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Apple Takes 104 Percent of All Smartphone Profits Following Galaxy Note 7 Recall (macrumors.com)
Apple accounted for over 100 percent of smartphone industry profits in the third quarter of this year, according to estimates published by BMO Capital Markets on Thursday. From a report on MacRumors: Analyst Tim Long, quoted in the Investor's Business Daily, said Apple's staggering 103.6 percent profit share in Q3 2016 came largely as a result of significant losses posted by rival vendors including LG and HTC, and despite Apple continuing to shift fewer handsets year on year. Based on units alone, Samsung accounted for 21.7 percent of all smartphones sold, with Apple coming in second with a 13.2 percent share. In terms of profits however, Samsung came a distant second to Apple, capturing only a 0.9 percent share.
I just read the story on Fortune and still can't understand how a share in profits can exceed 100%. Any financial wizards care to explain for us mortals? Hopefully in terms that indicate you are cognizant of how misleading and utterly stupid it is from the perspective of a logical user of the English language.
The larger than 100% number is because most firms operate at a loss. For example, one can easily be 200% more productive than a very lazy coworker.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
Sure they can. If they make $2bn but all their competitors collectively lose $1bn, then the profits for the entire industry are $1bn and Apple have taken 200% of the industry's profits.
So if their competitors lost $3bn, they have taken -200% of the industry's profits?
Except that Apple's money doesn't then go to anyone else to offset their losses. Economically speaking, these are independent events.
Apple made all the money. But Samsung didn't lose Apple's money. So counting their losses against Apple's profits is harebrained.
No, it goes to show that a lot of companies are operating on razor thin margins or lose money pursuing this business in an attempt to gain customers.
Here's a business tip: if you lose money on every phone sold, you can't make it up in volume.
It's not sustainable. Everyone wants a cheap phone, but you know why so many Android phones never get updates? Because it costs too much. The company has already lost money selling you the phone--you think they're going to support it, too?
Apple, and to a lesser extent Samsung, have the money from the profits to drive the parts of the business that don't seem like they're part of the sale price. You get support at Apple stores, for instance. R&D--whether you think Apple's priorities are good or not is irrelevant, they spend that money on R&D for materials, software, etc. All that is factored into the cost of the iPhone (in addition to the profit margin).
World-wide, Apple accounts for something like 13% of sales, Android accounts for nearly 100% of the rest. But that 87% is split among a lot of manufacturers fighting for the same slice of pie, and Samsung is the top of the heap there, being basically the only one that consistently makes a profit on its phone division.
With the kind of losing strategy that is being pursued by most manufacturers, Apple could make a lot less profit per phone and STILL walk away with nearly 100% of the profits this year.
I think Android counts for more than 85% of smartphone sales now, more like 99%. Which just goes to show what a price-gouger Apple is.
Apple does what any business would like to do: Sell a product to maximize profits. If they thought they could get more profit by selling iPhones for $1,000 apiece, they would. They're selling a premium item, not a necessity. There's plenty of cheap phones out there if you don't want to pay a premium.
Taking guns away from the 99% gives the 1% 100% of the power.