We’ve said it before and we’ll say it again, market share and profit share aren’t the same thing, and just to prove that point, it looks like Apple’s iPhone has shot passed Nokia to become the most profitable handset on the market. Says Telephony Online:
The firm estimates that Apple’s iPhone operating profit came in at $1.6 billion in Q3, while Nokia recorded only $1.1 billion in operating profit. “With strong volumes, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years,” said analyst Alex Spektor in the research note.
That’s based on 1.6 billion in Q3 iPhone profits for Apple vs. 1.1 billion for Nokia and their handsets.
Why does this matter to us? High profit margins for Apple means more cash they can re-invest into the iPhone and its technology, and like the MacBook and iMac line (and the boilerplate they keep feeding us on their conference calls) it means they can decide to amp up the innovation, even if costs them a little in the short term. No margin, no room for that kind of competition.
So, Apple, we hope you take a lot of that 1.6 billion, check out your competition, and invest heavily in wowing us again in 2010, b’okay?
[Strategy Analyst via Telephony Online via MacRumors]
Could Apple’s iPhone be destined for 3rd place in smartphone marketshare by 2012, trailing Nokia/Symbian’s 39% and Google Android’s 14.5% with a paltry 13.7%? That’s what some analysts at Gartner are telling ComputerWorld, with Nokia already in the global lead, and Google’s wallet, cloud-services, rapid iteration of the OS, and variety of form-factors and UIs from multiple manufacturers. Rounding out the other players are Windows Mobile with 12.8%, RIM BlackBerry with 12.5%, various Linux mobiles with a collective 5.4%, and Palm webOS with 2.1%.
iPhone, projected at 71.5 million unites sold, doesn’t have Nokia’s existing footprint or Google’s services, but here’s the thing: a) it has Apple’s still-unmatched 360 degrees of ecosystem integration, b) will likely continue to improve at the same rate it has since the original iPhone 2G running 1.x with no apps or services in 2007, and c) will remain wildly profitable, and that profit share will remain more important to Apple than raw marketshare.
TiPb has discussed this before, of course. Back in August we heard that while the iPhone currently only has 8% of the market, it gets 32% of the revenue. Further back in January, we heard Apple was making double the profits of Nokia.
So, okay, if the Mayans are wrong and we’re all still here in 2012, maybe Apple will only be making 30% margin on a 13.7% share. But that might still be killer compared to very little on a 39% share.
Just compare Apple’s current financial results to the rest of the industry for an indication of how that works…
All Things Digital reports that, based on Bernstein Research analyst Toni Sacconaghi’s estimates, that while Apple takes in only 8% of cellphone industry revenue, they rake in a bind boggling 32% of the profit. This is similar to their share of desktop computing revenue and profits.
“With the iPhone and its Apps Store, Apple has established a formidable smartphone ecosystem, which history suggests is very difficult to overcome,” the analyst explains. “In fact, Apple has the potential to become a de-facto standard of sorts in the consumer smartphone market, much like it became in the portable media player market with iPods, due in large part to its first mover advantage and tight software and hardware integration.
Indeed. Applying the Mac and iPod business model, especially as convergent, mobile devices begin to outpace traditional players and platforms, was said by Apple to be their strategy from the get go.
Looks like it just might work out for them…
The Wall Street Journal (via MacRumors) published a report stating that while Apple’s iPhone, and RIM’s BlackBerry make up only 3% of mobile phone sales last year, the gobbled up a huge 35% take of the profits. iPhone specifically was pegged at 1% of sales and 20% of profit. Boom! indeed.
Says Deutsche Bank analyst Brian Modoff:
The disparity will become even starker this year when the two will take 5% of the market in unit terms but 58% of total operating profits.
While feature phone maker Nokia can compete due to vast economies of scale, their profits have been declining, as have Sony Ericsson. Palm’s Pre is seen as something of a wildcard, depending on developer support and distribution reach.
For their part, Apple is set to announce Q3 results tomorrow, July 21, at 5pm ET. TiPb will provide our usual coverage of the conference call, especially as results pertain to the iPhone.
