Market share is probably the easiest and most often used point of comparison between competing products. It makes sense: If something has a large share of the market, it’s probably doing well. But that doesn’t always mean that it’s doing better than something with less market share, especially from a business perspective.
I bring this up because today brought some very interesting numbers from the research firm, Strategy Analytics. According to them, Apple has surpassed Nokia as the most profitable phone maker in the world. I’ll throw some numbers at you in a second to show why this is really incredible, but the key takeaway is that this is why, at the end of the day, Apple wins.
While the press and rivals obsess over market share, Apple quietly comes in and makes an insane amount of money. It’s the same in the computer industry. Small market share, huge amount of money. The most important thing for all of these are companies is the bottom line. Apple wins that battle.
According to the report, Apple made $1.6 billion in operating profit off of the iPhone in Q3. Nokia, meanwhile, made $1.1 billion. Let’s put this in perspective. Recent numbers suggest Nokia controls roughly 35% of the worldwide handset market. Apple? About 2.5%.
Not 25%. Two point five percent.
Since the launch of the iPhone in 2007, just about everyone has been clamoring for more variety in Apple’s offering. People wanted iPhone minis, they wanted CDMA iPhones, etc. But Apple stuck to its guns and has basically sold one phone, which it could manufacture efficiently, when rivals like Nokia are busy peddling dozens. Sure, there are a few variations on the iPhone (included memory, and now the 3G/3GS), but basically, it’s one phone that is pulling in hundreds of millions of dollars of more profit than the market leader.
To people who follow Apple closely, this should be absolutely no surprise. It’s the same thing it does in the computer industry. Despite having a much smaller market share than its rivals, it makes more money than most of them. The key, of course, is that Apple maintains its high profit margins, while the competitors shuffle to battle each other for market share.
That’s not to say that Apple doesn’t care about market share for either its computers or the iPhone, it undoubtedly does. But it’s a secondary goal to running a successful business. A business which is now absolutely thriving in an awful worldwide economic environment.
If Apple wanted to boost its computer market share, it could do so in a heartbeat simply by slashing into its margins and chopping hundreds of dollars off its machines. That’s why those “I’m A PC” shopping commercials this summer were humorous. They’re attacking Apple for not competing in segments (low cost PCs) that it has absolutely no desire to compete in. Would those commercials be effective if Apple chose to sell a $500 MacBook? No, because Lauren probably would have bought it (remember, her first stop was the Apple store).
Most consumers obviously shouldn’t like the idea that a company is purposely charging more for its product to keep its margins high. But Apple has a winning proposition for that because it builds machines of such high quality that to many users it seems like they should cost more than they actually do. Or as Apple COO Tim Cook put it in a earnings call over the summer, “Our goal is not to build the most computers. It’s to build the best.” When you do that, apparently you can keep your margins high and in turn, make insane profits.
The iPhone is a bit different because Apple has a partner that it has convinced to pay it an insane amount of money for each device sold and then subsidize the cost of it for consumers. Remember that when the iPhone first came out it was $600. That’s the price Apple clearly felt comfortable setting for it to maintain what it thought was a good margin.
That price, of course, was ridiculous (though, admittedly, myself and plenty of others paid it). A few months later, Apple realized this too, and slashed a couple hundred dollars off the price, thus slashing it margins. But then they figured out a better way. Previously, they had been getting a cut of every monthly AT&T iPhone contract. But with the iPhone 3G, Apple decided to give all that money to AT&T in exchange for one upfront payment, and the promise that AT&T would subsidize the cost of the phone down to $199 (and $299). Jackpot.
So basically, Apple is now making a huge margin on every iPhone sold, while AT&T more or less picks up the tab. (Don’t feel too bad for them, they still make plenty on those monthly contracts.) Now you see why Apple doesn’t mind that exclusive agreement even while us consumers bitch to no end? There are 1.6 billion reasons why they like that deal (okay, probably some smaller percentage of that, but still).
And because Apple makes all of this money, they have money to pour into making that next great product. A product that will likely be high quality — and sell with a high margin. Hopefully some of that $34 billion in cash (with no debt) is being poured into finalizing the tablet as we speak.
This influx of profit also allows Apple to take the plunge into new markets, like it did with the iPhone. Earlier today, blogger John Gruber recalled what former Palm CEO Ed Colligan said when he heard that computers makers like Apple could enter the phone market:
“We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in.”
Not only did they walk in, they walked in, changed the landscape, and have what now appears to be the best business model industry-wide.
Just as with the computer industry, while all its rivals were busy jockeying for market share, Apple secured the high ground and figured out the best way to bathe in profits.
[images: Touchstone Pictures and flickr/jaci xiii]
Siegler! stop using the word ‘basically’ so ****ing often. You can do better.
um, i count three times in over 1,000 words. seems like a pretty good ratio.
proximity is bad – you use it twice in consecutive sentences, and then at the start of a paragraph.
(nice report though! this is just nit picking from someone who really has a bad experience of the word ‘basically’ – it is basically an incredibly lazy word that basically fills sentence space with basically no additional value. Basically, it’s a filler. It should be banned. “Down with this sort of thing ect ect…”)
okay, fair enough. thx
No doubt Apple makes products with a great bussiness sense……it deals with class
Mind blowing stats..
“35% of the worldwide handset market. Apple? About 2.5%…” I read that twice and still couldn’t believe it!
yeah it’s fairly crazy. obviously they have a much bigger share when just narrowed to smartphones, but overall, pretty small (but growing fast)
You are a tech reporter, not finance. Apple follows GAAP, Nokia follows IAS. And the net profit determines who had a better year, not the operating margin. Y dont u just write about twitter?
Hello, last quarter for Nokia is net lose. Because a huge write off due to its venture’s spectacular failure with siemens.
can you please stop using “fairly”, “fair” or “pretty” so often in your comments. it’s basically annoying as shit. thank ya
CAN YOU BASICALLY STFU U TROLL
You do a great job and I enjoy your work. Great article.
Its quite interesting that you refer to the numbers from Strategy Analytics for this article, but then when it comes to mention about Market share, you use numbers from a different source?
Your linked article shows 37.5% Nokia Market share and not 35%. Now thats not a huge difference, but just wondering how you selectively use figures from different sources.
Also, btw its also interesting how TechCrunch doesn’t report good things about Nokia, ofcz when they happen.
For ex: Nokia N900 started shipping yesterday.
(wouldn’t expect this news here, if similar news were not reported about Droid).
It should make sense… the comparison is always made between Apple and BMW, which also has a very narrow share of the car market.
However, most people know what a BMW is. And most car people can even rattle off a rough idea of each series, or at least which is their favourite (M3!)
Just as Paris Hilton enjoys a relatively small market share of the total human population, people still are somehow… well, you get the idea
right on point. Nice one MG.
thank ya.
Any specific reason these photographs have been placed in here? Been trying to connect them to the topic. WIth no great success.
The way apple is going to loose is by demand for expensive overpriced gadgets completely going away very soon. Basically most people will soon be satisfied buying $100 laptops based on ARM processors and running Chrome OS, and most people will be satisfied with $100 Android phones, those Android phones will come with no required voice/sms contracts, they will even provide unlimited voip/I’m over white spaces broadband wireless data networks.
Apple is currently basing more than half of its revenues and profits on iphone and ipod touch sales. That’s based on ridiculous 500% profit margins on the iphone (apple selling each iphone upwards $1000 to att and manufacturing costs are $150 per iphone). Those huge profit margins will very soon dissapear, and I don’t think the apple tablet is a backup plan. Thus look forward to apple’s revenues, profits nd stock price soon go crumbling down.
isn’t that the exact same thing that’s been being said for several years now? also, you do know we’re in a recession, right now, right?
Well the recession is yet another good reason all consumers will very suddenly flock to $100 Chrome OS ARM laptops and $100 unlocked Android phones as soon as they are available in the next few months.
HTC, Droid, those basically cost the same ridiculous price as the iphone ($2500+ on ridiculously expensive contracts), the Android revolution comes soon with $100 unlocked fully featured Android phones, thanks to competition among 25 manufacturers, no 2 year contracts needed anymore, Google Viice over VOIP for unlimited free calls over data only networks.
sound a lot like Sun’s network computer promises.
Sun was recently bought by Oracle.
as for myself, i will not replace my IPhone, Macbook and IMac for some cheap plastic and ugly week ass online OS just to save some $. I’m not buying a computer every year and when i do i want to get a beautiful and powerful machine with tasteful and well thought off user interface.
why a 2 yrs contract is so bad btw? the phone company paid at least in part for the phone, and the plan is pretty decent. i might as well be a loyal customer.
it seems like Android is going to be the Windows of cellphone, good for them. to each his own i say. 5% market share for IPhone at good margins is all that Apple will ever need to keep shelling out these babies to customers like me.
kepp’em coming Cupertino, we love them.
You really think Apple can keep selling iphones at more than 2500 dollars with 2-year contracts while there will be Android phones sold at 100 dollars unlocked without contracts that perform just as well and look the same to most consumers?
The Chrome browser is not weak ass, it’s the best browser experience in the world. Chrome OS based 100 dollar laptops will run a full Chrome browser thus be just as good as your 1500 dollar apple air.
2-year contracts are huge scams, most of the rest of the world uses pre-paid mobile phone plans, most of Europe does as well. It’s only in the USA that consumers enjoy being scammed this way by telecom carriers and apple.
Wireless data access costs less than 20 dollars per month in most European countries, with no contracts needed, just pre-paid, and you can do VOIP and IM on the data network. So combine a 100 dollar Android phone with a 20 dollar per month 3G data plan, there is everything most people will need. Signing up for a 2500 dollar iphone plan will be completely ridiculous and even rich people won’t do that anymore.
Typical Apple fanboy
I’m sorry Charbax but you sound quite ignorant to me. Doesn’t mean that you can’t afford Apple products that the rest of the world will stop buying Apple products. That’s where you are terribly wrong. Please take this article for what it is…MG is just trying to demonstrate that with a small market share you can achieve highest profit. If you would own a company would your goal be to go bankrupt of be successful? That is the question my friend.
I understand apple has a small market share. Still they are selling incredibly many of these iphones and ipod touch, and those constitute more than half of apples overall revenues and profits.
When Android forces iphone to reduce prices, when Android sales take the biggest market share, that just changes the whole game and there is no way this company can keep the same level of revenues and profits.
@Charbax, you have the tech foresight of a gummy worm. Apple is no where close to going bankrupt.
Apple share value could plummet to half value or lower in the matter of only a few months, that does not mean they go bankrupt from one day to the next. It still would be a huge blow to Apple shareholders, even with their huge tresory, they would have to fire a lot of people and from then on would only be a slippery slope.
The business model of selling overpriced trendy units borrowing on others innovation is not going to last much longer.
Very basically, Android is going to kill iphone and ipod touch, and Chrome OS is going to kill the mac.
You don’t know shit from sherlock.
Um Charbax, we’ve seen the trough of the recession and continue to be in unhappy waters. Even so, Apple had its best ever quarter for macs, iPhones. So what do you expect to happen here, exactly?
I expect that Charbax is also over at “AutoCrunch” predicting the imminent demise of BMW and Mercedes as soon as Chevy delivers the new Cruze.
You realize the Droid has might have already failed don’t you?
iPhone 3GS sold 1 million phones the first weekend. AMTech estimates only 100,000 Driods have sold so far. Motorola’s stock was down about 10% on the news.
MOT told the Street it thinks it can sell 1 million phones by year end, which at this point, seems to be wishful thinking. They better have a blow-out Xmas.
MOT/GOOG/VZ are competiting against the Apple ecosystem. Consumers are not just buying the iPhone, they are buying it all – iPhone, iPods, Macs, etc.
The Palm Pre – with all its great features – was supposed to kill the iPhone. It didn’t, now Palm’s survival is in question.
The Droid could come with a $1,000 rebate and a free blowjob and VZ would have a hard time selling it.
The public just doesn’t care about apps that run in the background or a replacable battery or a great browser.
Cool features don’t necessarily sell consumer electronics.
No they won’t. Do you brag to your friends “look at the cheap computer I just bought for only $399?” Quality products never go out of style and always have an audience willing to pay for them, even if it’s not the highest market share. Apple understands this and has been true to it’s roots. That is why they make money while everyone else bashes themselves to be first to sell a netbook for $50!
This man is delusional. Nothing is free. Google can’t make GV free forever.
iPhone contracts are as expensive as you are foolish enough to let them be. I’ve finished my 12 month iPhone 3G contract that cost me $890 (I paid nothing on the day I got the phone, it was $70-something per month). My iPhone is unlocked, and it’s now $40 a month for the service (with tethering). Anyone who goes for a $2500+ contract is an idiot.
A $100 laptop is an impossibility. Netbooks cost $400+, and they’re hopeless compared to a modern notebook. What would you expect of a $100 laptop? You’ll need a network connection to make it even partially useful. There’s $30-$40 per month. That’s not so cheap now.
So if your definition of a $100 phone is one of a smartphone, these already exist – you just pay it off through your contract. If you don’t want to pay the cost of a phone off and just pay $100 upfront and only pay for service, it’s definitely not going to be a smartphone.
Do the world a favour and screw your head back on. If you think it’s possible for $100 netbooks and phones to exist, can you explain why this hasn’t been before? I can. Because the companies make jackall money out of it, so they can’t continue to make them!
mhenr18: I agree with all your points except the $100 laptop. it’s coming, It was only about 5 years ago that a sub $500 was just not possible and 10 years since a sub $1000 was never going to happen because of the cost to miniaturize components.. Now every store has their $339 core2 3GB 250GB 15.4″ laptop on sale for the holidays. I give it maybe another 10 years to see a sub $100 full function laptop, unless the laptop idea is gone by then, I’m hoping replaced with something like Sixth Sense or courier.
You must be another MBA tool. Life isn’t black or white nor is business nor are products. Its called “getting a great experience”. Why pay $4.00 for a coffee when you can have cheap coffee with a hazel nut off the shelf pour in.
> Its called “getting a great experience”
Or its also called “living a life of debt financed by China and paid for by my kids”.
Hi. We Chinese bought some 2 millions of the fruity phones already. If you have a problem with high margin, I am sure we can buy out Apple in a heartbeat.
No regrets though.
MBA tool?? Just because you didn’t graduate high school doesn’t mean you should hate on someone with a higher education and probably triple your income
i have always enjoyed the idea that someone who makes more in income, is some how better or smarter.
I do not think that it is relevant to compare Apple high end business with the low end net books that all the other PC makers are peddling. As a matter of fact, I think the net books threaten the very core of Microsoft business model directly because its business model is predicated on selling rather expensive programs. I do not see the need to buy an Office Suite for hundreds of dollars to install on a mere $100 PC, whereas Apple does install (for free) a good and highly usable multimedia suite with their hardwares which can run several different OSes at the same time (including the not so cheap Window 7 operating system), if one wishes to.
> Basically most people will soon be
> satisfied buying $100 laptops based
> on ARM processors and running
> Chrome OS
The mysterious future you’re contemplating is already here today in iPhone and iPod touch: ARM-based, from $99, Unix core OS with WebKit HTML5 browser, satisfies the day-to-day computing needs of a lot of users.
Apple is by far the biggest volume Unix vendor and biggest-volume ARM vendor and WebKit is even an Apple project, so you’re describing a computing future that is even more Apple-dominated than today, not one in which Apple is doomed. What you’re describing could be called “the iPod replaces the PC.” How could that be bad for Apple?
Even if a $99 Chrome OS ARM-based laptop were available right this minute, it would not compete well against today’s iPod touch. The iPod touch has all the same features plus 100,000 native apps and iTunes+iPod and Apple design and engineering and integration. The screen is smaller but it also fits in your pocket, so that’s a wash, but in every other way the iPod is better. And it’s shipping now for $189, not part of some hopeful future built around vaporware.
> You really think Apple can keep selling iphones
> at more than 2500 dollars with 2-year contracts
> while there will be Android phones sold at 100
> dollars unlocked without contracts
Android phones also need voice and data plans, which cost the same amount. iPhone is already $99. You’re not even making sense. And once again, it’s “Android” in the same sentence with “will be”.
> The Chrome browser is not weak ass,
> it’s the best browser experience in the
> world.
The Chrome browser is based on Apple’s WebKit engine. If you like what you see in Chrome today, that is what Apple users have been seeing since January 2003. You can’t knock Apple and praise Chrome in the same breath. Chrome is 80% Apple’s work.
> Chrome OS based 100 dollar laptops will
> run a full Chrome browser thus be just as
> good as your 1500 dollar apple air.
I run Logic Pro and Photoshop on my MacBook Air. Your fictional $100 Chrome OS laptop competes (badly) with my iPhone 3GS, not my MacBook Air. A full-size keyboard, Core 2 CPU, NVIDIA graphics, and Mac OS is an entirely different class of computer than ARM-based Chrome OS $99 laptop.
Everything is a computer now, but that does not mean all computers are interchangeable. Cheap Chrome OS laptops helps Apple, not harms them. Today’s Mac or iPhone is already an upgrade from your future Chrome OS laptop. You get to keep all your HTML5 apps from Chrome OS but you get native apps like Photoshop as well.
The Android phone I am talking about costs 25 times cheaper than signing up for a current 2 year iphone contract, features and design are about the same although I would argue Androids open applications platform, multi tasking, voip, turn by turn makes it superior.
The Chrome OS laptop I am talking about is 15 times cheaper than the apple air. Price difference between netbook screens, 12″ or 13″ screens is minimal, $50 price increase at the most, and ARM laptops run 3-5 times longer on a similar sized battery.
You cannot deny the fact the nokia has made an indelible impression in the hearts of people. Reaching out to people is more important than making profits.both are great is their own aspects.So we should draw any comparisions
We should not draw any comparisons
That’s a very informative article MGS! Makes up for the nasty Adobe thread of yday (RIP Bobo!).
Do you also have a 2009 stats of # of iPhones sold quarterly or so?
which adobe thing? don’t know the actual sales numbers off the top of my head,but it’s nothing a goog search couldn’t surface
I was referring to #1 actively discussed post today on TC. Adobe layoff news!
Actually, Google search didn’t help much … will keep searching.
Apple sold 4.4 3.8 5.2 7.4 million iPhone each quarter fiscal year 2009
the holiday projection is between 6 to 8 million.
Thanks … that’s the exact number I am lookin for. If there is a detailed report, I would like to see it.
You work too hard, MG! ‘..and like that, its 4am’. Get some sleep man
heh. never
Someone should finally say that market share is totally insignificant detail – a statistical lie.
A company can have have 50% (or more) market share and still go bancrupt – because the phone they sold to a customer three years ago still counts (if he uses it and haven’t bought a new one since).
Except, in case you missed it, Nokia’s handset division still made over a billion dollars profit last quarter.
I agree with a lot of MG’s post but there’s a few things that need to be borne in mind.
Firstly, Apple’s profit is derived from a launch quarter which contributes the peak of their sales. Other quarters will be less – although still very – impressive. Overall Nokia will still plug away with over a billion dollars every quarter.
Secondly, Apple and Nokia’s strategies are very, very different. Nokia sees the future as a transition away from dumbphones to smartphones and that the transition point will be low cost to mid tier, not high end. Apple’s high end product is superior to anything Nokia has just now – and pretty much everything else with the possible exception of the Hero, HD2 and maybe the DROID – so they’re goig to bag a lot of that premium market and make a lot of money because of the high margins on the product.
Third, that actually makes Apple a good deal more vulnerable than Nokia unless they can maintain that impetus which is incredibly hard to do in the mobile phone market. Nokia’s approach of maintaining (actually, US excluded, it’s increasing) market share is a safer but less profitable approach than Apple’s which is akin to putting all your eggs in one basket. That said, they’re still making over a billion dollars profit every quarter.
Apple may diversify and they may vary the iPhone line or they may not. However, not doing so is an incredible gamble – all it takes is for a series of realistic competitors (and these are appearing now) to come along and that market share will be eroded pretty quickly. I’m sure they’re aware of that though.
As for Nokia, it’ll be interesting to see how the N900 does. I don’t think it’s a game changer in the same way that the N95 or the iPhone have been but I think it will pave the way for a clawback of marketshare at the high end and should lead to other N9xx series phones some of which will be slimmer form factor and have capacitive screens.
Not exactly…. One report I saw here said that Apple made 200 million dollars (profit) more than Nokia last quarter (ending June). That counts for only 2 weeks of sales of new iPhone 3GS.
And BTW – iPhone is here for 2,5 years now…
While I agree with some things you said, the fact is still that Apple makes more profit with ONE phone than Nokia with all their phones. That’s what article was about. And there’s no excuse for that. I said 3 years ago that Symbian is crap. It took too long for Nokia to realize it.
N900 is pocket computer, not really a phone…
@Boro
I’m sure they did but consistently?
I totally agree that Apple make a lot of money but, as you point out, it’s been with one phone that has dominated the top end for the last two years. The trouble is realistic competition out now so the choice isn’t as cut and dried anymore.
Symbian isn’t crap, it’s a very good mobile OS. S60 on the other hand – the UI layer – is dated. This will however be replaced with QT and DirectUI. Symbian itself will be rewritten with ^2 to ^4. However, I do think Maemo is the future for their high end devices – Symbian will continue to dominate the low and mid tier or a long time.
Steve Jobs’s Apple has never been interested in mid to low end customers. By only offering high end products they can ensure massive profits by maintaining high margins.
Nokia, on the other hand, hasn’t put much effort into making high end products, which explains their huge popularity but lower profit margins.
I agree though, that now that worthy competitors are showing up, the iPhone’s popularity may dwindle, particularly as everyone and their mother now has one. People will want to differentiate.
One way that Apple’s adamant unwillingness to diversify the iPhone line may hurt them is the fact that they have to wait a whole year to release a new iteration (with one or two added features that should’ve been there since the beginning, but that’s just their business model, since the iPod).
It seems that a new Android handset comes out every couple of months, each one lightyears ahead of the last. At this pace, by the time the next iteration of the iPhone comes out, competition will no longer be worthy or comparable: It will be better (it already is, in some very important aspects, like multi-tasking).
I agree with one exception: Nokia do put a lot of effort into the high end it’s just that their last two flagships have been disasters – the N96 and N97. The N95 on the other hand was probably the first true multimedia smartphone for the masses.
I’m hoping the N9xx series will be better which, in fairness, looks to be the case.
> Apple’s high end product is superior to
> anything Nokia has just now
So is Apple’s low-end product, the $99 iPhone 3G, which replaces a $199 iPod touch and a $299 netbook quite handily. People are giving Apple the high-end and then arguing over who is going to get the low-end. Meanwhile, for every iPhone 3GS that Apple sells, they also sell an iPhone 3G.
What’s the elevator pitch from Nokia for a person who is walking into an Apple Store with $99 to get an iPhone 3G?
> One way that Apple’s adamant unwillingness
> to diversify the iPhone line may hurt them
Apple’s product line up is just as diversified as Nokia’s, but instead of going down to tiny feature phones, Apple goes up to notebooks, desktops, even workstations. The entire Apple product line should be compared to the entire Nokia product line. The bottom 3/4 of iPhone OS and Mac OS are the exact same, bit-for-bit. The MacBook Air is an iPhone; the Mac Pro is an iPhone.
The problem for Nokia is they have a small feature-phone OS in Symbian that they are trying to scale up to smartphones and failing, so as you go to the higher-end Nokia you get Linux or Windows. So Nokia have to start from scratch on a new OS. Apple has a workstation OS in Mac OS X that they scaled down to all-in-one desktops, notebooks, music players, and phones, so Apple is good to go for any kind of device. And Apple has 100,000 native apps on both iPhone OS and Mac OS, as well as the best HTML5 environment on both devices also. They are setup for the future.
> is the fact that they have to wait a whole year
> to release a new iteration
They don’t have to wait a year at all. They revved the original iPhone mid-year. They will likely replace the 3G 8GB with a 3GS 8GB mid-year also. They can ship what they want, when they want. With Android, what is making them so slow to ship is co-ordinating with Google, Android, the handset maker, the carrier. People are always acting like Android is just getting started when it is years older than iPhone. Predicting that Android is going to zoom past iPhone any moment now has become a lame joke we use to identify people who have their heads so far up Google’s ass they can’t see what’s actually going on.
“So is Apple’s low-end product, the $99 iPhone 3G,”
Err… that’s just the previous model of the iPhone. It’s not a ‘low end’ product. As for how succsessful it’s being you may want to ponder why Apple didn’t give the split between 3G and 3GS sales at the last earnings call.
…
Oh heck, I’ll tell you: The 3G isn’t selling that well because it competes against precisely one phone: the iPhone 3GS.
“Meanwhile, for every iPhone 3GS that Apple sells, they also sell an iPhone 3G.”
If that’s the case then the launch of the 3GS has been a failure. You may want to check your numbers
“What’s the elevator pitch from Nokia for a person who is walking into an Apple Store with $99 to get an iPhone 3G?”
Hi. This is a Nokia N900. It’s awesome and isn’t a piece of year old outdated tech that your mates with iPhone 3GS’s will laugh at you for owning.
“Apple’s product line up is just as diversified as Nokia’s”
This is possibly one of the most ridiculous statements I’ve read for quite some time unless, of course, I’m missing the part where Apple released sliders and candybars with keypads. Rememebr we’re not talking products here, we’re talking ‘phones’.
The iPhone has three models, two of which have been superceded.
“but instead of going down to tiny feature phones, Apple goes up to notebooks, desktops, even workstations.”
Which are entirely different products and aren’t counted in the numbers quoted. Oh yeah and Nokia go up to things like “international networks”. Just thought I’d point that out.
“The entire Apple product line should be compared to the entire Nokia product line.”
And when we’ve done that we can compare an elephant to a pineapple because that’s about as relevant.
“The bottom 3/4 of iPhone OS and Mac OS are the exact same, bit-for-bit. The MacBook Air is an iPhone; the Mac Pro is an iPhone.”
Really? They have 3G radios built in and can communicate over GSM networks?
“The problem for Nokia is they have a small feature-phone OS in Symbian that they are trying to scale up to smartphones and failing”
Actually that really is the most ridiculous thing I’ve seen posted. You really – and I mean REALLY – need to go and find a bit more out about what Symbian is.
“so as you go to the higher-end Nokia you get Linux or Windows”
The only current Nokia with Windows is the netbook which, err… isn’t a phone. Maemo Linux runs on internet tablets which includes the new N900 (more of a smartphone/computer hybrid).
“So Nokia have to start from scratch on a new OS.”
Well they would if they hadn’t been working on Maemo since 2005. Oh yeah and you do realise that Symbian is being developed into versions ^2 to ^4 along with the S60 UI (I’m going to assume due to your general level of ignorance that you probably think S60 actually is Symbian) which is beign phased out in favour of DirectUI and Qt.
“Apple has a workstation OS in Mac OS X that they scaled down to all-in-one desktops, notebooks, music players, and phones, so Apple is good to go for any kind of device.”
Err… the iPhone and iPod touch use a stripped down version of the Mach kernel. If you’re comparing that deskto OS X then you’re barking mad. Nokia’s modification of Linux in Maemo is far, far closer to desktop compatibility than Mobile OS X is.
“And Apple has 100,000 native apps on both iPhone OS and Mac OS, as well as the best HTML5 environment on both devices also.”
Most of which, like any app catalogue, are shit. As for your ‘best HTML5′ statement, again I don’t really think you know what you’re talking about here.
“They don’t have to wait a year at all. They revved the original iPhone mid-year.”
Sure. I’m positive the carriers who are subsidising the cost of the iPhone will have no problem with replacing the unit yearly on 18 or 24 month contracts. And, in any event, can you tell us the period of time between the launch of the 3G and the 3GS? Hint: It’s a year.
I can’t even address the rest of your post because it’s so frighteningly stupid. You have no idea what you’re talking about and are merely parrotting fragments from blogs that you don’t understand.
If the worldwide numbers are broken to US and non-US, it’ll be interesting to see…
In US, iPhone prolly puts Nokia to shame, but outside, Nokia still may be the king.
Nokia might be the king, but Apple is the rich business man that’s making a whole more money than he is. It doesn’t matter how big you are but how much money you do (that’s what business are for, making money)
And, if the market do change and Apple has to do some cuts in its profits, they have the muscle to do so in that huge pile of money they keep and in the huge margin they can slash.
So what do we learn from this? Apple massively overcharges it’s customers. This is hardly news….
You dumbass. The iPhone cost the same as other smartphones.
you dumbass, HTC, Motorola, LG and Nokia aren’t showing the same revenue per phone that Apple is
Doesn;t mean there’s overcharging. That just takes you to the value debate, which can go on forever. To each his own.
apple actually delivers better value than dell – at least comparing a macbook to a dell laptop of equivalent specs
http://effortle...ws-think-again/
not that apple’s marketing department would want you to think of them as ‘value’ goods
-ben
That report is ridiculous. I bought a Dell Latitude E4300 for $800 at those specs (got the battery and ram on my own), which is about 535 euro.
The iPhone was in a class by itself,but I think that big problem is going to be Android, and next year Windows Mobile 7.
Google is basically following the Microsoft model of lots of handsets on different carriers at different price points, they create competition and choice for consumers and force the carriers to lower the price of entry and become aggressive
to secure new revenue streams.
Apple has to raise its game because it now Has Google and Microsoft after it’s iPhone buisness.
Yeah, and the Microsoft model has just been a world of fairytales and delights hasn’t it?
I don’t know, quick someone ask Bill Gates if his Billions of dollars make him feel any better knowing that everyone in the f-ing world uses his software and says mean things behind his back. For the record unless forced to use M$ i choose Linux or Unix depending on the flavor of the month.
> Google is basically following the
> Microsoft model of lots of handsets
> on different carriers at different price
> points, they create competition
No, they don’t create competition. Android and Windows Mobile are both anti-competitive by nature. The handset makers agree not to compete with each other on operating system features by all using Windows Mobile or all using Android. Both systems remove competition from the industry.
For proof of this, I give you your own comment, just a few lines later:
> The competition in the phone market
> right now is coming from everybody
> trying to answer the iPhone.
The iPhone created competition because it raised the bar. Now people expect smartphones to have full desktop Web browsers, full-face multitouch screens, tons of native apps, and iPod functionality.
> and choice for consumers
Choice for consumers is over 100,000 native apps they can download to their phone with 1-click. Choice is all the music and movies you can buy from iTunes, and the 10,000 different cases and all the accessories.
> and force the carriers to lower the price
> of entry
The price of entry in smartphones was lowered by Apple with the $99 iPhone 3G. Since then we have seen $79 full-face touchscreen smartphones.
So the big event you’re waiting for with Android and Windows Mobile has already happened with iPhone. It’s already over.
It isn’t Google that stole Microsoft’s model; it’s Apple that stole it. Apple is offering exactly what Google and Microsoft are offering (software licensing) plus Apple includes a hardware design made by Jon Ives and other world class designers and engineers, and an iPod to boot. Whereas HP assembles a Windows PC, FoxConn assembles an iPhone. Both can scale up infinitely. Just as new PC makers come online or go offline as the market requires, new assemblers can come online with Apple. They are adding a new one right now, preparing for 2010.
Also, keep in mind that in PC’s, the market is 90% nerds and 10% consumers. In phones, it’s the other way around: 90% consumers. Microsoft is paid by PC makers and Google is paid by advertisers, but Apple is paid by consumers. Part of why the iPhone has been successful is that it is based on the only consumer-friendly PC, so they made a consumer-friendly smartphone. The advantages are all Apple here.
“Also, keep in mind that in PC’s, the market is 90% nerds and 10% consumers.”
You’re either trolling or a total fucking idiot.
apple follows GAAP, Nokia follows IAS. And the net profit determines who had a better year, not the operating margin. Y dont u just write about twitter?
And that is why I remain an $AAPL stockholder.
Interesting article, thought provoking as usual; but MG, why no mention of Blackberry in this article?
There is a striking focus on Nokia, but as much as I think Nokia would like to get into the smart phone space, and vice versa, Apple want to get into the mass consumer market (more sales is more sales, right?), neither are true competitors. You are comparing two separate consumer bases that have no real interest in one another.
The problem I see coming up very soon is that as the stock market rebounds, so will business, and in that mind-set, the iPhone really doesn’t succeed as a business device. It’s expensive, and doesn’t cater to that market, and business users like being specifically catered for. Yes, the App store is a killer feature, but it’s difficult to unify across a companies phone structure.
I have no doubt that Apple will continue to make increasingly large amounts of money, but it will be from iterating to the same customer base. I’ve been saying for a long time, manufacturers need to stop making SO many versions of products, however, diversity does still rule.
I disagree with Charbax’s prediction, I think he overestimates how long the recession will last; and I think that even despite recession, we will not end up going backwards (in my opinion) in terms of processing power, consumer needs drive the market, and as consumers become more tech savvy they will want more power and more functionality; the parallels to this currently are mobile phone screen sizes.
Far more of a flaw in his argument is the $100 android phone, yes, it may cost $100, but it’s not aimed at anyone. True, it’s cheap, but for that price, I could get a walkman phone if I’m a music consumer, or a blackberry, if I’m a business consumer. Google is recognized for search, and it’s very good at that, much like Apple is recognized for quality, and it’s very good at that. Google is a service, not an OS, and I think the distinction is very clear, and should remain very clear.
It’s generally an interesting time to be in the phone market, and I think, currently, there are too many players. A few will be eliminated in the next 5 years; notice no one is talking about palm right now. As much as I think this is a great article, I believe the survival of companies in the phone market right now will depend on market share and mind share, not profits. Currently Nokia and Apple hold one or the other.
MG, greater absolute profit values don’t mean that one company is doing better than another.
The purpose of profits are to give a return to investors. So the real measure of which company does best is return on investment (ROI) or Return on equity (RoE)
Companies could choose low volume, high margin business models (like Apple) or high volume, low margin strategies (like Wal Mart or Nokia). One model is not necesssarily better than another. Nokia has a higher turnover than Apple, so makes more money for a given level of capital.
To confirm this, Apple has a 5 year average return on equity of 23%, which is certainly great for share holders. However, Nokia has a 5 year average return on equity of 33%.
You may want to stick to technology and leave financial analysis to experts?
I agree a bit on that men. But he did not mend the absolute profit its the OPERATIONAL PROFIT Q4 not the margin Q4.
MG was never claiming to be a financial analysis expert on this subject. A lot of you guys are taking this the wrong way. Apple makes one frickin phone, the iPhone, and still takes home more cash at the end of the day than Nokia who makes a boatload of phones. Yes Nokia has a higher ROE but ask anybody and they will say that Apple is the stronger company and has the brightest future.
For their last fiscal years Apple and Nokia but had net income of around $5.7B but Nokia had to bring in $71B in sales to pull that off while Apple did it with $36B.
> Nokia had to bring in $71B in sales to pull that off while Apple did it with $36B.
You say that as if its a bad thing.
If you can the same profit margin, with faster inventory turnover (more sales) thats usually a more robust business. High-margin businesses look great when they are working, but can turn south in a hurry.
Apple has been through this story before – high-end product, low-cost products catch up in features, Jobs leaves, no new product to replace previous high-end product, death-spiral…
Cya in five years.
Best response in this whole thread.
Well, it would be….if it weren’t for this:
http://www.goog...&q=NYSE:NOK, NASDAQ:AAPL, &ntsp=0
Eh?
Have you actually looked at that graph over 5-10 years?
Look at the peaks in 2007 – that’s what Apple are experiencing now. When growth flatlines so does stock price.
Nokia’s stock has a 5 year return of -16.4% vs. Apple’s 5 yr return of 631%.
You made more money by investing in Apple over the last five years than you did with Nokia. That’s the bottom line.
Are you counting the troughs as well as the peaks. AAPL is a great growth stock, Microsoft doesn’t have that growth potential because of its dominance.
AAPL’s stock will flatline eventually. The trick is to get in at the right time although I think that’s long past.
Whatever…
… Google doesnt make any phones, only the OS (Android ), and wipes its ass with Apples profit margin, lol
How so? Android is free. How is that for a “money maker”? lol. Dumbass.
Anyone who starts a post with “Whatever…” is obviously a douche that doesn’t know shit from sherlock.
circus, what does google charge you for? Nothing? and yet they have so much money it’s stupid. rest assured they make killer profit on Android, not through sales of the OS, but licencing of other software, data, etc.
MG, one word for you: Awesome!
Question is, is the Apple premium worth paying for? Does the functional benefit outweigh the cost?
Sure, a premium model works fine in fashion and some other markets – as long as the brand has a solid reputation. I’m not sure of the long-term validity of Apple’s strategy. Apple is basically selling on the basis of emotion rather than function. Macs do not run faster or have any greater functionality than other manufacturers. The Apple marketing is very clever, but it’s based on the emotional connection to their brand. That concerns me from an investment perspective.
Joe, hardware wise I think it’s comparable, software wise I think there is a definite benefit of apple products.
Hardware wise it is not comparable either, most of the times.
There are no 27″ iMac equivalent, no MacBook Pro equivalent for example.
feature wise yes. But hardware is so much more than just check boxes.
The competetion’s be trying to up game Apple in the high-end machines for years. But they just can’t make a PC with comparable quality, give it a comparable price tag and keep a comparable margin at the same time.
All those attempts either end up with a insanely expensive product line (which means pricier than MacBooks, sometimes a lot pricier, have you seen the Adamo) or not profitable enough to sustain or both.
for Joe (@woodjoe): “Question is, is the Apple premium worth paying for? Does the functional benefit outweigh the cost?”
Yes. Quality matters. Life is too short to put up with unreliable, poorly designed, or shoddily built products.
The reason that Apple and some of the other high end brands succeed is that they offer a better experience – better as in more productive and creative and less frustrating.
I have a Mac at home and must use a Dell with Windoze at work. At work it often seems that I have to battle the system to get anything done, while at home, the Mac just lets me get things done.
So apple made 1.45 time the profile from 7% of the market share that Nokia has, that translates into about 20 time the profit margin. As a customer it’s nearly seems unfair but then I have no -> limited options. So it’s nearly a monopoly pricing. I don’t think apple would have level of margin in computer business.
The overall comparison I think is good, but it’s comparing two companies at different stages. Apple brought a game changing product, it’s riding on that move but as competition catches up, this will start to go down. I don’t have the numbers but I would imagine that Nokia would have been more profitable when
cell phones had started to come out which was a game changing moment for them.
Also, the margins are for iPhone business, which I would assume this include software profit form the apps and not just the phone. That is a part of the ecosystem that they built around iPhone, but a comparison of device to device revenue and margin should also be done.
Interesting read.
As a customer it’s nearly seems unfair but then I have no -> limited options. So it’s nearly a monopoly pricing. I don’t think apple would have level of margin in computer business.
Women are willing to get ripped off when they shop for handbag such as LV not because they have have limited options.
They pay higher price not because LV is more powerful function-wise.
Apple is smart on building it’s unique and cool image backed by right product. With that they should be able to plug in more products later on.
My first mobile phone was an Ericsson back in 1996. When I got my first Nokia – the 7110 ‘Matrix’ model I think – I fell in love. Navigating the menus was intuitive, it looked good, call quality was good – I “loved” it. It was an order of magnitude better than my previous phone. I was a convert – I never even considered other manufacturers and ended up shelling out for the overpriced all-metal 8800 series over many upgrades.
Then I got a Nokia 7610 – my first 3G smartfone. It was a complete and utter dog. Nothing was where I expected it to be, trying to get it to connect to wifi was a nightmare. Around the same time, friends got the Nokia E70 and reported that it too was a complete turkey.
So in Nokia’s transition from dumbfone Series 40 phones to smartfone Series 60, they completely destroyed all the brand loyalty they’d managed to build over about a decade. My experience with the N80 was equally bad. It was so awful that I switched network and went “back” to a Series 40 8800 Sirocco.
When the iPhone came out and I had a break in my contract, I switched network and now again I have a phone I “love”.
If Nokia wants to change its downwards trajectory (albeit from the lofty heights of being world market leader), they need to look at what Apple achieved and listen to Tim Cook’s comments on “building the best” – make the phones well built, well designed, usable and *loveable* – not the piles of poo that made me abandon the brand. Short of firing every last person in the design department and starting from scratch, I’m not sure how they can turn around.
Yet another really bad analysis and biased TC article.
Want to know who is better?
Nokia N900 completely kicks much of the iPhone 3GS experience into touch. It makes the iPhone look like a Fisher Price ‘My First Phone’ with it’s multi-tasking brilliance.
See review here:
http://www.mobi...y-the-n900.html
Another important fact to remember: what company creates more jobs, what company has more social responsibility?
“Another important fact to remember: what company creates more jobs, what company has more social responsibility?”
You can take all the money you make in Apple’s stock and donate it to the poor if you wish.
One interesting issue that I think Nokia has is that it doesn’t do enough journalistic outreach in the US. I see a bunch of reviews of the N900 in European blogs and mags and what-not, but not a peep from the big boys in the US.
And we wonder why there’s a skew in perception in the US market towards Apple and away from Nokia. Nokia has never really flaunted its big guns in the US.
From the review that was suppose to show how the Nokia was “Better”
“How do I know this?
Well… I opened up the N900 — ‘live’ on camera — and made a complete fool out of myself, for you.
(I couldn’t find the on button.. indeed, in the video which I’ll be publishing shortly, you can almost hear my crying for Rafe Blandford… ‘Help me Obi-Wan-Blandford… help me… where’s the ON button?’)”
“It’s all about the services, the capabilities,****** the possibilities.***** Can I load up the equivalent of the iPhone Network Rail application and click ‘my next train home’ and have the device automatically locate me, find the nearest train station and look-up the timetable, in 5-seconds flat? ”
Can I consume entertainment from an equivalent of iTunes (e.g. Amazon MP3 Store) or from (a much improved) Ovi Store?
*****I can’t necessarily do all this today.******
This is a *fan* saying the phone is confusing mess and speaking of “possibilities”. Not what it can do *today*.
And it’s $639 with no subsidy and you still have to pay the same price for a phone plan as you do the subsidized iPhone.
A reasonable article about Apple from TechCrunch? It’s about time.
The reason market share used to matter is we used to think that you had to have a majority of the market to get enough 3rd party developers on your platform. Since the iPhone App Store, we now know that it BS, there are many more variables than just market share. What really mattered was that Apple had 100% of “phones with desktop-level app development” and 100% of “phones with 1-click software purchase and install” which beat Nokia’s “35% of phones that have email but very few other computing features.”
You really are a total goon.
You have a majority of the market to make the most sales. It’s a pretty fundamental point.
Some folks seem to get upset that Apple are ‘ripping-off” their customers because they achieve higher margins on lower volume.
Of course the concept they are failing to grasp is ‘value’. Customers won’t pay extra for something with no extra value.
It kind of makes sense that a company that can create value for its customers’ (see customer satisfaction survey results) enjoys/extracts higher margins.
Looking to the future Mr Charbax et al predict Apple will be decimated by Android. I see something quite different. I imagine Apple will be quite happy to compete in a fragmented Android future. Apple’s biggest fear is the emergence of one dominant player who could indulge in a little embrace-extend-extinguish….
Apple products are selling like gangbusters when ordinary folks are financially hurting? Hmm, who can afford such expensive purchases in a recession? It’s the few rich who can afford overpriced Apple products, that’s who. That’s to whom Apple prices their products to. Such hypocrites- Apple’s 1994 commercial of smashing Big Brother, and freeing the masses- what a farce. That computer that Joe Main Street is using? it’s not a Mac.
Get real Just because their expensive compared to the piece of shit systems most companies sell doesn’t mean their unobtainable, their PCs not Ferraris. There’s this thing called “saving” ever heard of it? Further more you don’t even know when that commercial came out. It was 1984 and the commercial was about combating conformity and promoting originality, it wasn’t about the free the “masses” from oppressive prices. Back then most people didn’t even own a computer much less want one.
good discussion of why Apple HAS done well thus far.
But I’m going to suggest that just about every AT&T customer who wants an iPhone, has an iPhone.
The road ahead looks a lot tougher – see http://bit.ly/vXgTE