Apple Estimated to Account for 20% of Cellphone Industry Profit

[Evangelion]

That is hard to believe. Still haven't accounted for Samsung, Sony Ericsson, HTC, and LG.

They are accounted for in the original article.... See the attached picture.

You mean to tell me they *ALL* ran losses?

No. Whatever gave you that idea?

That they all were giving away cellphones at below cost of manufacturing prices?

Most of them had modest profits, while Motorola made substantial losses.

How did the analyst get the profit margin for the company's specific cellphone business?

Um, I believe just about every company report their results split according to different divisions. Nokia does, Apple does, and I bet that Samsung, Motorola and others do as well.

If those companies may zero (or negative profit ... gave away phones)

What exactly makes you think that operating at a loss means that they are "giving away" phones?

Negative profits..... what is that suppose to be???????

I believe the more common word for it is "losses".... You know, like "negative growth" and such.

I thought that the article was quite obvious in it's meaning, but apparently some people are confused by it....

 

[surferfromuk]

So I guess this means 02 are getting another 20% cos they mark up the iphone even more than Apple do!

 

[vipergts2207]

MR did a very bad job on this article. Upon reading the actual WSJ article you will find that Apple and RIM combined made 35% of the profit not 38%. You're better than this MR.

Edit- This has apparently just been changed on the front page a least. An edit will probably follow soon in the thread.

 

[cloud]

MR did a very bad job on this article. Upon reading the actual WSJ article you will find that Apple and RIM combined made 35% of the profit not 38%. You're better than this MR.

Edit- This has apparently just been changed on the front page a least. An edit will probably follow soon in the thread.

Get a grip. Are you this picky in bed? Seriously, was there a true need to nitpick like that? The internet brings out the worst in people sometimes. Also, you should have said "at least", not "a least". See, we can all be forum nazis.

Anyway, it'll be great if Apple adds more carriers next year...and also have an "iPhone nano".

 

[vipergts2207]

Get a grip. Are you this picky in bed? Seriously, was there a true need to nitpick like that? The internet brings out the worst in people sometimes. Also, you should have said "at least", not "a least". See, we can all be forum nazis.

Anyway, it'll be great if Apple adds more carriers next year...and also have an "iPhone nano".

Well if you read the thread you can see there is some confusion about the numbers in the article. Changing one of them doesn't help matters. It might be less important of a nitpick if the news article wasn't entirely about the numbers in the first place. And no duh it should say "at least." I guess I didn't press my T key hard enough. As you have proven, at least there is context with my typo and the real meaning is discernible. Not possible with a number now is it? I'm also not paid to post here. Nor was I being a forum nazi, more like a news nazi. Guess we differ in that I like my news to be true and factual. I could add something witty about Fox news here. But I won't.

 

[Fluffy Bunny]

No wonder AT&T has to nickel and dime their customers, Apple is sucking up most of the profit.

AT&T probably makes $15 (20%) margin each month on the iphone base plan ($75) and $20 on mid-priced plan. That's $360-$480 profit over 2 years to cover a $400 subsidy. And people wonder why AT&T doesn't lower rates or wants to charge for tethering. Not to mention the cost of constantly upgrading a nationwide network and maintaining it.

But we still deserve it for free. I guess I'll wait until the government takes over cellular service like they are everything else....with our tax dollars, but it still seems free, right?

 

[LagunaSol]

No wonder AT&T has to nickel and dime their customers, Apple is sucking up most of the profit.

AT&T (and Verizon) were nickel and diming their customers long before Apple entered the scene...

 

[vipergts2207]

No wonder AT&T has to nickel and dime their customers, Apple is sucking up most of the profit.

AT&T probably makes $15 (20%) margin each month on the iphone base plan ($75) and $20 on mid-priced plan. That's $360-$480 profit over 2 years to cover a $400 subsidy. And people wonder why AT&T doesn't lower rates or wants to charge for tethering. Not to mention the cost of constantly upgrading a nationwide network and maintaining it.

But we still deserve it for free. I guess I'll wait until the government takes over cellular service like they are everything else....with our tax dollars, but it still seems free, right?

Quit pulling numbers from out of no where. $15 a month? Lets use some more concrete numbers. $75 a month for an iPhone user. (This assumes no text plan which is almost pure profit for ATT because data is data, whether it's in the form of a text or a website.) $75 a month over 2 years is $1800. Minus the $400 from Apple and ATT makes $1400 over two years minus operating and expansion costs whatever those may be (I'm not even going to guess because I and probably no one else on here knows what those costs are). There have been over 21 million iPhones sold. Lets be very conservative and say only 15 million will fulfill a two year contract. ATT stands to make a minimum of $21 billion minus operating and expansion costs from those iPhone owners. That's only iPhone users, not to mention, the other smart phone users that use the same exact 3G network. Also not to mention the other 62 million non-iPhone users ATT is making profit from.

Now if you want 100% real concrete numbers, ATT (as a company as a whole, i.e. wireless, landline, television service, etc.) had a profit of almost $10.5 billion in 2008. Yes, poor ATT.

Apple on the other hand at $600 multiplied by all 21 million iPhones sold made only $12.6 billion minus costs of parts and labor for the iPhone. Once again for a 100% concrete number, Apple had a profit of only $4.8 billion in 2008. So who's making more off the iPhone again?

Disclaimer: I'm not one of the iPhone users that complain that my iPhone is too expensive. I knew what I would be paying when I signed my contract. Sure it would be nice if it was cheaper, but I'm not complaining about it. I just though Fluffy Bunny was making ATT out to be a charity case.

 

[omahajim]

removed

 

[SandynJosh]

I strongly disagree about AT&T being on the forefront of the digital data wave.

I can't imagine you saying that after comparatively experiencing how AT&T performs in one of the nation's largest data markets. You must treat yourself to the pleasure of using an iPhone in midtown Manhattan

Actually "no" on both guesses. AT&T, like all of the other carriers, have markets that they stink in as well as markets that they shine in. I doubt there is a cellular market where all carriers are equally well represented at high-speed data capacity.

I happen to live in a market where Verizon is the strong carrier, so I do not use an iPhone. Were Verizon to have invested in newer equipment to handle the data rates and capacity of a smart phone such as the iPhone, I'd be champing at the bit for them to soon handle Apple's phone. But with their current older equipment, the iPhone would be a terrible experience here. It may not be until 2011 or so before this area will have equipment in place for any carrier to handle the data load a concentration of iPhones will impose on the system.

From your comment "after comparatively experiencing AT&T" I can see that you too live in a market where AT&T is not the strong carrier, so I too would feel as you do if I took a micro-slice of the country and extrapolated it into a world view.

It may be a year or more before Verizon and AT&T will have ramped up their various systems where one can actually make such comparative statements in some markets.

I suspect it is very telling that Verizon recently came out defending AT&T's right to have an exclusive on the iPhone. Were the U.S. government today to demand that iPhones be available to all carriers, it would be a serious embarrassment to many of them because everyone could see how badly the others suck at high-speed data capacity at the moment. In another year or two it may be a totally different tune that will be sung... depending on how much money AT&T continues to pour into upgrading their system in capacity and technology to maintain their general advantage.

 

[kdarling]

I happen to live in a market where Verizon is the strong carrier, so I do not use an iPhone. Were Verizon to have invested in newer equipment to handle the data rates and capacity of a smart phone such as the iPhone, I'd be champing at the bit for them to soon handle Apple's phone. But with their current older equipment, the iPhone would be a terrible experience here.

Where do you live that you think you have "old" equipment? Really, no EVDO? As for capacity, many Verizon cells have 5-15 (or more) times the data capacity of other carriers, due to upgrading their backhaul (often via their FiOS network).

I suspect it is very telling that Verizon recently came out defending AT&T's right to have an exclusive on the iPhone. Were the U.S. government today to demand that iPhones be available to all carriers, it would be a serious embarrassment to many of them ...

Mild disagreement. I suspect that Verizon is far more concerned about keeping future exclusives to themselves.

 

[samab]

I suspect it is very telling that Verizon recently came out defending AT&T's right to have an exclusive on the iPhone. Were the U.S. government today to demand that iPhones be available to all carriers, it would be a serious embarrassment to many of them because everyone could see how badly the others suck at high-speed data capacity at the moment. In another year or two it may be a totally different tune that will be sung... depending on how much money AT&T continues to pour into upgrading their system in capacity and technology to maintain their general advantage.

For all the talk about how much AT&T sucked with the iphone --- they still rank the third fastest in the whole world according to the wired.com survey.

Nobody spends more money on capex than Verizon --- because Verizon is willing to spend money when they want to ($22 billion on FIOS vs. $6 billion for AT&T's fiber network) and because Verizon spends less money on handset subsidies. Wireless companies will always be compared on who suck the least --- and Verizon will continue to suck the least because they spend more money on infrastructure.

 

[marksman]

Although I can never see smartphones replacing laptops, I still wonder about how much they are going to erode the future profitability of making laptops or netbooks. If smartphones features keep on improving at the present rate, will they become the next personal computer? Remember, the average customer only use their computers for internet surfing, minor word processing, iTunes, and Facebook. This is evident in the popularity of netbooks.

Until such day as there is a display that allows some sort of projection to see larger images, that the small portable devices will not ursurp the need for bigger devices.

Some day we will likely just have very small computers with some way to proect/view content on a larger scale. Until that happens though, people will still need/want netbooks and laptops.

I love my iphone and use it constantly, but I also use my asus 1000he all the time, and my macbook pro all the time.

 

[marksman]

The smartphone segment is one that was not appealing to the majority of cellphone users. They just did not see a need to get one, especially given the horrible experiences with phones must people have had.

Everything below smartphones has essentially become a commodity. Most people don't care or know how or what their phone is or what it does. It has some stuff that likely was on the box that they could never get to work, and it either has a decent battery life and gets a decent signal or it doesn't. When an industry ends up being a commodity profits are razor thin.

The rest of the cellphone industry should be kissing Apple's feet and praising them for bridging the gap between the much less profitable commodity phone business and the much more profitable higher end phone business that allows for significantly higher profits per unit.

Apple did not invent the smartphone category. They just made it so a lot more people actually would want a smartphone.

Does anyone think the Palm Pre would have been met with any fanfaire at all if it came out absent the iPhone ever existing? Not to knock the phone or take anything away from it, but it would have sold as a very niche high-end smartphone that only a relatively small percentage of people would ever consider buying.

Apple has essentially opened people's eyes to these devices and paying for them, which has paved the road for everyone.

 

[miniConvert]

Apple's achievement here is incredible.

I do worry a little that they're sucking a lot of the profit out of the industry and yet aren't providing a lower-margin line themselves. By that I mean, for example, Nokia historically has produced a LOT of very low-margin, low cost handsets, almost subsidising them with its all-singing-all-dancing multimedia and 'status' phones. Apple (and RIM) are taking a big bite into this end of the market. That might mean prices have to rise at the other end.

However, that may allow players like SE and Moto to get back into the game. Nokia's relentless handset releases and low prices probably have a lot to do with them being pushed so far to the brink.

But yes, incredible for Apple and RIM, I think Apple with their single handset have made an astounding impact on the industry and this data illustrates that very clearly. It's a high-risk strategy, though, as always with Apple - one 'bad' phone for Nokia makes very little difference to them, where as one 'bad' phone for Apple would set them back to square one and do extensive damage to their reputation. But, then, Apple pour so much more into every one of their products than other manufacturers do, so that itself negates some of the risk.

Exciting days

 

[marksman]

No wonder AT&T has to nickel and dime their customers, Apple is sucking up most of the profit.

AT&T probably makes $15 (20%) margin each month on the iphone base plan ($75) and $20 on mid-priced plan. That's $360-$480 profit over 2 years to cover a $400 subsidy. And people wonder why AT&T doesn't lower rates or wants to charge for tethering. Not to mention the cost of constantly upgrading a nationwide network and maintaining it.

But we still deserve it for free. I guess I'll wait until the government takes over cellular service like they are everything else....with our tax dollars, but it still seems free, right?

What are you basing your margin numbers for AT&T on? I suspect their gross margins are much higher than that.

It is highly unlikely their gross margin on iphone service is only $15.00 a month.

While some industries certainly have 20% margins, these numbers vary wildly from industry to industry. The grocery business, for example, has traditionally had razor thin margins that might be as low as 5% or 6% overall, but might be as high as 50% or 60% on some classes of merchandise, leading to profitability of 1% being deemed extremely successful.

Other business might have gross margins of 80% and profits that are %35.

If you actually have a reason for assuming that AT&Ts margins on their cell service is only 20% I would love to know what it is... My experience and background make me think it is a good bit higher than that.. but if you have something to prove otherwise, I am all eyes.

 

[firewood]

$75 a month over 2 years is $1800.
...
Now if you want 100% real concrete numbers, ATT (as a company as a whole, i.e. wireless, landline, television service, etc.) had a profit of almost $10.5 billion in 2008.

The current numbers for ATT on Yahoo look to be in the neighborhood of 124BN in revenue and 12.5BN in net income, or proportionately around 10% of that $1800 revenue falls to the bottom line as income, less than half their iPhone subsidy.

 

[twoodcc]

wow. nice apple. i wonder if app store sales go into this figure?