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You're absolutely right: IOS related sales is the vast majority of their revenue.

That does not, *at all*, mean "iTunes Store". It could mean, "revenue from our products, AND the iTunes store" -- but the vast majority of the profit in that category is their products. IPhone, iPad, etc.

Getting precise break outs is impossible, because Apple doesn't specifically release a profit per product, but they do give certain numbers.

http://www.asymco.com/2011/01/25/ios-enables-71-of-apple-profits-with-platform-products-make-up-93-of-gross-margin/

for instance. See where "music" and "software" are, compared to "iPad", "iPhone", "iPod" combined?

You're doing some really weird math where you're saying, "before the store" verses "after the store" and equating the fact that they'd have explosive growth TO profits from the store itself. You're missing the part where they've also had record after record after record breaking quarters selling the actual *products*, iThings -- at a high margin, with huge profits.

Again: no. You're imagining that Apple is first and foremost a media and content delivery hegemony, and you're wrong. They're the biggest music seller in the world right now, but they still make most of their money, hands down, on their devices.

Profits due to "IOS" is not "app store": not even kind of. For apps, they've paid out 2.5b to developers total so far -- TOTAL. For the rest of the content, they don't lump iTunes Store (music, movies, etc) into "IOS" because its NOT part of the IOS profit category. You can get all that content (except books) on the Mac, and they have never really given (at least as long as I've been listening to their financial conference calls) really specific details about how much of their running profit comes from the content stores.

On a side note, assuming that the deal really is $5 per phone for patent license and nothing else, then Microsoft actually makes more on Android than on Windows Phone.

In related news, they are making more on Android sales than on Windows Phone 7.

somebody with brains & imagination needs to step up to the plate and kick Apple's ass for a change...

Google are already doing so with Android.

Tell me, how exactly is Google kicking Apple's ass with Android, when Apple's iPhone business by itself generates more revenue than Google's entire enterprise ? In market share? Like Apple gives a damn when they're vacuuming up 55% of the total profits for the entire mobile industry, not just the smartphone segment.

Companies must be lining up begging Google to kick their asses like that.

You are only looking at cash, but included in "reserves" (the original word used and more accurate) are things like marketable securities. The big picture on Apple's hoard of reserves here:

http://www.asymco.com/2011/04/26/2895/

Apple IOS devices are being outsold better than two to one by android.

Umm...no. The reality is almost the exact opposite of your claim. Devices powered by iOS --iPhone, iPod touch, and iPad-- are in fact outselling Android devices by 59% (37.9 million to 23.8 million). The summary also makes the same claim, that "Android is surging past iOS in marketshare", but it's as wrong as you are. Android-powered smartphones are outselling iOS-powered smartphones, but that's collectively; no single manufacturer even comes close to Apple. The iPhone is far and away the best-selling smartphone on the market.

Android proponents (I won't be disrespectful and call them "fanboys") and lazy journalists love to point out the fact that Android is outselling iPhone, but that's disingenuous; they're comparing a platform to a single device. In both platform-to-platform and device-to-device comparisons, Apple is still wa-aay ahead of the competition. At the end of 2010, Android had the largest smartphone market share at 33.3%, Nokia was second with 31%, and Apple third with 16.2% of the global market. Apple's smartphone market share translates to 4.2% of the total market for all mobile phones, and yet Apple is reaping 51% of the total profits of the entire mobile industry. And they're doing it with variations of a single device. That fact certainly gives the lie to the claims that the iPhone is "dead in the water". If these jaw-dropping numbers demonstrate that Apple is "getting desperate", as you claim, then I'm sure their competitors would love a big helping of the desperation they're imbibing.

Apple haters may have their reasons for disliking Apple, but they need to make a reasoned case if they hope to be taken seriously. Blithe disregard for the facts, and trumpeting bizarre assertions as fact, despite all evidence to the contrary, certainly doesn't help their cause. It only lumps them into the same category of fruit loop as the "birthers".

Vendors are making money hand over fist with Android.
Big vendors are making money hand over fist with Android.

http://www.asymco.com/2010/08/17/androids-pursuit-of-the-biggest-losers/

If Android's 33% came at the expense of iOS, you might have a point. But it didn't, so I guess not. The point of the original article is that Apple is making metric fucktons of money from iOS, and their insane growth shows no signs of slowing. Are you disputing this? Or are you proposing a novel definition of "trounced" that involves insane growth rates and billions of dollars in profits? Because I thought that this is what trouncing looks like.

The iTunes Store costs a billion dollars to run, and that was just last year. I think you underestimate how much of that money goes straight back to the content owners. For every piece of licensed music Apple keeps only pennies, and the store's most bandwidth-intensive operation, shipping iOS updates, receives no income.

Mac OS X growth is vastly outpacing the overall PC market. They're growing CPU sales by 28% year over year. No other large vendor is growing CPU sales. At all.

If you include iPad as a CPU sale, then prepared to have your mind blown.

http://www.asymco.com/2011/04/14/first-quarter-pc-forecast-windows-down-2-macipad-up-250/

> As soon as they stick Kinect in a smartphone they'll have a hit on their hands.

WTF? This is totally wrong for at least two reasons:
1) What in the world would you use Kinect for on a phone?
2) MS stuck another dominant product (Office) onto a phone and it didn't do them much good.

Besides, the Kinect came out of the gate strong--6 million in the first two months--but it has only sold 2 million more in the next two months. Apple, on the other hand, has sold about 18 million iPhones, 4.5 million iPod touches, and 4 million iPads in the first quarter of 2011.

Doh. I just had a post and accidentally clicked a link in the preview. Sigh.

Here are some charts. Most of Apple's profit comes from the iPhone of late. Without it, it looks like its profits would have been much lower.

Here's a slightly dated Windows one. Office and Windows, you're right. On the whole, I'd say iOS products are more of a luxury item (and have more competition?) than Windows and Office.

Of course, if either one stagnates, then either company is in trouble :) Not sure how Windows 7 has improved or deteriorated MS's profits from the Windows line. It doesn't look like the iPad has made a *huge* impact on Apple, at least not to the same extent the iPhone did. There's rising competition for iOS products from Android products, now, I think... but I'm not sure any major significant OS competition is there yet (aside from OS X, which has not been growing very quickly...)

Really "insanely profitable"

http://www.asymco.com/2010/08/17/androids-pursuit-of-the-biggest-losers/

This is what happened when Gartner tried to predict the mobile market a few years out: http://www.asymco.com/2010/09/12/

They were so far off that it's hillarious today.

If by "generate the most revenue for Apple" you actually mean "generate ~30% of Apple's revenue" then you would be closer to correct.

He quite obviously meant generated profits rather than top-line revenue, and therefore he's a lot more right than you...

In memoriam : Microsoft's previous strategic mobile partners. lol

Nokia has been amazing at undercutting all other phone manufactures's prices on the low end, yielding amazing sales in poor countries. Yet, now we're seeing Chinese companies who'll basically just copy all Nokia's products, and produce phone even more cheaply using almost slave labor, which'll obliterate into Nokia razor thin margins.

We're entering a time when Nokia's western low-end phones will run Symbian while other low-end phone remain simply feature phones because Symbian requires less resources than Android, iOS, Blackberry, WP7, etc. I donno how long that bright period will last of course, well maybe it'll depend most upon the marketing for Android, iPhone, Blackberry, etc.

In smart phones, Nokia could've easily run with MeeGo plus Andoird apps, giving themselves the largest app selection plus differentiation. It's dubious however that WP7 will deliver either the developers given that Apple and Android own the market currently, or the users, given that Android delivers all the choices you mentioned.

Rarely.

Oh, it's been much more than just one partner. And that's not even a list of everyone they've ever screwed--just smartphone makers. Unbelievable.

In memoriam : Microsoft's previous strategic mobile partners lol

All immediately after the N900 gets Android apps too, sad & stupid Nokia. If Intel's buddies continue pursuing MeeGo tablets, we'll maybe come back around to a MeeGo phone again, eventually.

Ideally, Finland might provide startup funds for some ex-Nokia employees wishing to bring another MeeGo phone to market. A small tech company with less overhead could do so far more inexpensively.

Here. My favorite one:

And finally,

Nokia. No, not this OS deal, but in August 2009 ”The worldwide leader in software and the world’s largest smartphone manufacturer have entered into an alliance that is set to deliver a groundbreaking, enterprise-grade solution for mobile productivity. Today, Microsoft Business Division President Stephen Elop and Nokia’s Executive Vice President for Devices Kai Öistämö announced the agreement, outlining a shared vision for the future of mobile productivity. This is the first time that either company has embarked on an alliance of this scope and nature.”

The plan was to bring “Microsoft Office Mobile and Microsoft business communications, collaboration and device management software to Nokia’s Symbian devices.”

What happened? One and a half years later the same Stephen Elop announced that Symbian will be deprecated.

Nokia's strategy was doing nothing be hemorrhaging market share and money for the past several years. They were pretty much screwed on the road they were heading down so moving over to another that may seem just as precarious doesn't leave them much worse off, especially if it works out in the long run.

Here's an analysis of this along with some nice charts that show how iOS and Android have really eaten Nokia's lunch over the past few years. Their stock has dropped from around $40 per share in 2007 to $10 in 2011. The only people who had faith that they were doing the right thing were the /. crowd.

MeeGo has already been plagued by serious delays and there was no indication that when it did ship everything would magically work. It's easy to point to this new deal and say that MeeGo got axed, but couldn't it be the other way around? It's just as possible that MeeGo was behind schedule and wouldn't be ready for a release for a few more quarters and even then would still need a lot of work to get it up to snuff. The /. crowd might have put up with that, but the mass market consumers would have hated it.

I don't know whether this move will pan out for Nokia. From my point of view it's more beneficial to Microsoft. However, Nokia needed to do something because they were watching the rest of the market move past and weren't able to respond. Maybe this deal ends up killing them, but they were probably dead either way.

This article gives a very good overview of Microsoft's previous strategic partners and how well each one of them ended.

(it's currently missing Sendo and Ericsson although the author has indicated that he'll update it to include them soon)

Personally I think it would be a good thing to have iOS, Android, WebOS and Windows Phone thriving in the marketplace as it means that each one will be forced to innovate to stay relevant - which can only be a good thing for the consumer.

However on the basis of Microsoft's past performance, I wish Nokia the very best of luck as they are going to need a lot of it.

What I find interesting is that despite essentially doubling their iPhone sales since the middle of 2010, Apple is now already a distant second to Android in terms of sales and smartphone market share. This situation is especially remarkable when you consider where Android was 2 or even 1 year ago.

Which is where Apple wants to be - in the low-volume high-profit arena. They're letting LG, Samsung, ZTE, etc. cut each other's throats while they ride the profit wave.

Some charts through Q4 2010 show this to great effect - http://www.asymco.com/2011/01/31/fourth-quarter-mobile-phone-industry-overview/

See that little Apple slice in the marketshare segment? Then see that HUGE Apple slice in the profit segment? And the moderate slice in the sales?

Apple doesn't care about selling "most" - it's profit they're after, and it seems that sure, Androids ship more than iPhones, but they're really eating away at each other profit-wise.

Actually smartphones are now about 25% of total worldwide phone sales (source) and climbing.

"succeed" is kind of an understatement.

Considering that Android users use more data, it's a safe bet that Verizon's network can handle the load.

Really? A safe bet? Considering that iPhones have outpaced all Verizon smartphones combined in sales, I'm not going to hold my breath.

My guess is that Android power users bring up the average for Android because there are "basic" users on Android. In my experience, I know a lot of iPhone users that hardly use data because they use their iPhone mostly for phone calls and email. I imagine the equivalent of those people on Verizon are mostly using Blackberry's.

There is a ray of hope...

Wrong.

I think you have it 100% backwards. Apple is undervalued based on it's financial performance.

Steve's health is already priced in. The run-up in share price has been driven by actual earnings, in fact the PE is down from a year or two ago. http://www.asymco.com/2010/08/02/apples-pe-ex-cash-nearing-15/

The global numbers are more amusing. Over the year, Nokia/Symbian has retained its majority market share, only dropping 7% in a market that has grown 64%; with Android and iOS more or less in equal competition for second place. (Source)

For some reason the discussion on the completely distorted US marketplace is amusing. But I question the relevance.

And finally, let me add that I vastly prefer my phone run an operating system that is designed to run phones, not an app or advertising channel primarily, no matter how shiny it looks.

Mart

citation please.
http://www.asymco.com/2010/03/11/the-tale-of-the-spitzer-bullet-patent-lawsuit/
Legal disputes resulted in the royalties not being paid until 1928. Interesting story none the less.

Android does not have the brand recognition or mindshare that Apple's iPhone and iPod brand has. Android has had an easy time in the U.S. because AT&T is the only iPhone carrier in the U.S. In effect, the Android/iPhone competition has been hampered by the carrier divide. Once the iPhone hits Verizon (and maybe other carriers) iPhone & Android will truly compete head to head. Given the iPhone/iPod's brand recognition and this interesting analysis of Android performance in the Verizon world, it could get very ugly for Android very quickly.

Android may become the new Windows or it may become than next Symbian.

The fact (and it is a fact) that Android outsells iOS should come as no surprise.

It's kind of hard to compete with market share when the other guys are doing 2-for-1 specials.

Apologies for posting anonymously, but I'd already moderated before reading your astute comment. The critical threat to Android is perfectly encapsulated in this excellent analysis by Horace Dediu, which states, in a nutshell, that the success of Android depends not on the marketshare of the platform, or its undeniable technical merits, but on the profitability of the manufacturers who use it.

Many commentators make the crucial mistake of focusing on market share as the most significant indicator of a platform's success, while ignoring whether it makes money for the manufacturers. Therefore it's more important to examine profit share as a clue as to whether the manufacturers can actually survive by selling Android.

At the end of the Q2 2010, a look at the profit share of the smartphone market revealed that Apple had 48% of the total profits, Nokia had 22%, and RIM had 17%. The remaining 13% was split among all other manufacturers, including Samsung with 10%, Sony Ericsson with 2%, and Motorola with 1% of the sector's profits (LG posted a loss for the quarter). While Android may have the potential to exceed iOS's market share, unless these manufacturers can actually make money from it they'll have no incentive to support it, and with the coming of Windows Phone 7, they'll have an alternative OS that they could fall back on. Plus never underestimate Microsoft's clout and marketing muscle. Also, the carriers have a major say in the success of Android, and if they put their advertising behind iPhone instead of Android *cough* Verizon *cough* or Windows Phone 7, that would bring further pressure to bear on Android. As it is, Android manufacturers are already in a race to the bottom. Consumers win of course, but only temporarily.

jamrock - (UID 863246)

While android may own the market, the companies with their own OS are making the majority of the profit. Shipping android is the equivalent of yet another beige box computer maker, it is a race to the bottom profit wise.

Asymco Profit Analysis

http://www.asymco.com/2010/08/17/androids-pursuit-of-the-biggest-losers/ From the above: "One problem I see is that Google is making a bet on those same vendors who are now squeezed in the middle of that last pie chart: Samsung, LG, Motorola and Sony Ericsson. Nokia, Apple and RIM will certainly not take the OS over what they already have as it dilutes their differentiation and margins. That means Android is aligned with the biggest losers in the industry." And: "In other words, Android’s licensees won’t have the profits or the motivation to spend on R&D so as to make exceptionally competitive products at a time when being competitive is what matters most."

As I understand it, Nokia has maintained their numerical share by selling low-end smartphones, especially in emerging markets, while completely ceding the high end 'proper' smartphone market to iOS and Android (ie. the part of the market that buys apps and actually uses the 'smart' bit of a smartphone).

Hence their massive drop in profit share and the fact that (in my experience at least) commuter trains are now a sea of iPhones, Blackberries and Android phones with only a few Nokia low-end phones around.

Yes, Symbian "only" has 44% of the worldwide market share of smartphones. http://www.asymco.com/2010/08/02/android-global-share-rises-to-16-of-smartphones-in-q1/

What is a smartphone? Do these smartphones you talk about have similar characteristics as modern smartphones running iOS or Android? Do they have an app store?

Yes, Symbian "only" has 44% of the worldwide market share of smartphones. http://www.asymco.com/2010/08/02/android-global-share-rises-to-16-of-smartphones-in-q1/

Out in the real world, Apple makes more money than all the other smartphone manufacturers combined. (Well, almost - only 44%: http://www.asymco.com/2010/08/19/htc-how-they-compare/ Scroll to the bottom to see earnings percentages)

You can keep your marketshare. Apple will take the money.

But of the big 3 only 2 are actually in the business of building platforms : RIM and Apple. Will all those manufacturers that make Android phones stay in it for the long haul ? Will they update their phones to the latest Android versions ? (They can't even be arsed to ship a recent version with their phones now.) Will they work ceaselessly to improve their phones ? I hope so but experience says no. All these manufacturers keep chasing the next big thing and right now it's iPhone clones. Read this comment on the story :

"They did the same thing a few years ago when the Blackberry was first successful. They all came out with monoblock keyboard phones within a year (Motorola Q, Samsung Blackjack, Nokia E series, HTC Dash etc.) In fact, they all did this because operators called them and asked them to build Blackberry look-aline phones (I know this from experience)."

If these guys stay true to form in a couple of years there will be a big variety of Android devices all on different versions depending on the cost, different hardware, with varying form factors and ugly custom themes and crapware. What'll that do to Android as a platform ? Lowest common denominator software or risk not selling your app at all ?