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Profit Share

Does it matter if Samsung is gaining on Apple in mobile profit share? Nope - here's why!

According to research by Cannacord Genuity analyst Michael Walkley, Apple still rakes in a whopping 57% of the profits in the mobile industry, while Samsung grabs the other 43%. Note that I said “mobile industry” not “smartphone industry”. In case you’re wondering why this adds up to 100% despite the presence of other players, it looks like the small profits from guys like BlackBerry and HTC are offset by losses from LG, Motorola, Nokia and others. The report also apparently goes into some detail on how Samsung should overtake Apple to be #1 in profitability. This is a red herring, and here's why...

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Making dollars and sense of Apple’s enormous share of mobile computing profits

For the last few years, industry pundits have been reporting on the surprising gap between Apple’s share of shipments compared to its share of profits. Investors care more about profits than market share.

On Monday of this week, John Paczkowski of AllThingsD wrote another one of these stories, quoting a report from analyst Tavis McCourt of Raymond James. Tavis is a sell-side analyst, and we’ve met many times at various trade shows and analyst events. I think he’s a smart guy, so I am happy to pay attention to stuff that he writes. And it does raise a really interesting question...

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73% of quarterly smartphone and tablet profits belonged to Apple

While Samsung shipped roughly double the amount of smartphones Apple did last quarter, market share still isn't translating into profit share, as Apple retains an absolutely massive 73% share of smartphone and tablet profits. And that was during a slow quarter where people started anticipating the next iPhone. John Paczkowski reports for All Things D:

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iOS devices combined -- including iPhone, iPad, and iPod touch -- may have outsold Android devices combined -- including Android phones and tablets -- by a narrow margin last quarter. During the Q1 2012 Apple conference call today, Tim Cook pegged the iOS device number at 62 million. Android numbers are harder to come by, but last month Andy Rubin said 700,000 were now being activated a day. Given the prior two months were likely less, the following month perhaps more, it probably works out to 60 or 61 million.

During the same call, Tim Cook also revealed that the Amazon Kindle Fire had no affect on iPad sales, far he can tell. Sprint ultimately paid dearly to get the iPhone on their network in order to remain competitive. Verizon announced their results today, and revealed that slightly more than half of their smartphone sales were iPhones.

Apple has long dominated their competitors in terms of smartphone profit share but recently Android was assumed to have a big lead in market share. I've long discounted that, saying it's irrelevant.

And nothing that was announced today changes that.

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Apple now owns 66% of mobile profits

Horace Dediu of Asymco has taken a look at the financial results of Apple, Nokia, Samsung, LG, Sony-Ericsson, Motorola, HTC, and RIM and put together a comparison of who is making profit and how much. Apple, perhaps not surprisingly, has gone from almost 0 in 2007 to 66% in the latest quarter, 2011.

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iPhone: Still not much market share, almost half of profit share

While Apple's iPhone still only accounts for about 4% of global phone market share they now rake in roughly 50% the profit share. Asymco has charts up for the top 8 mobile phone vendors broken down by market, sales and profit share and while Google's free Android OS has just crushed Nokia's Symbian in overall numbers I'd much rather have Apple's bank account. You?

[Asymco, Android Central]

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Smartphone market-share vs profit-share visualized

Interesting visualization of smartphone market-share vs profit-share and how it's changed from 2007 to 2010. Also interesting how survey results use terms like Android vs. iPhone while the actual business metrics always seem to break down by manufacturer (notice it's Apple, not iPhone or iOS above, and no Android is mentioned, though Moto, Sammy, et al are front and center).

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iPhone: 3% market share vs. 39% profit share

iPhone has tiny market shall, monumental profit share according to Canaccord Genuity and IDC, and pretty much everyone else who's ever mentioned it. TiPb's been pointing this out for a long time of course, but boy does the above graphic make it visually apparent just what the difference is.

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So which Android device out-sold iPhone?

Once again the internet is flooded with catchy headlines that Android outsold iPhone for the first half of 2010. And why not, that's a great headline. But it's also -- to quote the Simpsons -- unpossible.

Which Android device out sold iPhone? No, not the one with the GBs. Android is an OS, not a device. iPhone is a device, not an OS. Android is also not sold, it's given away by Google for free. Android devices are what's sold.

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Counting iPad, Apple is 3rd largest portable computer maker

With 3.3 million iPad sales last quarter, if that number is lumped in with MacBook and MacBook Pro laptop sales, Apple reportedly slingshots over Asus, Lenovo, Toshiba and Dell to claim the #3 spot in portable computer market share.

Which is okay for headlines and graphs, I guess. As longtime readers know, I've repeatedly said market share isn't anywhere near as important for Apple as profit share. With just 3% of the smartphone market they still make twice the profit Sony, Nokia, and RIM make combined. With single digit PC share they still make umpteen billions on higher end, higher margin Macs.

Sure an iPad can't do everything a Mac laptop or Windows or Linux laptop or netbook can do, but it can apparently do enough things well enough, and maybe a few things better enough, to be selling a million units a month with no sign of slowing down. It's not cannibalizing Mac sales to do it either. If it's cannibalizing netbooks and bargain laptops, already practically loss-leaders for Intel, Microsoft, and the manufacturers, while significantly boosting Apple's bottom line, then that's very interesting for the market.

Especially when Microsoft still seems intent on competing with tablets based on Intel chips running Windows 7 -- sometime in 2012. My guess is HP/Palm and BlackBerry maker RIM are more likely to try and emulate Apple's more mobile OS, higher margin strategy.

But back to the headline and graph: 1) should iPad be counted as portable computers alongside laptops and netbooks, and 2) what kind of market does that make where Apple is earning huge margins while everyone else is scraping by on razor-thin, race-to-the-bottom portable PCs?

[Fortune, graphs via Deutsche Bank's Chris Whitmore]

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