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

Apple 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, 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 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 and BlackBerry 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 and Motorola moved more than 100,000 Droid phones this weekend.

It’s especially worth noting the comment made by Motorola’s 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.

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