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Apple Snags 48% of Mobile Profit Pie

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Apple (s aapl) raked in 48 percent of the worldwide mobile market’s earnings before interest and taxes in the second quarter of 2010, mocking the relevance of market share figures, where it’s still a relatively small player. The Cupertino-based company achieved this feat with roughly 3 percent of the overall mobile sales in the quarter, further emphasizing its traditional approach of profitability over units sold. Asymco, an industry analysis organization that collated the data from over 500 data points, believes this disruptive profit shift in the industry is mainly because of a lack of viable response from the incumbent handset makers three years ago.

While the mobile market is growing, particularly in the smartphone sector, the overall effect since Apple’s 2007 iPhone introduction is a redistribution of wealth. Overall handset sales in the second quarter of 2007 accounted for $28 billion, says Asymco, while sales in the same quarter of this year were only up 12 percent to $32 billion. But far more of those recent sales dollars went into Apple’s coffers at the expense of Nokia (s nok), Motorola (s mot), LG and others. Such revenue erosion can’t continue in the long-term for a company to remain a key player in the industry.

Source: Asymco

The situation appears challenging for those that sell lower-end devices with small profit margins. Nokia being the seller of the most handsets overall is an excellent example, as the bulk of its devices don’t bring large amounts of profits relative to the number of sales. To illustrate, Apple enjoys six times the revenue when compared to the average Nokia device due to the average selling price: $600 for an Apple handsets vs. a sub-$100 average selling price for  Nokia devices. But the big picture isn’t just Apple taking on Nokia. Handset makers embracing Google Android (s goog) are earning money, while Research In Motion (s rimm) is also faltering. Without additional disruptions from those on the downslope within the next few years, the entire mobile market could look vastly different from that of 2007.

Even as it still takes in a large share of industry profits, RIM is attempting to fight off declining market share with a new operating system and flagship device, but it doesn’t look like enough of a disruption. My hands-on with the BlackBerry Torch shows an underpowered handset that tries to bring some appealing new features — such as a touch screen, WebKit browser and social networking integration — without getting away from the core competency of a traditional BlackBerry. Early sales estimates of 150,000 devices along with online half-priced deals less than a week after the Torch’s debut indicate that RIM needs further disruption to maintain the same level of relevance it has enjoyed for several years. It’s a war on two fronts, however.

As RIM has attempted to add consumer features to a highly capable enterprise device, Apple and Google have methodically added enterprise features to popular consumer devices. Support for Microsoft Exchange (s msft), remote data wipes, and improved security features have found their way into the iOS and Android platforms, giving enterprise customers an alternative to the traditional BlackBerry workhorses. Instead of a top-down feature approach, the current profit-makers have taken a bottom-up focus by building upon a stellar base experience.

Is there time for a Nokia, RIM or even a Microsoft to jump-start profits in light of the current Apple and Google movement? Of course there is, but the window of opportunity closes more each day with every high-profit device that doesn’t enjoy a large number of sales. Put another way: The number of at-bats in this ball game are fast decreasing.

Perhaps it’s even worse for those without their own platform;  Asymco postulates that Android isn’t more than a temporary designated hitter due to licensing the operating system to any hardware maker that wants to use it. Short of spending time, effort and money on ways to differentiate various Android handsets, those that use it may find no inclination to develop a better platform and ecosystem. Even worse: They’re more likely to attempt and fail against the incumbents, pending more disruptive technology. Against such odds, which company will step to the plate and swing for a bigger piece of the profit pie?

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15 Responses to “Apple Snags 48% of Mobile Profit Pie”

  1. Narayanan

    @Kevin, I see that you have neatly twisted Asymco’s conclusions about how, apart from the massive Apple slice, only RIM and Nokia with their self contained systems are making some profits.

    Obviously the loss makers are targeting Android as a last ray of hope, for some immediate relief. But this is unsustainable in the long run being a race to the bottom.

  2. Interesting analysis if a bit flawed. Nokia don’t have any high end handsets to speak of at the moment so that has a massive impact on profit and is why their shares have been hammered.

    On the other hand they do have about 40% of the smartphone market and will be releasing more competitive handsets in Q4 which will inevitably boost profit share.

    This, of course, will eat into Apple’s share – every N8 or E7 sold is a sales opportunity lost for Apple – although I’m not sure that it’ll prevent them from retaining the title of most profitable. That said, Apple’s market share has peaked (there’ll be a spike next quarter, perhaps to 18%, then it’ll settle down to abour 14% after that).

    • “Apple’s market share has peaked”

      Based on what? As Apple expands it’s carrier portfolio (including Verizon in the US) and opens up new territories it’s market share will go up.

      Also, new hit products like the iPad have a halo effect onto its older products. And where Apple is concerned, the hits keep coming.

    • Mark your analysis is the most stupid one I have ever read. Your lack of analytical skills is truly suprising specially after seeing data for the iPhone 4 run rate. With all the press regarding the attenna issue Apple is still selling out on the phone with a 3 week waiting period. Their sales for the next quarter are going to be off the charts. I don’t know where you are getting your information regarding Nokia but their own CEO has announced that they are on trouble and have had failures with their new OS used on the N900 and the aging symbian is no match for iPhone OS. I think you shoul find another job and leave the analytics to someone else

  3. jbelkin

    No surprise. Simpleton analysis is focused on market share but the smartphone market is NOT the emerging PC market in the late 1980’s where the AVG selling price meant PROFITS for EVERYONE and more important – market share meant profits, here, market share is important to build an app market BUT beyond that, ONLY Apple does NOT have to discount its offerings over the ENTIRE LIFE of that offering – EVERY other smartphone maker has to offer the full range of price points because other tahn a month at full price, it cannot compete with the iPhone and drops quickly into the BOGO bucket or in the case of Nokia, have to start life at the $49 price point. Because ONLY Apple has an OS that is unchanging, users are not only loyal but willing to invest in apps knowing that app can used across the board (itouch, ipad, another iphone and perhaps even iTV?) … while Android, RIM, WIN and Nokia OS change from device to device.

    Apple will continue to own and grow the PROFIT MARKET SHARE to 70% – leaving the others to fight over the remaining 30% and Apple will be #1 of smartphones over $150 (with subsidies) holding taht 70% market share.

    RIM will still hold a slim lead in enterprise but iPhone will be a close second.

    The under $100 smartphone will be the big market share fight between Nokia, Android, WIn and maybe Palm – Apple will not really care about this market until the cream of the smartphone market is tapped out (another 500 million iphones later?) …

    So, here, Android will talk up market share but as the chart notes, no profit.

    Just think of it like this – Android is tap water, Apple is bottled water, both are drinking water related but which is the MARKET?