Blog Post

Apple Shoots Past Nokia As World's Most Profitable Handset Vendor

Apple (s aapl) became the world’s most profitable handset vendor in the third quarter of this year, reports Strategy Analytics. “We estimate Apple’s operating profit for its iPhone handset division stood at $1.6 billion in the third quarter of 2009,” wrote analyst Alex Spektor. That means Apple overtook Nokia (s nok), whose operating profit came in at just $1.1 billion. As Spektor noted, “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.”

Well I don’t know if Apple can accurately be described as a “PC vendor,” but I do know that it’s seen unprecedented success with its App Store, that Nokia’s share of the smartphone market continues to slide, and that, going forward, Google’s (s goog) Android may represent the real competition for Apple.

The iPhone’s success has everything to do with the huge and healthy ecosystem of great applications available for it. Strategy Analytics’ estimates only highlight how many ways Nokia, by comparison, has dropped the ball. For example, the company announced plans to focus on a new, open-source version of the Symbian operating system more than a year ago.

Fast-forward to today, and the Symbian Foundation has only recently open sourced the operating system’s microkernel. Meanwhile, Nokia reported terrible financial results for its latest quarter, capped by a 31 percent decline in North American sales. If the Finnish handset maker had a more fleet-footed, organized operating system and application strategy, it might have avoided having its lunch eaten by Apple.

Both the Windows Mobile (s msft) and BlackBerry (s rimm) line of devices are being forced to confront the power of Android, and the  open source operating system is likely to provide some significant competition for the iPhone as well. As Stacey pointed out this morning, Verizon (s vz) and Motorola moved more than 100,000 Droid phones this weekend.

It’s especially worth noting the comment made by Motorola’s (s mot) Sanjay Jha analyst Mark McKechnie with Broadpoint AmTech, quoted in Stacey’s post, who said: “We estimate each Android unit contributes 4x the gross profit of a feature phone unit and that 10 million Android units will contribute nearly half of the gross profits in MOT’s handset division.” Indeed, from a profitability standpoint, Apple and the Android-based handset players are becoming the ones to watch.

22 Responses to “Apple Shoots Past Nokia As World's Most Profitable Handset Vendor”

  1. You are completely ignoring the new Nokia operating system, Maemo 5: linux based, strongly connected with the Linux community, it will be shipped in the next days on the brand new N900.

    I think that Nokia, although suffering IPhone competition, has a lot more to say in this field. Maemo is the good way to do it, IMHO.

  2. Sebastian Rupley

    @Economyst–The Strategy Analytics numbers represent operating profit for the “iPhone handset division” for the third quarter, as quoted. You’re citing revenues from phones alone.


    • Nope. $4.5B in Revenues and actually, I pretty sure operating profit is closer to $2B. Apple spreads iphone revenue over 24 months, so the SEC filings are GAAP accounting. Apple discloses the amount iPhone handset revenue, it was more than $4.5B.

      Second, you are looking at the wrong quarter anyway. Apple’s Q3 ends in June, its Q4 ends in September, the most recent quarter.

  3. Now wait a minute. I’m not good at math or have an accounting degree so please please correct me. Apple’s net quarterly profit Q3 2009 for the whole company was $1.23 billion. Of that they are saying 1.6 billion came from iPhones? That leaves what, 0,12 billion for Macs, iPods, software, services etc.? Really? Or is the net quarterly profit something completely different?

  4. @Slipdisc–what I’m getting at is that the very healthy App Store makes the phone a huge attraction, just as applications have always been essential for hw platforms to succeed.
    @sfmitch — it is quite a lot to achieve in such a short time.


  5. Unbelievable, just totally unbelievable.

    Apple launches iPhone June 2007 on one carrier in one country. Two years later – Boom! – it is the most profitable handset vendor in the world.

    My brain hurts trying to put it into perspective.

  6. Good read but, I think the numbers seem a bit skewed as they appear.

    “Apple became the world’s most profitable handset vendor in Q3 2009”. And it comes from the massive amount of junk that’s currently available in the Apple app store? That is where the money comes from Sebastian.

    Its not the amount of phones they are selling because both RIM and Nokia’s shipments on smartphone sales far surpass any numbers that we have seen or heard from apple.