Doesn't happen often? It never happens except for Apple. Companies either have low sales of a premium product at high margins, or high sales of a low margin product. Apple has high sales of a high margin product. That's never happened before.
Who are you ? Someone has made quite the Freudian list of vices ... And no Heroin has never been called premium by anyone that could discern - let alone the Coca Cola people. They've been cutting thier ingredients for a 100 years
Who are you ? Someone has made quite the Freudian list of vices ... And no Heroin has never been called premium by anyone that could discern - let alone the Coca Cola people. They've been cutting thier ingredients for a 100 years
Actually, you are incorrect.
Heroin started out it's life as a "miracle drug" - used for many things like to help people with tuberculosis, pneumonia and as a miracle cure for morphine addiction.... only many laters year did they realize that there were many less than wonderful side-effects etc.
This is an interesting situation: 14.5% of the market but 94% of the profits. That doesn't happen often.
It's a bit like the Mercedes car. Apple can get away with charging high prices, because its products are seen by consumers as the best and their usefulness worth the added cost. Most other cell phone makers are playing a 'this is not how to do business' game of selling below cost but hoping to make it up on the volume. I would not want to be them.
Personally, I like this particularly market however weird it may be. With all that money, Apple can afford to keep its products great and by buying used, I can afford an older iPhone.
Apple's greatest danger? Probably that politicians and bureaucrats here or in Europe will demand that, with profits that great, Apple must give up a bit of those profits and assembly iPhone and iPads in their country.
For a parallel, think back to when Detroit automakers were losing money and Asia automakers were pressured to build factories here, which they did.
Currently you can buy a Toyota auto made with more USA parts than a similar Ford... It's sure complex when one wants to "Buy American" these days.
Who are you ? Someone has made quite the Freudian list of vices ... And no Heroin has never been called premium by anyone that could discern - let alone the Coca Cola people. They've been cutting thier ingredients for a 100 years
Actually, you are incorrect.
Heroin started out it's life as a "miracle drug" - used for many things like to help people with tuberculosis, pneumonia and as a miracle cure for morphine addiction.... only many laters year did they realize that there were many less than wonderful side-effects etc.
When I was a kid living in farm country, teenagers would smoke "ditch weed" because they couldn't get their hands on real tobacco...
Coca Cola-13%
Marlboro-32% but not an expensive premium product
Johnnie Walker-8%
Herion-got me on that one.
Oil-6.1%
You might want to rethink your list.
Btw I meant to add high priced along with high margin. There are quite a few low priced high margin products out there that sell in high numbers.
Your original post didn't limit things to "premium" products - so I was only commenting on high-volume, high-margin.
Where did you get your numbers? I found significantly higher numbers when I looked them up. After your post, I double checked just Coke and Cigarettes. iPhone Gross margins are about 40%. Coke Gross Profit margins are 61%! Cigarettes are about 41%
I also don't know how Oil can be just 6%? If it's 6% now when it's selling for $40/barrel - what were the margins when it was selling for $80-100/barrel?
By far, the most lucrative business to be in is taxation! If you want to get rich quickly, don't start a big company - start a government!!! /s
Coca Cola-13%
Marlboro-32% but not an expensive premium product
Johnnie Walker-8%
Herion-got me on that one.
Oil-6.1%
You might want to rethink your list.
Btw I meant to add high priced along with high margin. There are quite a few low priced high margin products out there that sell in high numbers.
Your original post didn't limit things to "premium" products - so I was only commenting on high-volume, high-margin.
Where did you get your numbers? I found significantly higher numbers when I looked them up. After your post, I double checked just Coke and Cigarettes. iPhone Gross margins are about 40%. Coke Gross Profit margins are 61%! Cigarettes are about 41%
I also don't know how Oil can be just 6%? If it's 6% now when it's selling for $40/barrel - what were the margins when it was selling for $80-100/barrel?
By far, the most lucrative business to be in is taxation! If you want to get rich quickly, don't start a big company - start a government!!! /s
Yeah, I meant to add 'premium' in my original post.
I looked up financial reports, perhaps I read them wrong. Also none of the companies sell those products have such a large share of the profit share. It's truly amazing, and unique what Apple has accomplished, and there isn't an end in sight.
It's truly amazing, and unique what Apple has accomplished, and there isn't an end in sight.
And the interesting thing is... Apple doesn't set a goal to get 94% of the profit in the smartphone market. They just happen to sell $600+ phones and they happen to sell a lot of them while also making a good chunk of money from every phone they sell.
But the other side of the equation is that everyone else is doing so POORLY. When there are 280 million Android phones sold in a quarter... and most of those companies LOSE money selling those phones... it really messes up their profit percentage.
According to the chart: Apple makes a lot of money... Samsung makes a little money... and everyone else loses money.
For every 100 smartphones sold... 14 are made by Apple... 24 are made by Samsung... and the other 62 lose money.
Is there any other industry where 62% of the market loses money?
It's truly amazing, and unique what Apple has accomplished, and there isn't an end in sight.
And the interesting thing is... Apple doesn't set a goal to get 94% of the profit in the smartphone market. They just happen to sell $600+ phones and they happen to sell a lot of them while also making a good chunk of money from every phone they sell.
But the other side of the equation is that everyone else is doing so POORLY. When there are 280 million Android phones sold in a quarter... and most of those companies LOSE money selling those phones... it really messes up their profit percentage.
According to the chart: Apple makes a lot of money... Samsung makes a little money... and everyone else loses money.
For every 100 smartphones sold... 14 are made by Apple... 24 are made by Samsung... and the other 62 lose money.
Is there any other industry where 62% of the market loses money?
How is this sustainable?
They absolutely went for the the highest amount of profit share they could get. With the 6, and 6 Plus they went after the market, and profit share Samsung had.
Btw it's not sustainable. The smartphone war is over. Nobody has the cash to last much longer, and they definitely don't have the money to compete with Apple. Soon enough it'll be the iPhone, and a few other niche devices.
They absolutely went for the the highest amount of profit share they could get. With the 6, and 6 Plus they went after the market, and profit share Samsung had.
Apple went for a high amount of profit per unit... which... after 48 million iPhones were sold... ultimately gave them the highest profit share.
But there's no way they went for exactly 94% profit share... since percentages are based on the performance of ALL companies in the market. And Apple has no way of knowing how everyone else will do.
Apple could have set a goal to sell 48 million iPhone units at $300 profit per unit.... but they won't know what their percentage will be on the profit share chart until someone tallies each company's performance at the end of the quarter.
And that's the thing with percentages... it includes you... and a bunch of companies who are not you.
Btw it's not sustainable. The smartphone war is over. Nobody has the cash to last much longer, and they definitely don't have the money to compete with Apple. Soon enough it'll be the iPhone, and a few other niche devices.
They absolutely went for the the highest amount of profit share they could get. With the 6, and 6 Plus they went after the market, and profit share Samsung had.
Apple went for a high amount of profit per unit... which... after 48 million iPhones were sold... ultimately gave them the highest profit share.
But there's no way they went for exactly 94% profit share... since percentages are based on the performance of ALL companies in the market. And Apple has no way of knowing how everyone else will do.
Apple could have set a goal to sell 48 million iPhone units at $300 profit per unit.... but they won't know what their percentage will be on the profit share chart until someone tallies each company's performance at the end of the quarter.
And that's the thing with percentages... it includes you... and a bunch of companies who are not you.
Btw it's not sustainable. The smartphone war is over. Nobody has the cash to last much longer, and they definitely don't have the money to compete with Apple. Soon enough it'll be the iPhone, and a few other niche devices.
They fell short by 6%, because they were aiming for 100%. It won't be long before they finally do, or at least very near it.
The only one making a profit was Apple, and Samsung. Apple went directly after Samsung's customers with the 6/6 Plus, and have successfully taken a large portion of Samsung's profit share. No other company was or is making a profit, so Apple doesn't have to consider them.
Apple has nothing to worry about for at least a decade if not more.
The only one making a profit was Apple, and Samsung. Apple went directly after Samsung's customers with the 6/6 Plus, and have successfully taken a large portion of Samsung's profit share. No other company was or is making a profit, so Apple doesn't have to consider them.
Apple has nothing to worry about for at least a decade if not more.
Yes... going after 100% of smartphone industry profits does seem like a good goal. I'm on-board with you regarding profit share.
But I was talking about percentages in general. Sorry.
For instance: This article says Apple had 14.5% market share. But could only be calculated AFTER all the other companies' smartphone sales were tallied.
There's no way Apple could have tried to be 14.5% of all smartphone sales simply because Apple wouldn't know how many phones everyone else will sell. Percentages are based on EVERYONE... not just you.
The only one making a profit was Apple, and Samsung. Apple went directly after Samsung's customers with the 6/6 Plus, and have successfully taken a large portion of Samsung's profit share. No other company was or is making a profit, so Apple doesn't have to consider them.
Apple has nothing to worry about for at least a decade if not more.
Yes... going after 100% of smartphone industry profits does seem like a good goal. I'm on-board with you regarding profit share.
But I was talking about percentages in general. Sorry.
For instance: This article says Apple had 14.5% market share. But could only be calculated AFTER all the other companies' smartphone sales were tallied.
There's no way Apple could have tried to be 14.5% of all smartphone sales simply because Apple wouldn't know how many phones everyone else will sell. Percentages are based on EVERYONE... not just you.
That's the point I was trying to make.
Steve Jobs knew the numbers, and said he would have been happy just capturing 1% of such a massive, and growing market. At 14.5% they've blown expectations out of the water. How much more can they grow? Difficult to tell. How much of that 80 some odd percent can ever afford an iPhone in their lifetime?
Steve Jobs knew the numbers, and said he would have been happy just capturing 1% of such a massive, and growing market. At 14.5% they've blown expectations out of the water. How much more can they grow? Difficult to tell. How much of that 80 some odd percent can ever afford an iPhone in their lifetime?
True.
My point is... percentages are more tricky than real hard numbers.
1% of the 2007 smartphone market is a very different number compared to 1% of the 2015 smartphone market. That's because the size of the market in 2007 is very different than the size of the market in 2015.
Apple has absolutely grown every year and sold more phones every year. But at the same time... their market share has never been above 20% worldwide. It's at 14.5% right now.
Percentages don't tell enough of the story. You just can't look at a percentage the same way you look at a raw number.
I get annoyed when I see headlines saying "iPhone market share drops"
Sure... the percentage of iPhones sold compared to all other smartphones has dropped.
But iPhone sales actually went up! And that's the number we should be looking at.
I say.... F--- the percentage. Apple sold 231 million iPhones these last 4 quarters. A nice real number. Who cares what percentage that happens to be compared to all other smartphones combined?
My point is... percentages are more tricky than real hard numbers.
1% of the 2007 smartphone market is a very different number compared to 1% of the 2015 smartphone market. That's because the size of the market in 2007 is very different than the size of the market in 2015.
Apple has absolutely grown every year and sold more phones every year. But at the same time... their market share has never been above 20% worldwide. It's at 14.5% right now.
Percentages don't tell enough of the story. You just can't look at a percentage the same way you look at a raw number.
I get annoyed when I see headlines saying "iPhone market share drops"
Sure... the percentage of iPhones sold compared to all other smartphones has dropped.
But iPhone sales actually went up! And that's the number we should be looking at.
I say.... F--- the percentage. Apple sold 231 million iPhones these last 4 quarters. A nice real number. Who cares what percentage that happens to be compared to all other smartphones combined?
You obviously understand the difference between hard numbers and percentages - but you don't at all understand the importance or significance of the percentages.
Percentages of the market show how you are doing compared to your competition. You ask "who cares" about this? Investors care. If your share of the overall market is dropping, then you are losing ground to the competition (even if you're making more money because the overall market is expanding). Investors want to see that you are taking market share away from your competitors.
Also - someone said (and you agreed with them) that Apples goal should be to capture 100% of the profit in the Smartphone market - but that would actually be a stupid target. Their target would be to capture 100% of the REVENUE from the smartphone market - which is a very different number! If you're going after the "profits", then when your competitors lose money, that lowers the profit ceiling and makes it easier for you to hit the 100% profit share. What you really want to do is to keep customers from giving ANY of their money to your competitors.
Giving 85% of the market to competitors - even if they're not making money on their sales - is still a LOT of money that is not going into Apples pockets. The competition may just be breaking even or losing money on the sale but it still represents money from a consumer that Apple was not able to capture. The amount of money that Apple is leaving on the table represents the potential growth - to both profit AND market share - and when Wall Street values a stock - future growth plays a huge part. If Apple was currently owning 90% of the market, they would have little room to grow - at least in terms of iPhone sales....but the fact that they only hold 14% market share indicates they still have a LOT of room to grow. This should be a good thing but Wall Street seems to be ignoring this fact for now. Apple is so big and so successful already, people can't believe there is still room to grow - even though the numbers show that there is. That's why Apple stock is still a bargain at current prices. One day, Wall Street will wise up and give Apple the multiple they deserve. Turning some of their revenue into subscription based services revenue will increase that ceiling even more.
Anyhow. Profit is important - but percentages are equally, if not more important - at least to the owners of the company - we the shareholders.
You obviously understand the difference between hard numbers and percentages - but you don't at all understand the importance or significance of the percentages.
Percentages of the market show how you are doing compared to your competition. You ask "who cares" about this? Investors care. If your share of the overall market is dropping, then you are losing ground to the competition (even if you're making more money because the overall market is expanding). Investors want to see that you are taking market share away from your competitors.
Also - someone said (and you agreed with them) that Apples goal should be to capture 100% of the profit in the Smartphone market - but that would actually be a stupid target. Their target would be to capture 100% of the REVENUE from the smartphone market - which is a very different number! If you're going after the "profits", then when your competitors lose money, that lowers the profit ceiling and makes it easier for you to hit the 100% profit share. What you really want to do is to keep customers from giving ANY of their money to your competitors.
Giving 85% of the market to competitors - even if they're not making money on their sales - is still a LOT of money that is not going into Apples pockets. The competition may just be breaking even or losing money on the sale but it still represents money from a consumer that Apple was not able to capture. The amount of money that Apple is leaving on the table represents the potential growth - to both profit AND market share - and when Wall Street values a stock - future growth plays a huge part. If Apple was currently owning 90% of the market, they would have little room to grow - at least in terms of iPhone sales....but the fact that they only hold 14% market share indicates they still have a LOT of room to grow. This should be a good thing but Wall Street seems to be ignoring this fact for now. Apple is so big and so successful already, people can't believe there is still room to grow - even though the numbers show that there is. That's why Apple stock is still a bargain at current prices. One day, Wall Street will wise up and give Apple the multiple they deserve. Turning some of their revenue into subscription based services revenue will increase that ceiling even more.
Anyhow. Profit is important - but percentages are equally, if not more important - at least to the owners of the company - we the shareholders.
Yes and no. Yes, because you are generally correct. No, because the percentage should be taken from the relevant market segment. Not the whole market. What I mean by this is from that from 100% of potential and actual customers only a certain percentage is willing to pay a price that would lead you to make the margin you want to make. Looking at that market segment I would say Apple is more close to 75% (guesstimate).
In other words, no investor would like you to have 100% of the market if the consequence would be to lose money or have minimal margins
You obviously understand the difference between hard numbers and percentages - but you don't at all understand the importance or significance of the percentages.
Percentages of the market show how you are doing compared to your competition. You ask "who cares" about this? Investors care. If your share of the overall market is dropping, then you are losing ground to the competition (even if you're making more money because the overall market is expanding). Investors want to see that you are taking market share away from your competitors.
Also - someone said (and you agreed with them) that Apples goal should be to capture 100% of the profit in the Smartphone market - but that would actually be a stupid target. Their target would be to capture 100% of the REVENUE from the smartphone market - which is a very different number! If you're going after the "profits", then when your competitors lose money, that lowers the profit ceiling and makes it easier for you to hit the 100% profit share. What you really want to do is to keep customers from giving ANY of their money to your competitors.
Giving 85% of the market to competitors - even if they're not making money on their sales - is still a LOT of money that is not going into Apples pockets. The competition may just be breaking even or losing money on the sale but it still represents money from a consumer that Apple was not able to capture. The amount of money that Apple is leaving on the table represents the potential growth - to both profit AND market share - and when Wall Street values a stock - future growth plays a huge part. If Apple was currently owning 90% of the market, they would have little room to grow - at least in terms of iPhone sales....but the fact that they only hold 14% market share indicates they still have a LOT of room to grow. This should be a good thing but Wall Street seems to be ignoring this fact for now. Apple is so big and so successful already, people can't believe there is still room to grow - even though the numbers show that there is. That's why Apple stock is still a bargain at current prices. One day, Wall Street will wise up and give Apple the multiple they deserve. Turning some of their revenue into subscription based services revenue will increase that ceiling even more.
Anyhow. Profit is important - but percentages are equally, if not more important - at least to the owners of the company - we the shareholders.
Thanks for that! Good info.
So what happens when that percentage never rises? I can't imagine the iPhone ever becoming 45-50% of the smartphone market. There are just too many cheap smartphones being sold in volume around the world. Even when iPhone sales grow... there are even more non-iPhones being sold.
I see your point about 14% having room to grow... but do you ever see that happening?
And it's the same story for the Mac. In 30 years the Mac has never had a significant share of the market against the PC and PC clones. It's never even been close. And even though Apple is now selling the most Macs in history... non-Macs still sell in volume and make up 90% of computer sales.
Aren't investors turned off by this?
I also like WonkoTheSane's idea above about market segments. It's commonly referred to as the "smartphone market" but shouldn't it be broken down into different segments?
A $50 no-name smartphone sold in China or India shouldn't even be on the same list as a $650 iPhone. And the person buying that $50 smartphone isn't in the market for an expensive iPhone.
Yet we lump ALL smartphones together.
Apple has 14% of the ENTIRE smartphone market... even though Apple doesn't play in the entire market.
Apple's phones start at $450 but average $670.... so why do we include them on a chart with cheap $50 and $100 smartphones?
Remember this? "Macs have 90% of the $1000+ PC market"
Maybe it's time to start talking about a premium smartphone market.
I'm not sure if I like the projected trend coming from such numbers - should Apple finally "officially" win this competition to a point where its position is so strong that they do not need to innovate anymore to keep their clientele, I'm afraid they will slow down on the innovation front.
Over the last weeks I observe a lot of complaints regarding features intentionally being held back. This ranges from the ATV, iMac to iOS9. Sure, SJ was fully correct saying "you can please some people some of the time". Still, Apple Has a reputation for holding back stuff. Storage configurations, GPUs, peripherals, and sure a lot more. These are commercial decisions working towards increasing profit margins, only. Apple is walking a line between extraordinarily high margins and very high customer satisfaction. Without the additional pressure of competition I see this balance potentially shifting towards leaving the customer behind. I certainly hope they won't.
I'm not sure if I like the projected trend coming from such numbers - should Apple finally "officially" win this competition to a point where its position is so strong that they do not need to innovate anymore to keep their clientele, I'm afraid they will slow down on the innovation front.
Over the last weeks I observe a lot of complaints regarding features intentionally being held back. This ranges from the ATV, iMac to iOS9. Sure, SJ was fully correct saying "you can please some people some of the time". Still, Apple Has a reputation for holding back stuff. Storage configurations, GPUs, peripherals, and sure a lot more. These are commercial decisions working towards increasing profit margins, only. Apple is walking a line between extraordinarily high margins and very high customer satisfaction. Without the additional pressure of competition I see this balance potentially shifting towards leaving the customer behind. I certainly hope they won't.
I think the quote you're referring to and crediting SJ with is:
"You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time”.
It was actually originally made by poet John Lydgate and then made famous by persistent Abraham Lincoln.
As for Apple becoming complacent and slowing down with the innovation - we just have to trust that SJ has established a culture within Apple that will prevent that from ever happening. I think he did - but a lot of people look at what happened with Research In Motion and see it as a foregon conclusion and an inevitability that Apple will follow in their footsteps. RIM got lazy and greedy and failed to see Apple as a credible threat when they first appeared. They won the market through innovation and it was theirs to keep - but through greed and stupidity at the CEO level, they lost everything. A lot of people think that Apple is destined to follow in their footsteps - but I think Apple is smart enough to heed the RIM case study as a warning and learn from it - allowing them to thrive and prosper even as new competition comes and goes. The lesson is to NOT become too arrogant or too complacent. Other companies have strived to make and maximize profits - and they have done so by cost cutting - whether it be on build quality, downsizing or on R&D spending cutbacks (which has short term gains but drastically affects their future product pipeline) but Apple has always strived to create "the best" and to redefine what "the best" is and the profits have followed as a natural byproduct of creating something truly useful, desirable and by building a reputation of customer service and satisfaction.
What I'm trying to say is that Apple is a different company with a different culture and I think they have a very good chance of avoiding the problems other companies have had with complacency and greed. Even though there is a lot of room to grow in the smartphone market, there will eventually be a time when it becomes saturated and no more growth is possible. In order to grow beyond that, other product lines will need to be created - and we already see evidence of Apple exploring some of those markets. Whether it be cars, wearable technology, TV's or something completely different - there are a lot of industries that could really benefit from a disruption and I hope that Apple is the company that does it.
As for your other point about Apple intentionally holding back features - that is just speculation. I think that the reason some recent products have launched without features that look like they should have been included was because the features aren't ready yet. Samsung has rushed out many new features and technologies as soon as they have become available while Apple has held back for 1 or even 2 years - and we've seen what happens when Apple finally does release those features. Their implementation has always been far superior to the junk that has been rushed to market without thought to reliability, usability or integration with the rest of the phone and ecosystem. So I hope that's what's happening here. I don't believe that Apple is simply holding features back so they can compel people to upgrade in a year. They are still perfecting the implementation of those features so that when they do come out, they will work very well and integrate seamlessly with the rest of the platform.
Comments
Coca Cola-13%
Marlboro-32% but not an expensive premium product
Johnnie Walker-8%
Herion-got me on that one.
Oil-6.1%
You might want to rethink your list.
Btw I meant to add high priced along with high margin. There are quite a few low priced high margin products out there that sell in high numbers.
Who are you ? Someone has made quite the Freudian list of vices ... And no Heroin has never been called premium by anyone that could discern - let alone the Coca Cola people. They've been cutting thier ingredients for a 100 years
Actually, you are incorrect.
Heroin started out it's life as a "miracle drug" - used for many things like to help people with tuberculosis, pneumonia and as a miracle cure for morphine addiction.... only many laters year did they realize that there were many less than wonderful side-effects etc.
This is an interesting situation: 14.5% of the market but 94% of the profits. That doesn't happen often.
It's a bit like the Mercedes car. Apple can get away with charging high prices, because its products are seen by consumers as the best and their usefulness worth the added cost. Most other cell phone makers are playing a 'this is not how to do business' game of selling below cost but hoping to make it up on the volume. I would not want to be them.
Personally, I like this particularly market however weird it may be. With all that money, Apple can afford to keep its products great and by buying used, I can afford an older iPhone.
Apple's greatest danger? Probably that politicians and bureaucrats here or in Europe will demand that, with profits that great, Apple must give up a bit of those profits and assembly iPhone and iPads in their country.
For a parallel, think back to when Detroit automakers were losing money and Asia automakers were pressured to build factories here, which they did.
Currently you can buy a Toyota auto made with more USA parts than a similar Ford... It's sure complex when one wants to "Buy American" these days.
Who are you ? Someone has made quite the Freudian list of vices ... And no Heroin has never been called premium by anyone that could discern - let alone the Coca Cola people. They've been cutting thier ingredients for a 100 years
Actually, you are incorrect.
Heroin started out it's life as a "miracle drug" - used for many things like to help people with tuberculosis, pneumonia and as a miracle cure for morphine addiction.... only many laters year did they realize that there were many less than wonderful side-effects etc.
When I was a kid living in farm country, teenagers would smoke "ditch weed" because they couldn't get their hands on real tobacco...
Your original post didn't limit things to "premium" products - so I was only commenting on high-volume, high-margin.
Where did you get your numbers? I found significantly higher numbers when I looked them up. After your post, I double checked just Coke and Cigarettes. iPhone Gross margins are about 40%. Coke Gross Profit margins are 61%! Cigarettes are about 41%
http://www.businessinsider.com/packaged-goods-with-highest-margins-2013-8
That qualifies as high-volume, high margin to me.
I also don't know how Oil can be just 6%? If it's 6% now when it's selling for $40/barrel - what were the margins when it was selling for $80-100/barrel?
By far, the most lucrative business to be in is taxation! If you want to get rich quickly, don't start a big company - start a government!!! /s
By far, the most lucrative business to be in is taxation! If you want to get rich quickly, don't start a big company - start a government!!! /s
I view mining / oil etc. where you are depleting a natural resource to be more of an asset sale than taxation.
Yeah, I meant to add 'premium' in my original post.
I looked up financial reports, perhaps I read them wrong. Also none of the companies sell those products have such a large share of the profit share. It's truly amazing, and unique what Apple has accomplished, and there isn't an end in sight.
And the interesting thing is... Apple doesn't set a goal to get 94% of the profit in the smartphone market. They just happen to sell $600+ phones and they happen to sell a lot of them while also making a good chunk of money from every phone they sell.
But the other side of the equation is that everyone else is doing so POORLY. When there are 280 million Android phones sold in a quarter... and most of those companies LOSE money selling those phones... it really messes up their profit percentage.
According to the chart: Apple makes a lot of money... Samsung makes a little money... and everyone else loses money.
For every 100 smartphones sold... 14 are made by Apple... 24 are made by Samsung... and the other 62 lose money.
Is there any other industry where 62% of the market loses money?
How is this sustainable?
They absolutely went for the the highest amount of profit share they could get. With the 6, and 6 Plus they went after the market, and profit share Samsung had.
Btw it's not sustainable. The smartphone war is over. Nobody has the cash to last much longer, and they definitely don't have the money to compete with Apple. Soon enough it'll be the iPhone, and a few other niche devices.
Apple went for a high amount of profit per unit... which... after 48 million iPhones were sold... ultimately gave them the highest profit share.
But there's no way they went for exactly 94% profit share... since percentages are based on the performance of ALL companies in the market. And Apple has no way of knowing how everyone else will do.
Apple could have set a goal to sell 48 million iPhone units at $300 profit per unit.... but they won't know what their percentage will be on the profit share chart until someone tallies each company's performance at the end of the quarter.
And that's the thing with percentages... it includes you... and a bunch of companies who are not you.
They fell short by 6%, because they were aiming for 100%. It won't be long before they finally do, or at least very near it.
This was the story 2 years ago.
http://forums.appleinsider.com/t/157374/apple-takes-57-of-handset-profits-samsung-accounts-for-remaining-43
The only one making a profit was Apple, and Samsung. Apple went directly after Samsung's customers with the 6/6 Plus, and have successfully taken a large portion of Samsung's profit share. No other company was or is making a profit, so Apple doesn't have to consider them.
Apple has nothing to worry about for at least a decade if not more.
Yes... going after 100% of smartphone industry profits does seem like a good goal. I'm on-board with you regarding profit share.
But I was talking about percentages in general. Sorry.
For instance: This article says Apple had 14.5% market share. But could only be calculated AFTER all the other companies' smartphone sales were tallied.
There's no way Apple could have tried to be 14.5% of all smartphone sales simply because Apple wouldn't know how many phones everyone else will sell. Percentages are based on EVERYONE... not just you.
That's the point I was trying to make.
Steve Jobs knew the numbers, and said he would have been happy just capturing 1% of such a massive, and growing market. At 14.5% they've blown expectations out of the water. How much more can they grow? Difficult to tell. How much of that 80 some odd percent can ever afford an iPhone in their lifetime?
True.
My point is... percentages are more tricky than real hard numbers.
1% of the 2007 smartphone market is a very different number compared to 1% of the 2015 smartphone market. That's because the size of the market in 2007 is very different than the size of the market in 2015.
Apple has absolutely grown every year and sold more phones every year. But at the same time... their market share has never been above 20% worldwide. It's at 14.5% right now.
Percentages don't tell enough of the story. You just can't look at a percentage the same way you look at a raw number.
I get annoyed when I see headlines saying "iPhone market share drops"
Sure... the percentage of iPhones sold compared to all other smartphones has dropped.
But iPhone sales actually went up! And that's the number we should be looking at.
I say.... F--- the percentage. Apple sold 231 million iPhones these last 4 quarters. A nice real number. Who cares what percentage that happens to be compared to all other smartphones combined?
Percentages of the market show how you are doing compared to your competition. You ask "who cares" about this? Investors care. If your share of the overall market is dropping, then you are losing ground to the competition (even if you're making more money because the overall market is expanding). Investors want to see that you are taking market share away from your competitors.
Also - someone said (and you agreed with them) that Apples goal should be to capture 100% of the profit in the Smartphone market - but that would actually be a stupid target. Their target would be to capture 100% of the REVENUE from the smartphone market - which is a very different number! If you're going after the "profits", then when your competitors lose money, that lowers the profit ceiling and makes it easier for you to hit the 100% profit share. What you really want to do is to keep customers from giving ANY of their money to your competitors.
Giving 85% of the market to competitors - even if they're not making money on their sales - is still a LOT of money that is not going into Apples pockets. The competition may just be breaking even or losing money on the sale but it still represents money from a consumer that Apple was not able to capture. The amount of money that Apple is leaving on the table represents the potential growth - to both profit AND market share - and when Wall Street values a stock - future growth plays a huge part. If Apple was currently owning 90% of the market, they would have little room to grow - at least in terms of iPhone sales....but the fact that they only hold 14% market share indicates they still have a LOT of room to grow. This should be a good thing but Wall Street seems to be ignoring this fact for now. Apple is so big and so successful already, people can't believe there is still room to grow - even though the numbers show that there is. That's why Apple stock is still a bargain at current prices. One day, Wall Street will wise up and give Apple the multiple they deserve. Turning some of their revenue into subscription based services revenue will increase that ceiling even more.
Anyhow. Profit is important - but percentages are equally, if not more important - at least to the owners of the company - we the shareholders.
Yes and no. Yes, because you are generally correct. No, because the percentage should be taken from the relevant market segment. Not the whole market. What I mean by this is from that from 100% of potential and actual customers only a certain percentage is willing to pay a price that would lead you to make the margin you want to make. Looking at that market segment I would say Apple is more close to 75% (guesstimate).
In other words, no investor would like you to have 100% of the market if the consequence would be to lose money or have minimal margins
Edit: except for Amazon l, maybe.
Thanks for that! Good info.
So what happens when that percentage never rises? I can't imagine the iPhone ever becoming 45-50% of the smartphone market. There are just too many cheap smartphones being sold in volume around the world. Even when iPhone sales grow... there are even more non-iPhones being sold.
I see your point about 14% having room to grow... but do you ever see that happening?
And it's the same story for the Mac. In 30 years the Mac has never had a significant share of the market against the PC and PC clones. It's never even been close. And even though Apple is now selling the most Macs in history... non-Macs still sell in volume and make up 90% of computer sales.
Aren't investors turned off by this?
I also like WonkoTheSane's idea above about market segments. It's commonly referred to as the "smartphone market" but shouldn't it be broken down into different segments?
A $50 no-name smartphone sold in China or India shouldn't even be on the same list as a $650 iPhone. And the person buying that $50 smartphone isn't in the market for an expensive iPhone.
Yet we lump ALL smartphones together.
Apple has 14% of the ENTIRE smartphone market... even though Apple doesn't play in the entire market.
Apple's phones start at $450 but average $670.... so why do we include them on a chart with cheap $50 and $100 smartphones?
Remember this? "Macs have 90% of the $1000+ PC market"
Maybe it's time to start talking about a premium smartphone market.
Over the last weeks I observe a lot of complaints regarding features intentionally being held back. This ranges from the ATV, iMac to iOS9. Sure, SJ was fully correct saying "you can please some people some of the time". Still, Apple Has a reputation for holding back stuff. Storage configurations, GPUs, peripherals, and sure a lot more. These are commercial decisions working towards increasing profit margins, only. Apple is walking a line between extraordinarily high margins and very high customer satisfaction. Without the additional pressure of competition I see this balance potentially shifting towards leaving the customer behind. I certainly hope they won't.
I think the quote you're referring to and crediting SJ with is:
"You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time”.
It was actually originally made by poet John Lydgate and then made famous by persistent Abraham Lincoln.
As for Apple becoming complacent and slowing down with the innovation - we just have to trust that SJ has established a culture within Apple that will prevent that from ever happening. I think he did - but a lot of people look at what happened with Research In Motion and see it as a foregon conclusion and an inevitability that Apple will follow in their footsteps. RIM got lazy and greedy and failed to see Apple as a credible threat when they first appeared. They won the market through innovation and it was theirs to keep - but through greed and stupidity at the CEO level, they lost everything. A lot of people think that Apple is destined to follow in their footsteps - but I think Apple is smart enough to heed the RIM case study as a warning and learn from it - allowing them to thrive and prosper even as new competition comes and goes. The lesson is to NOT become too arrogant or too complacent. Other companies have strived to make and maximize profits - and they have done so by cost cutting - whether it be on build quality, downsizing or on R&D spending cutbacks (which has short term gains but drastically affects their future product pipeline) but Apple has always strived to create "the best" and to redefine what "the best" is and the profits have followed as a natural byproduct of creating something truly useful, desirable and by building a reputation of customer service and satisfaction.
What I'm trying to say is that Apple is a different company with a different culture and I think they have a very good chance of avoiding the problems other companies have had with complacency and greed. Even though there is a lot of room to grow in the smartphone market, there will eventually be a time when it becomes saturated and no more growth is possible. In order to grow beyond that, other product lines will need to be created - and we already see evidence of Apple exploring some of those markets. Whether it be cars, wearable technology, TV's or something completely different - there are a lot of industries that could really benefit from a disruption and I hope that Apple is the company that does it.
As for your other point about Apple intentionally holding back features - that is just speculation. I think that the reason some recent products have launched without features that look like they should have been included was because the features aren't ready yet. Samsung has rushed out many new features and technologies as soon as they have become available while Apple has held back for 1 or even 2 years - and we've seen what happens when Apple finally does release those features. Their implementation has always been far superior to the junk that has been rushed to market without thought to reliability, usability or integration with the rest of the phone and ecosystem. So I hope that's what's happening here. I don't believe that Apple is simply holding features back so they can compel people to upgrade in a year. They are still perfecting the implementation of those features so that when they do come out, they will work very well and integrate seamlessly with the rest of the platform.