How do the unprofitable handset manufacturers justify continuing to lose money?
I mean this sincerely, not cynically. It doesn't seem to make sense for any for-profit company... unless they have other ways to profit from the handset sales (e.g., getting paid to bundle software, or money from ad revenue [Google Pixel]).
I wonder if some of the unprofitable players will exit over the next 2 - 3 years?
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.
In short: it isn't tanking, you're seeing a fluctuation which is typical for Apple.
Share price is a reflection of demand in shares, which is not governed by earnings or dividends. Since Apple's float is being constantly reduced (Buy-back) and large investors buying and selling it is more prone to significant change, this is exacerbated by being in a fast-paced industry. Market perceptions to a product drastically impact share transactions. Apple frequently update their products in unconventional "risky" ways. (Removal of 3.5mm headphone jack and no-legacy ports in the macbook pro are two recent examples.) This risk is too much for certain investor groups, so they abandon the stock temporarily in case any of the risks don't pan out. Apple have been growing their steady-earning-businesses (such as an online services) which have a net effect of reducing volatility - this is part of the reason why Apple's share value has been progressively trending upwards since 2014 (when services was a much smaller segment of their business.)
Now the Apple stock price is not "tanking" whatsoever, it's certainly not as high as its peak in 2014 (launch of iPhone 6), but it's still significantly trending higher than other recent times, and certainly high with respect to its share price this year. Apple's share price bounces up and down around announcements - there is nothing new about that and it's typical for companies that have a small collection of big-hitting items.
This headline is stupid. You can't capture more than 100% of something.
It means other players in this market lost money
It's still not a very useful measure.
Say that Apple makes 10 billion profit, Samsung makes 6 billions and everybody else loses 6 billion.
Then Apple makes 100% of industry - but Samsung also makes 60% of industry profits.
However, the "100%" suggests somehow that everyone but Apple is insignificant which is not the case in this example. It would seem more informative to compare Apple's profits to the closest competitors.
Whatever profits Apple makes, it means Apple has enough capability to push the market harder and also they take too much money from our pockets.
So, because unit number wise market share is also important, Apple can introduce more price competitive but quality iPhone for the market where its not popular, like France, Latin America, India and China. just because its American products and its price is set based on American market, the price barrier in countries like India and China is too high. I've heard that the iPhone price is as much as one month or multiple months of salary in China.
This headline is stupid. You can't capture more than 100% of something.
It means other players in this market lost money
It's still not a very useful measure.
Say that Apple makes 10 billion profit, Samsung makes 6 billions and everybody else loses 6 billion.
Then Apple makes 100% of industry - but Samsung also makes 60% of industry profits.
However, the "100%" suggests somehow that everyone but Apple is insignificant which is not the case in this example. It would seem more informative to compare Apple's profits to the closest competitors.
how long till the android vendors simply give up and cut their losses? Whether or not they make great phones, it surely comes down to making money for these businesses. Why bother selling handsets at all if you're fridge/tv/other services have to subsidise it year after year - what benefit could there be?
Say that Apple makes 10 billion profit, Samsung makes 6 billions and everybody else loses 6 billion.
Then Apple makes 100% of industry - but Samsung also makes 60% of industry profits.
However, the "100%" suggests somehow that everyone but Apple is insignificant which is not the case in this example. It would seem more informative to compare Apple's profits to the closest competitors.
Indeed.. If Apple makes 100$ profit, Samsung makes 100$ profit, and two other players each lose 50$, then *both* Apple and Samsung earn 100% of total profits.. So, the percentage is meaningless on itself..
Say that Apple makes 10 billion profit, Samsung makes 6 billions and everybody else loses 6 billion.
Then Apple makes 100% of industry - but Samsung also makes 60% of industry profits.
However, the "100%" suggests somehow that everyone but Apple is insignificant which is not the case in this example. It would seem more informative to compare Apple's profits to the closest competitors.
Indeed.. If Apple makes 100$ profit, Samsung makes 100$ profit, and two other players each lose 50$, then *both* Apple and Samsung earn 100% of total profits.. So, the percentage is meaningless on itself..
Good thing it's NOTHING close to that, and rather... as the article says: Apple made 103%, Samsung came in a distant second w/ .9%, & all others lost $. If there is some ambiguity there, or it is difficult to fathom that there is a big difference between 103% & .9%, I'm not really sure expressing it in a different way is really gonna help you.
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.
I know the math but it's still a silly headline. Assuming we even believe these numbers - as no one (including Apple) tells us what their profit is just for smartphones.
This headline is stupid. You can't capture more than 100% of something.
Why not? Have you known about negative profit?
Negative Profit, i.e. Loss. That's all I'm saying. Obviously mathematically Apple would be over 100% but wouldn't it make more sense to just say Apple is the only profitable smartphone maker? And even that is silly because not one smartphone maker tells you what their profit/loss is just for smartphones. Apple doesn't give us a P&L for iPhone.
But is it really possible that all other companies like Huawei, Xiaomi and number of others only loose money all the time? They have to be out business already but they are not and some of them seem doing good. Can somebody explain that more deeply?
How do the unprofitable handset manufacturers justify continuing to lose money?
I mean this sincerely, not cynically. It doesn't seem to make sense for any for-profit company... unless they have other ways to profit from the handset sales (e.g., getting paid to bundle software, or money from ad revenue [Google Pixel]).
I wonder if some of the unprofitable players will exit over the next 2 - 3 years?
Depends on the manufacturer. Samsung and I guess LG operates the same, are vertically integrated but make their money off components. I suspect that with their intersegment sales, they book the profit at the component division rather than the handset one. That firstly means they are probably making more money than the analysts realise and second, by pushing their display, camera, semiconductors into the market with their own handsets, they force the rest of the handset companies to follow and as a result they make more money by selling externally. Last quarter, Samsung made about $100M operating profit on handsets, once the Note debacle was accounted for but $4B on components, although usually it's roughly the same.
Then there's Huawei, which I guess isn't that worried about losing money/not making a lot on handsets as the bulk of their revenue is from networking gear. If they can stimulate the handset market, get people using a lot of data, they sell more routers/switches to telcos. It also gets their name out there so they are no longer viewed as a Chinese knock off of Cisco, even if that's what they might be. They are also in massive growth mode so profit becomes less of a concern. Focus on share now, profit tomorrow.
I'm not sure what Lenovo's game is. They keep buying up companies in dying markets, I guess thinking they can make them profitable with scale. Not sure if it has worked or not
Comments
I mean this sincerely, not cynically. It doesn't seem to make sense for any for-profit company... unless they have other ways to profit from the handset sales (e.g., getting paid to bundle software, or money from ad revenue [Google Pixel]).
I wonder if some of the unprofitable players will exit over the next 2 - 3 years?
(Apple iPhone profit) divided by (Total smartphone industry profit) = 1.036 = 103.6% of industry profit.
In short: it isn't tanking, you're seeing a fluctuation which is typical for Apple.
Share price is a reflection of demand in shares, which is not governed by earnings or dividends. Since Apple's float is being constantly reduced (Buy-back) and large investors buying and selling it is more prone to significant change, this is exacerbated by being in a fast-paced industry. Market perceptions to a product drastically impact share transactions. Apple frequently update their products in unconventional "risky" ways. (Removal of 3.5mm headphone jack and no-legacy ports in the macbook pro are two recent examples.) This risk is too much for certain investor groups, so they abandon the stock temporarily in case any of the risks don't pan out. Apple have been growing their steady-earning-businesses (such as an online services) which have a net effect of reducing volatility - this is part of the reason why Apple's share value has been progressively trending upwards since 2014 (when services was a much smaller segment of their business.)
Now the Apple stock price is not "tanking" whatsoever, it's certainly not as high as its peak in 2014 (launch of iPhone 6), but it's still significantly trending higher than other recent times, and certainly high with respect to its share price this year. Apple's share price bounces up and down around announcements - there is nothing new about that and it's typical for companies that have a small collection of big-hitting items.
But everyone know unit sales is more important that $$$. Who cares if you can't pay the bills. Market share, baby! /s
Say that Apple makes 10 billion profit, Samsung makes 6 billions and everybody else loses 6 billion.
Then Apple makes 100% of industry - but Samsung also makes 60% of industry profits.
However, the "100%" suggests somehow that everyone but Apple is insignificant which is not the case in this example. It would seem more informative to compare Apple's profits to the closest competitors.
So, because unit number wise market share is also important, Apple can introduce more price competitive but quality iPhone for the market where its not popular, like France, Latin America, India and China.
just because its American products and its price is set based on American market, the price barrier in countries like India and China is too high. I've heard that the iPhone price is as much as one month or multiple months of salary in China.
compare 103% to .9%.
If there is some ambiguity there, or it is difficult to fathom that there is a big difference between 103% & .9%, I'm not really sure expressing it in a different way is really gonna help you.
Then there's Huawei, which I guess isn't that worried about losing money/not making a lot on handsets as the bulk of their revenue is from networking gear. If they can stimulate the handset market, get people using a lot of data, they sell more routers/switches to telcos. It also gets their name out there so they are no longer viewed as a Chinese knock off of Cisco, even if that's what they might be. They are also in massive growth mode so profit becomes less of a concern. Focus on share now, profit tomorrow.
I'm not sure what Lenovo's game is. They keep buying up companies in dying markets, I guess thinking they can make them profitable with scale. Not sure if it has worked or not