With 4% market share, Apple's iPhone rakes in 52% of mobile profits
Apple is estimated to have taken in 52 percent of the handset industry's operating profits last quarter, despite only having a 4.2 percent global handset market share.
Analyst T. Michael Walkley with Canaccord Genuity issued a note to investors on Friday in which he estimated Apple took more than half of the industry's operating profits in the third quarter of calendar 2011. That's a 5 percent increase from the third quarter of 2010, when Apple's share of industry operating profits was 47 percent.
In fact, Apple's growth in profit share came even as Apple lost market share. The iPhone dipped from a 5.4 percent market share to its current 4.2 percent as Samsung is estimated to have led the industry in smartphone shipments for the quarter, though its profits shrank.
Calling it an "epic reversal of fortunes," Canaccord noted that in 2007, Nokia had 67 percent of operating profits in the industry, while Apple and its iPhone represented just 4 percent. Now, with more than half of the industry's profits, Apple has switched places with Nokia, which accounts for just 4 percent of operating profits.
Apple's chief rival in the mobile industry is Samsung, which Walkley said has scale advantages and the leading share of Android devices. Together, Apple and Samsung are said to have represented 81 percent of the handset industry's operating profits last quarter.
Walkley said he has conducted "channel checks" that show strong demand not only for Apple's new iPhone 4S, but also for the lower-priced iPhone 4 and iPhone 3GS models. Accordingly, he has increased his projected iPhone sales for the December quarter to 29 million, up from 27 million.
The analyst previously reported in July that Apple had captured 50 percent of the handset industry's profits during the first quarter of 2011. Walkley has also repeatedly revealed that Apple's previous-generation products, like the iPhone 3GS, are strong sellers that often outperform newer Android handset models.
On the strength of the iPhone and Apple's industry leading profits, Canaccord Genuity has maintained its buy rating for AAPL stock and increased its price target to $560.
Analyst T. Michael Walkley with Canaccord Genuity issued a note to investors on Friday in which he estimated Apple took more than half of the industry's operating profits in the third quarter of calendar 2011. That's a 5 percent increase from the third quarter of 2010, when Apple's share of industry operating profits was 47 percent.
In fact, Apple's growth in profit share came even as Apple lost market share. The iPhone dipped from a 5.4 percent market share to its current 4.2 percent as Samsung is estimated to have led the industry in smartphone shipments for the quarter, though its profits shrank.
Calling it an "epic reversal of fortunes," Canaccord noted that in 2007, Nokia had 67 percent of operating profits in the industry, while Apple and its iPhone represented just 4 percent. Now, with more than half of the industry's profits, Apple has switched places with Nokia, which accounts for just 4 percent of operating profits.
Apple's chief rival in the mobile industry is Samsung, which Walkley said has scale advantages and the leading share of Android devices. Together, Apple and Samsung are said to have represented 81 percent of the handset industry's operating profits last quarter.
Walkley said he has conducted "channel checks" that show strong demand not only for Apple's new iPhone 4S, but also for the lower-priced iPhone 4 and iPhone 3GS models. Accordingly, he has increased his projected iPhone sales for the December quarter to 29 million, up from 27 million.
The analyst previously reported in July that Apple had captured 50 percent of the handset industry's profits during the first quarter of 2011. Walkley has also repeatedly revealed that Apple's previous-generation products, like the iPhone 3GS, are strong sellers that often outperform newer Android handset models.
On the strength of the iPhone and Apple's industry leading profits, Canaccord Genuity has maintained its buy rating for AAPL stock and increased its price target to $560.
Comments
Possible changes the industry might adopt:
- Low profit companies stop selling phones
- Companies reduce the range of product offerings to reduce cost
- Companies improve their products enough to gain market share and profits
Right now, Apple makes an average of 25 times as much per phone as the rest of the industry. SOMEONE has to make a change.
Even assuming this is true, it's unsustainable.
Unsustainable for everyone else, you mean. Apple's gonna do just fine, I think.
Hard to believe that 96% of the industry sucks SO MUCH.
Agree.
Even assuming this is true, it's unsustainable. Eventually, something has to change.
Possible changes the industry might adopt:
- Low profit companies stop selling phones
- Companies reduce the range of product offerings to reduce cost
- Companies improve their products enough to gain market share and profits
Right now, Apple makes an average of 25 times as much per phone as the rest of the industry. SOMEONE has to make a change.
The first two are extremely likely.
There exist huge barriers to entry WRT the last one. Apple's ecosystem and the tight integration between products, all linked to services, is very hard for anybody to match. Couple that with market manipulation in the supply chain, and, well, things become that much more difficult for competitors.
Hard to believe that 96% of the industry sucks SO MUCH.
Agree.
I believe in this in general (i.e. Apple makes a big chunk of profits) but I don't think we can trust the specifics. After all, these analysts are consistently wrong in their projections. Furthermore, even when companies release their numbers (particularly profits), they cannot be take on their face value.
What we do know is this: HTC and Samsung are making money off smartphones. LG and Motorola are not. RIM is still profitable but its future is murky. Nokia is riding a very precarious transition train. Google makes more money off iOS than Android. And Microsoft is also profiting nicely from Android.
Hard to believe that 96% of the industry sucks SO MUCH.
Unsustainable for everyone else, you mean. Apple's gonna do just fine, I think.
... and, imho, it's just going to get worse for the competition.
Hard to believe that 96% of the industry sucks SO MUCH.
I take ur point...but not really that surprising when u consider most businesses follow the "Walmart" business model....sell "crap" at a low cost, but sell a lot of it. Americans seem to equate good value to low cost...
Largest retailer, Walmart. What do they sell? Crap!
Largest beverage company, Coke. What do they sell? Crap!
Largest restaurant company, McDonald's. What do they sell? Crap!
Largest software company, Microsoft. What do they sell? Crap!
Largest PC manufacturer, (by volume), HP. What do they sell? Crap!
Largest auto company, (until recently), GM. What do they sell? Crap!
Largest food company, General Mills-(?). What do they sell? Crap!
Etc., etc....
P.S. Anyone have some more examples I can add to the list?
I take ur point...but not really that surprising when u consider most businesses follow the "Walmart" business model....sell "crap" at a low cost, but sell a lot of it. Americans seem to equate good value to low cost...
Largest retailer, Walmart. What do they sell? Crap!
Largest beverage company, Coke. What do they sell? Crap!
Largest restaurant company, McDonald's. What do they sell? Crap!
Largest software company, Microsoft. What do they sell? Crap!
Largest PC manufacturer, (by volume), HP. What do they sell? Crap!
Largest auto company, (until recently), GM. What do they sell? Crap!
Largest food company, General Mills-(?). What do they sell? Crap!
Etc., etc....
P.S. Anyone have some more examples I can add to the list?
I disagree on the coke, like how you noted that GM has moved up in the rankings of best cars.
I take ur point...but not really that surprising when u consider most businesses follow the "Walmart" business model....sell "crap" at a low cost, but sell a lot of it. Americans seem to equate good value to low cost...
Largest retailer, Walmart. What do they sell? Crap!
Largest beverage company, Coke. What do they sell? Crap!
Largest restaurant company, McDonald's. What do they sell? Crap!
Largest software company, Microsoft. What do they sell? Crap!
Largest PC manufacturer, (by volume), HP. What do they sell? Crap!
Largest auto company, (until recently), GM. What do they sell? Crap!
Largest food company, General Mills-(?). What do they sell? Crap!
Etc., etc....
P.S. Anyone have some more examples I can add to the list?
Largest smartphone vendor, Apple.
I take ur point...but not really that surprising when u consider most businesses follow the "Walmart" business model....sell "crap" at a low cost, but sell a lot of it. Americans seem to equate good value to low cost...
Largest retailer, Walmart. What do they sell? Crap!
...
Etc., etc....
P.S. Anyone have some more examples I can add to the list?
Largest porn producer, Vivid. What do they sell? Well, it's er, not that bad.
Even assuming this is true, it's unsustainable. Eventually, something has to change.
Possible changes the industry might adopt:
- Low profit companies stop selling phones
- Companies reduce the range of product offerings to reduce cost
- Companies improve their products enough to gain market share and profits
Right now, Apple makes an average of 25 times as much per phone as the rest of the industry. SOMEONE has to make a change.
And what that change will be will be Apple moving on and leaving the commoditized markets to the bottom dwellers.
(Listening to music from Invincible by Two Steps From Hell - seems appropriate! Amazing data if correct!)
On the other side, a profitable business has profits to invest in future product development, making it even more profitable. Breaking out of that cycle is possible (and easier than breaking out of the other one), but surprisingly hard. Not even Steve Ballmer has been able to break Microsoft's virtuous cycle of profits begetting profits, and he appears to have really been trying ;-)
And what that change will be will be Apple moving on and leaving the commoditized markets to the bottom dwellers.
Huh? Apple already leaves the commoditized markets to the bottom dwellers. Why would that be a change?
I take ur point...but not really that surprising when u consider most businesses follow the "Walmart" business model....sell "crap" at a low cost, but sell a lot of it. Americans seem to equate good value to low cost...
Largest retailer, Walmart. What do they sell? Crap!
Largest beverage company, Coke. What do they sell? Crap!
Largest restaurant company, McDonald's. What do they sell? Crap!
Largest software company, Microsoft. What do they sell? Crap!
Largest PC manufacturer, (by volume), HP. What do they sell? Crap!
Largest auto company, (until recently), GM. What do they sell? Crap!
Largest food company, General Mills-(?). What do they sell? Crap!
Etc., etc....
P.S. Anyone have some more examples I can add to the list?
I disagree on the coke, like how you noted that GM has moved up in the rankings of best cars.
Off topic, but how can you disagree with Coke being crap when its ingredients are water, sugar, caffeine, a tiny bit of flavoring and coloring, and carbon dioxide. Not a whole lot of good stuff in there. Also Coke's founder was famous for saying something to the effect that his goal was to sell something to the masses that cost a few pennies to make, that he could sell for a quarter, and that was addicting. Which is why Coke is named Coke, because it originally had cocaine as an addicting ingredient. Now the replacement addicting ingredient is caffeine.
On topic, and yet, the media keeps trumpeting the triumph of Android over iOS. If I were in the smartphone business I would want the profit end of the spectrum rather than the market share end. However, I hope that Apple keeps inovating and doesn't rest on its laurels. Because I believe that Google's strategy is very Mircosoftian in that they and their partners are willing to risk low profits if they can saturate the market to the point were they become the de facto standard. By the way the list really makes you think doesn't it?
I disagree on the coke, like how you noted that GM has moved up in the rankings of best cars.
11 spoonfuls of sugar in each 12oz. can of Coke? Sounds like crap to me, albeit sugary crap!
11 spoonfuls of sugar in each 12oz. can of Coke? Sounds like crap to me, albeit sugary crap!
Indeed, that is crap.
They don't use sugar, they use HFCS. If they used sugar, anyone who drinks it would be HEALTHIER.
I cut out HFCS from my fluid intake two years ago.
Now I'm limited to water, milk, 100% juice (various companies? you have to watch, though), and Throwback Mountain Dew and Jones soda.
And I wouldn't trade it for anything. I can't even drink stuff with HFCS in it anymore. It's too dang thick.
Indeed, that is crap.
They don't use sugar, they use HFCS. If they used sugar, anyone who drinks it would be HEALTHIER.
I cut out HFCS from my fluid intake two years ago.
Now I'm limited to water, milk, 100% juice (various companies? you have to watch, though), and Throwback Mountain Dew and Jones soda.
And I wouldn't trade it for anything. I can't even drink stuff with HFCS in it anymore. It's too dang thick.
Oh boy - when's your trip to India?
Anybody else reading the biography (and of Boomer age) and seriously wonder what happened to the "audacity" of going across the globe to discover yourself, without solid funding?
Keep up the good habits, tS!
Indeed, that is crap.
They don't use sugar, they use HFCS. If they used sugar, anyone who drinks it would be HEALTHIER.
I cut out HFCS from my fluid intake two years ago.
Now I'm limited to water, milk, 100% juice (various companies? you have to watch, though), and Throwback Mountain Dew and Jones soda.
And I wouldn't trade it for anything. I can't even drink stuff with HFCS in it anymore. It's too dang thick.
Luddit