Apple: 2.8% of Mobile Handsets, 39% of Mobile Profits

| Apple Stock Watch

Apple sold a tiny percentage of mobile handsets during the first half of 2010, but the company managed to rake in the lion’s share of the industry’s profits, according to Canaccord Genuity analyst T. Michael Walkley. In a research note obtained by The Mac Observer initiating coverage of Apple, Mr. Walkley said that Apple sold 2.8% of all mobile handsets, but claimed 39% of manufacturing profits.

Apple sold some 17 million handsets during that time period. In comparison, the top three handset makers (Nokia, Samsung, and LG) combined sold some 400 million units, or 65.9% of all mobile handsets. Those same three manufactures laid claim to 32% of the industry’s profits, which is less than Apple’s share.

These numbers represent the entire mobile handset industry, and not just the smartphone sub-category in which Apple competes. The analyst didn’t break down the profits from just the smartphone category.

“Apple leads the industry in every metric except for unit share,” Mr. Walkley said in his research note, adding that Apple stands out in its ability to both innovate and turn that innovation into profits.

Mr. Walkley initiated coverage of AAPL with a “Buy” rating and a price target of $356 per share. He currently estimates fiscal 2010 sales (Apple’s fiscal year ends in September) at $63.3 billion with earnings per share (EPS) of $14.27. Fiscal 2011 estimates are revenue of $81.6 billion and EPS of $17.80, while fiscal 2012 estimates are for revenue of $93.3 billion and EPS of $20.4 billion.

Shares in Apple closed the day with a new record high of US$283.77, up $0.54 (+0.19%), on strong volume of 23.5 million shares trading hands.

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.  

Comments

Bryan Chaffin

That’s a stunning achievement, IMO, if not necessarily surprising.

Tim O'Brien

Red flag statement: “These numbers represent the entire mobile handset industry, and not just the smartphone sub-category in which Apple competes. The analyst didn?t break down the profits from just the smartphone category.”

Show me the numbers and the definitions, something smells fishy here.

danmanteufel

It’s not that hard to believe. Even the android smartphone makers like HTC, Samsung, and Motorola have Verizon pitching their phones as buy-one, get-one-free within months of their release. Only Apple holds their value firm. Another reason that Apple may not get in bed with Verizon. They won’t do the buy-one, get-one-free thing.

Tim O'Brien

So, back to what’s fishy about this particular story.  Nokia, Samsung, and LG have massive scale at the low end of the market.  As the demand for prepaid phones continues to grow, this low-end is almost entirely subsidized.  Apple has always targeted affluence and there’s nothing different about the iPhone.  If you factor in the entire market then you are comparing high-end phones with higher margins with a far larger bucket of low-end phones with almost no profits.

Comparing Apples the Oranges.

vpndev

and there?s nothing different about the iPhone

I’m not quite sure where you’ve been the past three years. Taken a long nap, perhaps?

Bosco (Brad Hutchings)

This is another thing I don’t get about the current crop of Apple fans. How is this good for anyone but AAPL shareholders? Of course end-users don’t see Apple’s profit taking in direct costs since their phones are subsidized by AT&T, and their out-of-pocket is pretty much the same for any high-end smartphone. Yet they are saddled with a crappy network. A Verizon iPhone will just kill those margins.

Tiger

Interesting thing about a possible Verizon phone…not that it will or will not happen. But far fewer than expected would switch according to this survey by Credit Suisse.

AT&T Exclusivity End and potential changers

The quick and dirty of the story is Credit Suisse is bullish on AT&T because they think the whole Verizon switch is overblown.

paint thrower

bosco…and apple still can’t make them as fast as they can sell them…so tell me how a verizon phone will cut into margins…are you saying that apple needs verizon so bad that they’ll cut better terms, now that is crazy talk…remember apple is a worldwide company and seeing how they are operating around the globe tells a much more interesting story…the u.s. market is where the smart phone money is today, but not for long…china (europe/asia/latin america too) is where the future of smart phone (profits) lie and apple is gearing up to do just that…and if profit is the true motive of any company then apple seems to be doing a really good job no matter how crazy some people think the margins are…

jfbiii

Well, it’s good for everyone, actually, not just Apple shareholders. It’s good for people who buy Apple’s products, because those folks get a product that they really like and for which they are willing to pay a premium to own. The fact that Apple can continue to rake in profits off of their innovations mean that they will likely continue to innovate, thus providing the rest of the industry innovations which they can copy (with varying degrees of quality so as to maximize market penetration) and stuff into cheaper products that a larger audience can afford a little easier.

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