Apple Controls 75% Of The Profits In The Key Mobile OEM Space
Speaking of crazy charts… these great ones by Horace Dediu of Asymco are just bonkers.
In the first, you’ll see that Apple retains the top rank in profitability among mobile phone OEMs for the third straight year…
In the second chart, you’ll see that Apple snatched the revenue crown back from Samsung last quarter.
But the third one is the best. It’s not just that Apple is ahead in profit share, they’re destroying everyone else. That includes Samsung.
(And if you can’t see Sony, LG, and Motorola on that chart, it’s because they’re making little or no profit.)
Apple now makes an astounding 75% of the profit in the industry amongst their peers. That’s with just 9 percent unit share (smartphones and feature phones are combined), as Dediu points out. Amazing.
“Let’s see how the competition goes…”
Just to beat a dead horse, after seeing the post noting Apple’s iPhone business now brings in more revenue than all of Microsoft’s businesses combined, Jason Hiner reminded me of Steve Ballmer’s classic 2007 video laughing off the iPhone announcement (above).
To be fair to Ballmer, he does say that selling a $500 fully-subsidized phone is insane, and Apple did end up dropping the price, which has fueled sales. Still, the business argument sounds like something RIM would (and did) make. How’s that working out for them now?
As for “I like our strategy, I like it a lot” — there’s simply no excuse. Windows Mobile was quickly exposed for the turd it was, and Windows Phone, while good, was far too late. But 2007 wasn’t all bad for Ballmer…
I went ahead and re-did two of Ed Bott’s charts to better reflect the reality of the situation.
I’m reminded of this…
(And no, it’s not really to scale. I did this in about 3 minutes. I didn’t feel like breaking out my high school math book to figure out correct cylinder volume circumference ratios…)
Size Matters
Earlier, I linked to this set of three pie charts by Ed Bott, but it’s worth mentioning something else about them. The subtle point that it seems Bott is trying to make is that out of Microsoft, Apple, and Google, Microsoft has the best business because it’s the most well-rounded. (Meanwhile, Google has the worst because it’s entirely dominated by one thing: advertising.)
At a high-level, that’s an interesting point to make, I think. But without context, the Apple chart is a little misleading.
It looks like Apple’s business is mainly about iPhone. And while it’s true that the iPhone is responsible for over half of Apple’s total revenue, it’s important to consider that Apple’s total pie is now significantly larger than Microsoft’s. Actually, it’s more than twice as large.
Last quarter, Microsoft brought in $20.89 billion in revenue. Apple brought in $46.33 billion.
Put another way: Apple’s iPhone business alone is larger than all of Microsoft’s businesses combined.
And — just as remarkably — if you took away Apple’s iPhone business from the chart, the remaining Apple businesses would still be larger than Microsoft’s total business. And Apple’s earnings would look a lot more evenly distributed then.
Point is: these charts don’t actually show Microsoft is a better business because they’re the most diversified. They just show how out-of-this-world Apple’s iPhone business is at this point.
Update: Just to drive the point home…
Panasonic Comes In At Negative $10 Billion
Swimming in a sea of red, Panasonic is the bloodiest yet. A $10.2 billion annual loss. That’s not just bad, it’s insanely bad.
But again, they’re hardly alone. Reports Tim Kelly and Yoko Kubota for Reuters:
Together, Panasonic, Sony and Sharp Corp expect to lose $17 billion this year, highlighting the savaging of Japan’s electronics industry by foreign rivals led by South Korea’s Samsung Electronics, weak demand and a strong yen.
$17 billion. And the underlying subtext here is that all are (were) key players in the television set industry. The low-margins and competition finally caught up to these guys. To some, this will raise more questions about Apple entering the industry. But to me, this signals yet again that they need to enter it. The system is in disarray. Ripe for disruption.
iBooks Author 1.01 out with updated EULA
Notes Megan Lavey-Heaton for TUAW:
The change is an important one though, clarifying that Apple has rights over the format a book is in, not the content.
And we have yet another bit of controversy to file away under: Apple Is Not Fucking Stupid.
I haven’t weighed in on the EULA hubbub for this exact reason. If Apple was actually trying to suggest that they own the content of all iBooks published via iBooks Author, then yes, obviously that’s bad. But get this: Apple is neither the devil nor are they fucking stupid — as we’ve seen before.
"Think Loss."
Speaking of profit problems, Sony lost $2 billion on revenue of $23.37 billion last quarter. For the full year, the losses are going to be more like $3 billion. Ouch.
The upside is that they just got a new CEO, Kazuo Hirai. Maybe he can come in and do the “Think Profit” moves. Sony needs it. Badly.
From Cupertino With Love
No clue if this 1.3 megapixel-equipped iPod nano is real or not (though it has a certain legit quality to it). But the idea of a super-stealth spy cam appeals to me. Embassies worldwide will be put on alert for the new iPod nano.
Amazon Feels The Profit Squeeze
Just to follow up, Amazon has released their numbers. As expected, net income doesn’t look great — $177 million, down 58 percent year over year. But at least it’s not a loss (which Amazon had warned it might be).
That $177 million is on sales of $17.4 billion. Crazy. That’s what low margins — and selling hardware at a loss — will do to you.
Speaking of 177, that’s also the percentage that Amazon says Kindle sales increased during the holiday period when compared to the previous year — which means basically nothing since Amazon refused to release actual numbers last year. And they still refuse to this year.
Looking forward, Amazon expects profit to be anywhere from $100 million — to a $200 million loss next quarter. Ouch.
To be fair, unlike my earlier statement, Amazon did make more money in the entire quarter than Apple did in one day last quarter, but just barely: $177 million versus around $145 million.
But that’s an average. I’m sure during some of the busy shopping days, Apple actually did make more money in one day than Amazon did for the entire quarter.
Amazon’s profit for all of 2011 was $631 million. As a reminder, Apple made $13.06 billion in profit last quarter. Perhaps not a fair apples-to-apples comparison, but not exactly apples-to-oranges either.
A Tale Of Two Catalysts
Amazon will announce their earnings later today. As I outlined in October, the results this past quarter will highlight the difference between Apple and Amazon.
Writes Tricia Duryee:
Here’s one data point: For the holiday period, Apple’s gross margin was an impressive 44.7 percent, up from 38.5 percent a year earlier. Meanwhile, analysts are estimating that Amazon’s operating margin will fall to 1.3 percent from 3.6 percent last year.
44.7 percent versus 1.3 percent.
What does that mean? It means that even though Amazon should report record revenues, their profit will likely be depressed — probably badly depressed. Why? Well, first and foremost, most of the goods they sell have low margins. But even the goods that should have high margins — hardware — have low margins.
Or worse. Take the Kindle Fire — Amazon’s most popular product (though don’t bother asking how many they actually sold) — it’s sold at a loss.
Like Apple, Amazon has built an amazing business that has revolutionized more than one industry. But context is important. Right now, Apple probably makes more profit in a day than Amazon does in a quarter.
Update: The numbers are out.
Apple Becomes World's Biggest Maker of Computers, Thanks to iPad
Cue dozens of people screaming bloody murder: “THE IPAD IS NOT A PC!!!!!!!”
Cue millions of the rest of us laughing at those people.
Just as with the move from desktops to laptops, the transition to tablets (or “pads” as Canalys humorously refers to them) is underway.
“But, but, but… it doesn’t have a keyboard!” Yes it does.
“But, but, but… it doesn’t have a physical keyboard!” How’s that argument working out for RIM?
“But, but, but… it doesn’t run PC software!” Who gives a shit? Clearly not the people buying millions of the devices each quarter.
All you need to know about the “is the iPad a PC?” argument: are people buying them instead of traditional PCs? Sure looks like it.
Update: Including two tweets (at Anthony Ha’s request):
Lot of response there (as expected). Main point: arguing over definition of “PC” is stupid and totally missing the actual point.
— MG Siegler (@parislemon) January 31, 2012
“PC” is about how people use and interact with computers, not what it looks like. Who cares what it looks like?
— MG Siegler (@parislemon) January 31, 2012
"Spouting Nonsense"
Tim Worstall, a Forbes contributor, absolutely rips apart the anti-Apple tone of the recent stories about Chinese factory conditions.
This, alongside Tim Cook’s response and the letter to The New York Times from BSR President and CEO Aron Cramer refuting just about everything attributed to an anonymous “BSR consultant” in the most recent NYT story, certainly makes it seem even more like the laser-focus on Apple here was simply unwarranted.
Worstall’s best line is his last one:
Boycotting Apple for better Foxconn wages and conditions is like having sex for virginity. Entirely counter-productive and exactly the wrong thing to be doing.
[via The Brooks Review]
No, Now We Have
In his (rather ridiculous) new PandoDaily column, Farhad Manjoo pegs Android’s high-water mark as last April, and points to this post by Fred Wilson as an example of when the sky seemed to be the limit for Android. In that post, Wilson writes:
Roughly six months ago, I put up a blog post suggesting Android was going to be the dominant mobile phone operating system and that developers interested in the largest user bases ought to start developing for it in preference to iOS.
As you might expect, I got a lot of heat from Apple fanboys for that post and one of the strongest points they made was that we had not yet seen the effect of the Verizon iPhone on market share numbers.
Well now we have.
No, what we actually saw back then was a muted introduction. When Apple introduced the iPhone on the network, that model, the iPhone 4, was already several months old. More importantly, most people still believed at the time that a new iPhone was likely just two months away. This, of course, ended up being incorrect, but it still impacted would-be buyers.
How can I say that with such confidence? Look at the numbers. The April launch of the iPhone on Verizon was strong, but this past quarter — which saw a new iPhone launch on the network for the first time — was far stronger.
Back in June of last year, I wrote that the Verizon iPhone halted Android’s surge and predicted that the iPhone 5 could reverse it. All but the “iPhone 5” part proved correct. The iPhone 4S launching on Verizon alongside AT&T (and Sprint) proved to be the spark the iPhone needed to close the gap with Android.
For Verizon, the iPhone accounted for more than half of all smartphones the carrier sold.
So no, back in April, we had not seen the true effects of Verizon on iPhone sales — now we have.
Or have we?
What’s really crazy is that AT&T’s iPhone sales are still far ahead of Verizon’s — almost double, in fact. Maybe that’s because Verizon has a better selection of alternative devices. Or maybe it’s because of contract timing issues for consumers.
Remember, Verizon is the larger overall network. And again, over half of the smartphones they sold last quarter were iPhones. Who wants to bet that the Verizon iPhone numbers in 2012 will be insane?
The Android Oil Rig
An interesting pipedream by Farhad Manjoo: in order to make more money, Google should close down Android and start charging a licensing fee.
Of course, it will never happen. Never. Such a move would be the single biggest example of hypocrisy in the history of technology.
There’s another problem with this argument. Manjoo sets it up as solely a money-making ploy in the face of Apple — but as Amit Runchal details, it actually wouldn’t make Google that much money relative to Apple. Certainly not enough to justify destroying relationships with OEMs and consumers.
The biggest mistake here is the idea that there’s something, anything Google could do in order to turn Android into a business like the ones Apple has created. There isn’t. Writes Manjoo about Apple’s most recent earnings:
The numbers ought to ring alarm bells in Mountain View. They prove the folly of Google’s Android business model: Free and “open” (or clopen) may make money someday, but it’s hard to see how it’s ever going to make Apple-like profits.
It’s not hard to see, it’s impossible to see. There are three companies that have ever made more profit in a quarter than Apple did last quarter, and all three are oil companies. The only other companies even to come close to such numbers? All oil companies as well.
Google’s best shot to turn Android into a business with iPhone-like profits would be to create an Android-powered oil rig and get drilling.
