Apple captures more than 103% of smartphone profits in Q3 despite shrinking shipments

AppleInsider

Apple raked in more than 100 percent of all smartphone industry profits during the third quarter of 2016, despite owning roughly 12 percent of the market, according to new estimates published on Thursday.

In a note to investors, BMO Capital Markets analyst Tim Long estimates Apple's share of handset industry operating profits hit an all-time high of 103.6 percent for the most recent quarter, reports Investor's Business Daily. Apple's super-100 percent performance resulted from losses posted by other major vendors over the same period.

Apple rival Samsung placed a distant second on Long's list with a 0.9 percent share of profits, while HTC and LG ended up in the red.

By comparison, Long says Apple took a 90 percent share of profits in the year ago quarter, though other estimates put that number as high as 94 percent on only 14.5 percent of total volume.

Apple's results are all the more impressive considering fresh research published by Strategy Analytics, which noted iPhone continued to cede ground to Android during the September quarter. Specifically, iOS devices accounted for 12.1 percent of global smartphone shipments for the three months ending in September, down from 13.6 percent in 2015. Android gained ground over the same period, jumping from 84.1 percent to 87.5 percent.

Looking at units sold, Samsung led smartphone unit sales in quarter three with a 21.7 percent marketshare, Long said. Apple came in second with 13.2 percent share, while Huawei managed 9.7 percent for a third-place finish.

The estimates jibe with statistics released by market research firm IDC last month that show Apple grabbing a 12.5 percent share of global shipments. That same report saw No. 1 Samsung's marketshare erode to 20 percent -- levels not seen since 2014 -- due to the recent Galaxy Note 7 recall. The Note 7 fiasco obliterated Samsung's quarterly earnings, with the company's mobile unit suffering a 96 percent year-over-year decline.

Apple in its most recent earnings release reported a dip in iPhone shipments from 48 million in the third quarter of 2015 to 45.5 million in 2016. Despite continuing shipment declines, however, it appears high handset ASPs and demand for the new iPhone 7 series once again land Apple on top in profits.

sockrolid

Winning.

r00fus1

Clearly Apple is doomed. Over 100% of profits...

rogifan_new

This headline is stupid. You can't capture more than 100% of something.

dugbug

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

It means other players in this market lost money

ireland

Someone owns AAPL. Analyst.

andrewj5790

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

Yes you can. Many handset makers sell at a loss which means negative percentages. Balancing those who lost money with those that made money, you get 100%. If I make 2 dollars and you lose 50 cents, the profit for our industry would be $1.50. $2.00(my share of profits)/$1.50(total profits for the industry) = 133% (my percentage of profits earned)

roundaboutnow

andrewj5790 said:

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

Yes you can. Many handset makers sell at a loss which means negative percentages. Balancing those who lost money with those that made money, you get 100%. If I make 2 dollars and you lose 50 cents, the profit for our industry would be $1.50. $2.00(my share of profits)/$1.50(total profits for the industry) = 133% (my percentage of profits earned)

I found a comment on WSJ that put it a slightly different way that cleared it up for me:

Say the smart phone industry had operating profits of $100 last year, with Apple getting $92 in profits, Samsung getting $15, and Nokia losing $7. That's how Apple and Samsung can total more than 100% of the industry profits. If you isolated for only companies that broke even or made money, then their profit percentages would have to total 100%

douglas bailey

Called it. 
Just can't remember where I called it.

But I certainly got challenged by the "can't have more than 100%" crowd.  

misa

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

Sure you can. It's like a bonus question on a quiz, not a question of efficiency in a friction/energy/motion equation.

... and someone else already posted a better analogy.

At any rate, the point is that Apple is gaining at other phone vendor's expense, so if Apple now makes 100%+ of the profits, that means that someone (eg Microsoft/Nokia, RIM/Blackberry) lost revenue. eg They lost money with every phone.

dasanman69

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

It's a zero sum game with the other players involved.

badmonk

Apple's profits in this space ensures its dominance for the time being.  And note the bifurcation of the market...no windows phones, no tizen devices.  It means things will continue this way for awhile.

And Microsoft will not be the next Apple with its top-down approach with $2700 surface tablets and mega-touch devices.

We live in a post-computer world.

anantksundaram

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

Stop. Please. This silly argument, and every possible variant of it, has gone on in this forum pretty much annually since 2012 or so.

dasanman69

sockrolid said:

Winning.

They won a long time ago. Where have you been?

chris_ca

anantksundaram said:

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

Stop. Please. This silly argument, and every possible variant of it, has gone on in this forum pretty much annually since 2012 or so.

125% of the people posting here, agree. 

9secondkox2

badmonk said:

Apple's profits in this space ensures its dominance for the time being.  And note the bifurcation of the market...no windows phones, no tizen devices.  It means things will continue this way for awhile.

And Microsoft will not be the next Apple with its top-down approach with $2700 surface tablets and mega-touch devices.

We live in a post-computer world.

We don't live in a post computer world.

macs and pcs (of which the surface family belong) are computers. Nothing more.

and mobile devices are as well, just tailored to suit more limited needs. And that's something that only Apple seems to get. It is also why they are steadily succeeding while everyone else whiffs.

EsquireCats

"You can't capture more than 100% of something."   

You're on the internet, there is no excuse for such ignorance. Do some research of financial concepts before sharing your extraordinary laziness.

Now a condescending example: If you spent $5 on candy, but could only make $2 in sales before the candy's use-by date, then you have a loss of $3. A loss is the opposite of profit, and it's a bad thing.  It means you're subsidising candy sales with your own money. 

So if profit is making money and loss is losing money. This means we can talk about a "loss" as a negative profit. Since they're both about earning money, just positive or negative versions of it. 

For simplicity let's pretend there is only one other person selling candy and they made $10 profit.  This means overall profit in the industry is $7. (They made $10, you lost $3 that means the market profit total is $7) Their share of that $7 is more than 100% - it's actually 143%. This is a useful figure as it tells us about what the market looks like. Naturally the flip side is that you made a negative 43% share of industry profits, i.e. you made a loss. 

Now let's look at Android vendors versus Apple: There are now bucket loads of Android vendors, they're all competing on price and they're relying on very-thin profit margins to turn over any money at all. Most of these companies don't make money and are instead trying to gain a foothold in the market. It's no surprise that many new entrants (and even many existing ones) fail to make any profit because of this. It sounds like I'm talking about cheap brands like Oppo, Huawei and others - the reality is I'm talking about major brands like Samsung, HTC and others. These companies only advertise their best devices, however their business is almost entirely the sale of very very cheap android phones, especially to countries with tiny incomes: these people could never afford an iPhone, or a flagship device from one of the Android brands. So it's curious that we still count unit sales altogether when these represent extremely different devices, and a large and growing section of the market couldn't possibly afford a flagship. (It's like counting skateboard sales with luxury cars, because you can ride a skateboard on a road.)

What does this mean? It means that Apple's % share of phone units will decrease, but the amount of phones apple sell will keep increasing, and thus the money Apple earns will continue to get larger, this means that Apple's share of industry profits will keep exceeding 90%+ (As it does with personal computers.)

What will happen next? Firms like IDC don't like it when their customers (e.g Samsung, etc) are being beaten in the market by people who aren't their customers (e.g Apple.) So they like to change the definition of the various categories to favour how their paying clients look. (So skateboards and luxury cars would be counted together to please the skateboard company.) Since Apple are performing better every year, maybe IDC will start breaking apart the categories into ways that better favour their customers? This is called cherry picking and IDC does a lot of it - one could argue that a $1000 iPhone shouldn't be included in the same category as a $50 android "smartphone", when the capabilities of one are unsurpassed by the other.

gmgravytrain

dasanman69 said:

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

It's a zero sum game with the other players involved.

If it's a zero sum game for all the other smartphone players then why does Apple's share price continue to tank? It almost seems as though Apple has no real competition or has a clear field, so to speak. If this is so, why the constant doom and gloom for Apple? How is Apple's business being threatened? Apple's stock is falling faster than ever despite the clear gain in profits. I really don't understand these things.

lkrupp

Read an article on a financial website about Apple losing market share and how Apple vs Android is becoming Apple vs Microsoft. Then the article goes on to say that the big problem with Android is that very few of the OEMs make any profit and that Google’s Pixel phone may anger these unprofitable OEMs even further.

So I fail to see how market share means diddly-squat if you’re not making any money. And unlike the Mac vs PC analogy the Android can’t even come close to saying there are more and better apps available for Android. Remember how the Windozers would always gloat about how they could walk into any store and buy PC software while Mac users were left in the cold. Not true with iOS and Android and never has been. 

ksec

There is also the word Shipment. Shipment is what other manufacture shipped to its partner, for Apple it is more like how much they sold.

So what really matter is, iPhone market usage. i.e In all of the 3.5B Smartphone users, how many of those are Apple. I think Benedict Evans broke out those numbers some times ago.   

Sometimes I wonder, what strategy could be use, to not lower the profit margin too much, while getting more market shares?. There are roughly 1 Billion active iOS devices. That is all iPad, iPhone, iPod Touch users. Roughly 600M active iPhone users, what could Apple do to get to 1 Billion iPhone users?.

lkrupp

gmgravytrain said:

dasanman69 said:

rogifan_new said:

This headline is stupid. You can't capture more than 100% of something.

It's a zero sum game with the other players involved.

If it's a zero sum game for all the other smartphone players then why does Apple's share price continue to tank? It almost seems as though Apple has no real competition or has a clear field, so to speak. If this is so, why the constant doom and gloom for Apple? How is Apple's business being threatened? Apple's stock is falling faster than ever despite the clear gain in profits. I really don't understand these things.

Wall Street’s attitude towards Apple has never made any sense. It’s a special case because Apple usually thumbs its nose at the advice it receives from Wall Street analysts. Apple doesn’t kowtow to Wall Street and they are hated for it.