the carriers a tiny kickback from the ad revenue earned on Android phones. While the amount was pretty small at the time, under $10 million, its more than enough to cover Verizon/AT

I'd be interested if you (or anyone) could provide a link or something with substance to that incentive claim.  Either way I'd bet the 'incentive' amount is far less than Apple's strategy of providing a substantial disincentive to carriers- 'if you sell one of my iPhones to a customer- you owe me $300'  Carriers make up for the losses they take selling iPhones over the long run by the locked in contracts.  Since those are a fixed price (Android users pay the same monthly rates as iPhone users) it is actually a tremendous advantage for Apple (not in number of sales, but in profit margins).  Essentially Android users who pay high monthly rates to help carriers offset iPhone subsidies are really helping Apple users buy their expensive phones.

Most carriers last quarter that sold 'record numbers' of iPhones last quarter posted record profit losses because of it (which is okay, they'll make it up over the next few years with a contract).  With the android phones they make the same contract profits but don't have to eat the initial kick in the teeth losses.  If you're a carrier of course you are going to push your team to sell phones that you make more money on.  My guess would be there is an incentive to the salespeople, but it comes from the carriers themselves.  I believe Google actually provides a disincentive themselves and charges carriers to sell their phones rather than giving them money- its just compared to Apple's disincentive, Google's disincentive looks comparitvely much better. 

I am not sure why you think the carrier cost from an iPhone 5 is substantially higher than the S3.
post #37 of 67
Quote:
Originally Posted by mstone View Post

This one is US so Nokia is not very much.

Smartphone market sharepicture-44.png


This chart is very indicative of the war between iOS and Android.  The Android based smartphones inaugurated in 2009/4. It quickly overtook iPhone in market share in 2010/1.  So in terms of market share iPhone was never a competitor to Android smartphones. 

 

I think there are two reasons.  First, there are huge number of Microsoft Windows PC users, they are historically dislike whatever Apple made.  Second, there are huge number of Microsoft Windows PC users, they dislike Apple because its products are expensive. 

 

Another interesting things you can see from the graph is Blackberry phone was not significantly affected by iPhone.  Its market share started to decline after the introduction of Android phones.  So Blackberry phones lost market share to Android phones.  I will say the most significant composition of present Android smartphones come from Blackberry users. So it is ironic and stupid that Blackberry chief will choose to attack iPhone instead. 


Edited by tzeshan - 3/18/13 at 11:39am
post #38 of 67
Quote:
Originally Posted by Wovel View Post


I am not sure why you think the carrier cost from an iPhone 5 is substantially higher than the S3.

I believe the carriers are paying $100 more in subsidy on the iPhone than on top end Androids. Perhaps they make more money because iPhone users pay for a more expensive plan, but the iPhone's subsidy cost to the carrier is indeed higher.

post #39 of 67
Quote:
Originally Posted by tzeshan View Post


This chart is very indicative of the war between iOS and Android.  The Android based smartphones inaugurated in 2009/4. It quickly overtook iPhone in market share in 2010/1.  So in terms of market share iPhone was never a competitor to Android smartphones. 

 

I think there are two reasons.  First, there are huge number of Microsoft Windows PC users, they are historically dislike whatever Apple made.  Second, there are huge number of Microsoft Windows PC users, they dislike Apple because its products are expensive. 

 

Another interesting things you can see from the graph is Blackberry phone was not significantly affected by iPhone.  Its market share started to decline after the introduction of Android phones.  So Blackberry phones lost market share to Android phones.  I will say the most significant composition of present Android smartphones come from Blackberry users. So it is ironic that Blackberry chief will choose to attack iPhone instead. 

 

There have never been as many BBs as there are iPhones or Androids. So it is impossible for past BB users to make up a significant portion of any competitor's market share.

post #40 of 67
Quote:
Originally Posted by Frood View Post

 

I'd be interested if you (or anyone) could provide a link or something with substance to that incentive claim.  Either way I'd bet the 'incentive' amount is far less than Apple's strategy of providing a substantial disincentive to carriers- 'if you sell one of my iPhones to a customer- you owe me $300'  Carriers make up for the losses they take selling iPhones over the long run by the locked in contracts.  Since those are a fixed price (Android users pay the same monthly rates as iPhone users) it is actually a tremendous advantage for Apple (not in number of sales, but in profit margins).  Essentially Android users who pay high monthly rates to help carriers offset iPhone subsidies are really helping Apple users buy their expensive phones.

 

Most carriers last quarter that sold 'record numbers' of iPhones last quarter posted record profit losses because of it (which is okay, they'll make it up over the next few years with a contract).  With the android phones they make the same contract profits but don't have to eat the initial kick in the teeth losses.  If you're a carrier of course you are going to push your team to sell phones that you make more money on.  My guess would be there is an incentive to the salespeople, but it comes from the carriers themselves.  I believe Google actually provides a disincentive themselves and charges carriers to sell their phones rather than giving them money- its just compared to Apple's disincentive, Google's disincentive looks comparitvely much better. 

 

It depends on what you mean by initial kick. But I do believe carriers are paying upfront subsidies for some Android phones, just not as much as they do for the iPhone. Furthermore, Apple dictates iPhone pricing whereas there is a process of negotiation with other phone makers (or there used to be), with the carriers dominating the negotiations.

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