Apple's Share of Cellphone Industry Profit Estimated at 32% for First Half of 2009

[ddTaylor]

I'd say that, given the crazy sales numbers, it's not backfiring.

Not at this moment but as anyone who sells a premium product will find - it is a tough sell when the margins are THAT high for prolonged periods - ask Runco and Pioneer Elite plasma TV's, simply the BEST video products EVER MADE - both not being made any longer but for Runco in VERY SMALL quantities (I think that is a fair comparison as both were HUGE sellers at 3X the price of other plasma TV's until they saturated the market and now no one wants one or can afford one - luckily I have one!). To those that think the iPhone at $800 unsubsidized it realistic versus a 32GB iPod Touch you are HIGH! The margins are HIGHER in the iPhone than the iPod! CHECK! Silly! Apple must be charging ATT $500 a phone or more to make those margins!

D

 

[nkawtg72]

Its not always about Market share.

thanks for confirming what us apple fanboys have been saying for years in response to all the hardline pc fanboys saying apple doesn't have the market share needed to be sustainable. or they dont have the market share needed for their products to be looked at seriously.

now that they're treading on dangerous ground and have all but been issued that official decoder ring of a recognized monopoly, all of a sudden market share isn't always what it's about?!

nice one

 

[LagunaSol]

Not at this moment but as anyone who sells a premium product will find - it is a tough sell when the margins are THAT high for prolonged periods

So I assume Microsoft Office sells around the $20 dollar range, seeing how it sells bajillions of copies and ships on a 10 cent CD, right?

 

[mags631]

Its not always about Market share. Influence can be a scary thing. Ask Google.

Let's make it even more difficult to test objectively for a monopoly.

 

[nkawtg72]

So I assume Microsoft Office sells around the $20 dollar range, seeing how it sells bajillions of copies and ships on a 10 cent CD, right?

you may as well give up. they'll never get it. i'm with you though.

what many fail to realize, is that i for one am not suggesting that apple WILL be able to sustain those kinds of margins forever. and when that time comes, because of the high margins they have now, they'll have plenty of leg room to move, and lower their margins to newer sustainable levels.

and dont forget, it'll probably be a climate change in the industry and as such everyone's margins will go down from where they are now, which will still leave apple comfortably on top.

high margins are not inherently a sin, nor a crime.

 

[Eidorian]

you may as well give up. they'll never get it. i'm with you though.

what many fail to realize, is that i for one am not suggesting that apple WILL be able to sustain those kinds of margins forever. and when that time comes, because of the high margins they have now, they'll have plenty of leg room to move, and lower their margins to newer sustainable levels.

and dont forget, it'll probably be a climate change in the industry and as such everyone's margins will go down from where they are now, which will still leave apple comfortably on top.

high margins are not inherently a sin, nor a crime.

Is this another early adopter gets screwed over situtaion again? It seems to apply a lot with Apple. So I'm told.

 

[DaBrain]

Interesting questions from

Law PDF/Tests for a Monopoly

Performance
_______________________

• How does the firm's actual performance
deviate from the competitive norm?

– How much does price depart from marginal
cost?

– How much does its profit margin exceed that of
a comparable competitive industry?​

Three strikes, Apple !

Aiden, Im just curious as to Why are you so negative man? You seem to hate Apple and it's products so why do you waste your time posting Apple Hate posts ALL the time?
IM really curious.

Inquiring minds wanna know--)))

 

[cnorth3]

Its not always about Market share. Influence can be a scary thing. Ask Google.

Fail. "Influence" without market share does not fall within the legal definition of monolopy. Apple's market presense has consistantly added to the competetive landscape, not subtracted from it. That's what antitrust law is meant to encourage, not discourage.

 

[autrefois]

I'm still waiting for the announcement on Dell's Cash For Clunkers program, where you can turn in crappy Dells with Windows Vista for big rebates on crappy Dells with Windows 7.

Maybe Apple should use some of the extra profits from the iPhone to do this for all the not-crappy PowerPC computers that will be unable to upgrade to Snow Leopard.

i'm glad to see that there appears to be more people in this thread, than have appeared in others, that understand the differences and delicate balances between market share, revenues, profits, and margins.

Where's the "delicate balance"? This is what people don't seem to be understanding. Are you saying the only two options are losing money and making obscene profits? Where is the delicate balance in fleecing customers?

It's harder to see with the iPhone because the consumer is not paying directly for it in most cases. If your plan is subsidized by AT&T, then AT&T is paying for the lion's share of your phone upfront. As we know, AT&T is not a non-profit organization, so the cost is then passed on to us.

LOL. I'm sure these are the same people that gripe when their jobs are outsourced to offshore companies..

Apple doesn't need to outsource, because they already have their iPhones (and many other products) made in China. Maybe if more of Apple's money actually went into the American economy for job creation, you could make this argument.

I'm not anti-Apple. I have 3 Macs in my household, watch every keynote, and praise Apple when I think they deserve it. But it sickens me to see people giddy that a company is making these kind of profits off of people. There's healthy profit (which allows for R&D, salaries, etc.) and then there's simply taking advantage of people by overcharging for products. If you're a shareholder, or a top Apple exec, then you're very fortunate. If not, then maybe you should look at the bigger picture instead of just cheering because our favorite company is getting richer.

 

[LagunaSol]

what many fail to realize, is that i for one am not suggesting that apple WILL be able to sustain those kinds of margins forever. and when that time comes, because of the high margins they have now, they'll have plenty of leg room to move, and lower their margins to newer sustainable levels.

Or simply discontinue current products and release new, improved products to keep the price point (and margin) stable.

This has been Apple's business practice for years.

For example, Microsoft will release its iPod touch wannabe, the Zune HD, in a couple of months. Rather than do the "typical" thing and slash iPod touch prices to undercut the Zune (which Apple could easily do, thanks to their economy of scale), Apple will likely release a new iPod touch that leaves the Zune in the dust again (Apple did exactly this with the original iPod touch after the 2nd gen Zune was announced, I believe).

There's no reason to cut profit margins as long as you have a product that creates enough demand to sustain them. Again, refer to the Microsoft Office example.

 

[cnorth3]

Is this another early adopter gets screwed over situtaion again? It seems to apply a lot with Apple. So I'm told.

Moor's Law pretty much guarantees that prices will drop over time. Moreover, early adopters pay a premium for being first. These truths apply to all OEMs, not just to Apple. So you have a choice: pay more sooner or less later (or just plain don't buy it at all). In what way is that being "screwed"?

 

[nkawtg72]

Are you saying the only two options are losing money and making obscene profits? Where is the delicate balance in fleecing customers?

it's using terms like "obscene profits" that alerts me to the fact that we'll never agree. the words "obscene" and "profits", when used together like that are for all practical purposes NOT in my vocabulary.

business exists to make money. period. sustainability can only occur when a business is profitable. can you educate me, and define the EXACT dollar figure at which point a "profit" transitions from normal to obscene?

so to answer your question, no, that's not what i'm saying. there are in fact 3 options:
-lose money
-break even
-make money

and option 4 for some of the people of this thread
-wish you had someone else's money, and because you don't, complain about it

 

[nkawtg72]

Or simply discontinue current products and release new, improved products to keep the price point (and margin) stable.

This has been Apple's business practice for years.

For example, Microsoft will release its iPod touch wannabe, the Zune HD, in a couple of months. Rather than do the "typical" thing and slash iPod touch prices to undercut the Zune (which Apple could easily do, thanks to their economy of scale), Apple will likely release a new iPod touch that leaves the Zune in the dust again (Apple did exactly this with the original iPod touch after the 2nd gen Zune was announced, I believe).

There's no reason to cut profit margins as long as you have a product that creates enough demand to sustain them. Again, refer to the Microsoft Office example.

exactly

 

[DaBrain]

Did anyone force a gun to peoples head forcing them to buy the iPhone? I think not! I choose not to buy, to me it's just a damn phone. But, people made their own choices and knew the costs, so I would say the market place worked just fine! Your argument that Apple is fleecing people is therefor FLAWED! Again, no one forced anyone to buy it!

 

[nkawtg72]

Did anyone force a gun to peoples head forcing them to buy the iPhone? I think not! I choose not to buy, to me it's just a damn phone. But, people made their own choices and knew the costs, so I would say the market place worked just fine! Your argument that Apple is fleecing people is therefor FLAWED! Again, no one forced anyone to buy it!

unfortunately i've tried that come back in threads before, and people these days just don't seem to know what personal choice and responsibility is all about anymore. oh well

 

[deconstruct60]

All Things Digital reports on research from analyst Toni Sacconaghi of Bernstein Research that shows Apple holding 32% of the cellphone handset industry's operating profits for the first half of 2009.

That 32% number is skewed statistics. It is the 25%. By making the "total profits" smaller by subtracting out the losses by Motorola and Sony Ericsson you give bonus "boost" percentage points to the the vendors who didn't post losses. If your expenses exceed you revenues that is a loss; not a profit. Motoroloa and S-E contributed 0 to the "industry profits". How one companies losses boost the weighting for another company's profits is rather baffling (the profitable companies are measured from 0 not starting from the negative number those two losses amount to). The money after expenses that is in the "bank" after the bills are settle are the profits. Otherwise you are counting the money not paid for by the phones, but that giving to the suppliers (in a voodoo fashion). That loss difference is paid to their suppliers; not to their competitors (usually).

The other part to look more closely at in these numbers is the assumed profit margin. RIMM mostly has smartphones also. However, their margin is 20% less than Apple's? Sure they have more models , but 10% of their revenues. That is a HUGE difference in overhead. To put in perspecttive that is a similar percentage to what Apple devotes to R&D. And Apple's "General and Admin" costs are larger percentage of their total revenues than R&D.


Finally, Apple didn't really have a line up of phones. With the 3G staying on the market well see if that amounts to 40% going forward.

In short, if you spot Apple 12+% better margins that anyone else in your analysis they will look like winners compared to everyone else. Surprised?

 

[MacFly123]

At least not now.
Problem is their market share is very small in regards of unit sales. They don't have a user base large enough to keep it up if something goes wrong that's how I see it.
So it is working ok just now but like I wrote I wonder if it will backfire on day.

Seems they don't want to lower margins to fit the economy as they know hype is driving the product.
Money hungry... Wonder if it will backfire.

States what we all knew already. Apple stuff is way more expensive than everyone else's.

Does that mean we are over paying for the iPhone???

Exactly. I agree 100%. A product is only worth what people are willing to pay for it......and people are paying for it. People have this idea that companies "owe" them. A company makes a product to make money from it. That's the whole point of a company. When a company has high profit margins, their employees benefit.....(no job cuts, pay raises, etc.) which is GOOD for the economy. Why demonize a company because it's being successful? If anything, other companies should be following Apple's example. High quality means a higher price, and people WILL pay the price for high quality.

Seems they don't need to lower margins as they've created a product that people want to buy.

Profitability. They're doing exactly what they should be.

There, I fixed your comment for you.



+1. I love the iPhone and can appreciate the benefits a closed system like this can offer, but am growing increasingly concerned about Apple's hamfisted App Store control as well as their poisonous partnership with AT&T.



I know, huh. I mean, I can get an 8 GB Palm Pre with a smaller screen for the same price as a 16 GB iPhone 3 GS with a bigger screen.

Oh, wait...

Seriously people! You can get an iPhone for $99.00 lol. How much cheaper do you expect them to be? They are cheaper than iPods for crying out loud. The iPhone is like a little computer with all it can do and replaces like 5 different devices that cost hundreds more and you think it should be free or something? Any other smart phone which is not even near as good is as much or more. People amaze me!

 

[SandynJosh]

info like this is a double-edged sword for apple. their shareholders love to see such an absurd markup, but any customer who sees this and gives it two seconds thought will realize that it means they are paying WAY too much for the "privilege" of using Apple's hardware. It makes me thing of Apple more like Bose. That's not a good thing, by the way.

First off, only in the electronic commodity market are products sold at tight margins. Most everything you buy has 30 to 50% gross margins. This is why Apple entered the smart phone segment of the market where they can have better margins like RIM. (see chart)

When it becomes plausible to use OS X very easily on non-apple hardware, their sales will begin to fall.

Plausible? PLAUSIBLE?? It's already plausible technically, it's just implausible as a business model.

The iphone hasn't had any strong competition yet, true, but it is only a matter of time. If they insist of 50% margin, they aren't going to stay on top forever. 50% margin can't maintain critical mass in an open economy.

First off, where in the hell did you come up with a 50% number?

Secondly, Apple and RIM own the smart phone market today. RIM was there first with their thinner margins. According to your logic, Apple shouldn't have been able to grab any of their market.

What Apple did was take the mind share and develop the market share from that. They did not "buy" the market share with low margins, which seems to be the only strategy you can imagine.

Apple has positioned themselves as a "prestige" product in customers minds, a lot like certain automobile and watch companies. Everything they do, from the design of their store fronts, to the packaging of their products speaks to that end.

But Apple products also appeal to consumers and are within their buying range. So, while I'd never buy a Rolex, I would buy an iPhone. And there's where the price quibbling comes into play.

Does Apple care that you moan that their hardware is too expensive? Or do they care that you love your Apple products way out of proportion to other brands you can afford? Value is all in the minds of the beholder. That you pay 300% to 500% markup for items in a jewelery store, is not a part of the equation when you walk into the store. It's the value in your mind.

 

[cnorth3]

business exists to make money. period. sustainability can only occur when a business is profitable. can you educate me, and define the EXACT dollar figure at which point a "profit" transitions from normal to obscene?

+1. By the logic of some of these posts, Motorola makes the best phones because they are selling at a 21% loss.

 

[Goona]

Maybe Apple should use some of the extra profits from the iPhone to do this for all the not-crappy PowerPC computers that will be unable to upgrade to Snow Leopard.



Where's the "delicate balance"? This is what people don't seem to be understanding. Are you saying the only two options are losing money and making obscene profits? Where is the delicate balance in fleecing customers?

It's harder to see with the iPhone because the consumer is not paying directly for it in most cases. If your plan is subsidized by AT&T, then AT&T is paying for the lion's share of your phone upfront. As we know, AT&T is not a non-profit organization, so the cost is then passed on to us.



Apple doesn't need to outsource, because they already have their iPhones (and many other products) made in China. Maybe if more of Apple's money actually went into the American economy for job creation, you could make this argument.

I'm not anti-Apple. I have 3 Macs in my household, watch every keynote, and praise Apple when I think they deserve it. But it sickens me to see people giddy that a company is making these kind of profits off of people. There's healthy profit (which allows for R&D, salaries, etc.) and then there's simply taking advantage of people by overcharging for products. If you're a shareholder, or a top Apple exec, then you're very fortunate. If not, then maybe you should look at the bigger picture instead of just cheering because our favorite company is getting richer.

Who are you to determine which level of profits is healthy. Companies in it to make as much money as possible. I would say most people can live on 60 000 a year, why do they go out to seek a make more money. Why aren't they content with getting whatever they have, this world is about money. If Apple or any company has the opportunity to make money, what is wrong with that. Apple is a multinational company, they employ enough people in America, or should all their jobs be in America. There is nothing wrong with them having workers outside the country or outsourcing to other companies outside of America.

 

[Evangelion]

Its not always about Market share. Influence can be a scary thing. Ask Google.

Google is by far the dominant player in it's core business. That said, what "influence" are you talking about here? Well, sure, Apple attracts a lot of copycats because they were the first one to make a phone that actually works well.

 

[deconstruct60]

No, it doesn't. Looking at the sales-figures of the iPhone, people are more than willing to pay the asked price. And it seems that iPhone has superior customer-satisfaction, so you can't really say that we are paying "too much".

In the markets where phones are paid for incrementally the cost of the iPhone is partially hidden from the consumer. Apple's volume kept growing in part because Apple keeps lowering the barrier costs. To say that folks would pay at full price. LOL. No way. If many folks had to explicitly confront what they are paying for the phone many would not buy it.

Hide the cost in an installment plan and many folks will not think about how much the phone actually costs.

 

[Goona]

+1. By the logic of some of these posts, Motorola makes the best phones because they are selling at a 21% loss.

I'm just astonished by some of the thinking in this thread.

 

[windywoo]

I can't believe people like you seem to be against capitalism. Let me guess, you either work in academia or the public sector. Am I right? People in the real world with real jobs actually like to see their employers doing well especially if those companies offer bonuses for a good quarter.

And how is that an argument for capitalism? When your company does badly don't you start to worry about your job and your perks? Let me guess, you didn't lose your job in this recession? Therefore, because your ass is safe, capitalism is still a good thing.

And **** sake take a good long look at what you say when you think a business is there to make money.

 

[Goona]

In the markets where phones are paid for incrementally the cost of the iPhone is partially hidden from the consumer. Apple's volume kept growing in part because Apple keeps lowering the barrier costs. To say that folks would pay at full price. LOL. No way. If many folks had to explicitly confront what they are paying for the phone many would not buy it.

Hide the cost in an installment plan and many folks will not think about how much the phone actually costs.

I think most people are smart enough when presented with a contract stating they have to pay 80 dollars a month or whatever they have to pay. Nobody is forcing them to signing anything.