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…

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…

The symphony of my life.

No Disputing This “Winning”

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. 

Android Keeps On "Winning"

AT&T says that 7.6 million iPhones were activated last quarter, and 9.4 million smartphones overall were sold. Impressive numbers, but be careful.

As Eric Slivka of MacRumor notes, this doesn’t necessarily mean that 7.6 million of the 9.4 million smartphones sold were iPhones because “activated” can include older devices given away or sold through a third-party.

Still, AT&T says the “majority” of iPhone activations were of the iPhone 4S (which was new). And it’s probably safe to assume that overall, the vast majority of the activations were sales. If that is indeed the case, that means the iPhone outsold all Android phones combined on AT&T’s network.

Just like Verizon.

AT&T does say that they set a sales record for Android devices (as they did with iPhone). But they only give the vague, Amazon-like: “more than twice as many Android smartphones were sold versus the fourth quarter a year ago”. 

AT&T’s statement reads a lot like, “we love you too Android, we just love iPhone more”.

More Than Half

Tom Krazit for paidContent:

In the first quarter that Verizon Wireless was on board with Apple for an iPhone launch event, the company sold 4.2 million iPhones, accounting for more than half of the 7.7 million smartphones that its customers purchased in the fourth quarter.

We already knew the massive 4.2 million number. What we didn’t know was Verizon’s overall numbers. Now we do.

Every single Android phone that Verizon sells — dozens of models — combined could not outsell the iPhone last quarter. When you consider that Verizon sells plenty of BlackBerrys (and a few Windows Phones here and there) as well, this is even more incredible.

Yes, it’s just one carrier in one country. But it’s the biggest carrier in the key battleground country.

The only thing not looking good about this post from June of last year is the incorrect assumption that it would take the iPhone 5 to reverse the Android surge. It “only” took the iPhone 4S.

These numbers aren’t based on analyst checks. They aren’t based on store traffic guesses. They aren’t based on units shipped. These are Verizon’s stated quarterly sales numbers. And the iPhone dominated.

Apple 2.0's Q1 2012 "Whisper" Numbers

Based on six analysts with the best track records, Philip Elmer-DeWitt compiles his best guess for the Q1 (Apple’s holiday quarter) numbers Apple will announce tomorrow. These are analysts who typically update their numbers over time and, notably, aren’t necessarily Wall Street analysts (who generally blow at guessing about all things Apple-related).

If he’s close, my prediction from October 18 (the day Apple announced Q4 numbers) that this quarter would not only be Apple’s first $30 billion quarter, but first $40 billion quarter, looks very good. Elmer-DeWitt’s numbers have revenues coming in at a cool $42.76 billion.

Such a number would constitute a massive blow-out. Apple’s previous revenue record is $28.57 billion, hit in Q3 2011. Again, if the numbers hold, Apple could see a quarter almost exactly 50% better than their previous record quarter. That would be insane.

It would also further prove that last quarter’s miss was simply because analysts were lazy and failed to recognize the impact moving the iPhone launch a quarter later would have.  

It’s worth noting that Elmer-DeWitt’s whisper numbers were off last quarter as well. But again, all analysts were off, so it’s no surprise that an average of the best would be off as well. 

DeWitt’s craziest number has to be iPhone sales of 33 million. The previous record was 20.24 million iPhones sold (again, in Q3 2011). It would also be eerily close to the projection of 34 million iPhones sold if you extrapolated out Verizon’s stated numbers. And it would directly speak to the recent NPD and Nielsen numbers that iPhone has closed the gap with Android sales in the U.S. 

iPhone Closes The Gap On Android

The reports keep rolling in. 

The surge isn’t surprising. But just how big of a surge the iPhone is seeing from the iPhone 4S — a “disappointment” remember — is pretty amazing.

A Rainbow At Its Peak

Horace Dediu presents yet another amazing way to look at the rapidly evolving computer industry (here are Dediu’s other fascinating looks of the past few days).

The PC looks like a rainbow at its peak.

The Macintosh looks like a roller coaster with a misleading small first hill that tricks riders.

Android, iPhone, and iPad look like fireworks just taking off…

iPad 3 Said to Have High-Def Screen, LTE

Hi-def screen has been more or less a forgone conclusion for months (I cannot wait to see what it looks like). Better processor is a no-brainer. But this is the big news in the Bloomberg story from Tim Culpan, Peter Burrows and Adam Satariano:

Apple is bringing LTE to the iPad before the iPhone because the tablet has a bigger battery and can better support the power requirements of the newer technology, said one of the people.

Makes sense to me. Sarah and I talked about this possibility on iPad Today (about 4:30 in) a few weeks ago. 

And if the iPad does gain LTE, the logical next step is that the next iPhone would gain the technology as well. But I’m with John Gruber, it’s more likely, but not a slam dunk. Every single person I know who has a 4G phone still just bitches about the awful battery life when LTE is enabled. There will need to be more power-efficient chips (which seems likely) and/or Apple will have to pull out some battery life magic (also likely) to ensure an LTE iPhone this year.

The Nokia Lumia 900

I think Farhad Manjoo has this exactly right on Twitter:

I have yet to touch this (or the Lumia 800 for that matter), but what was shown today immediately makes every Android phone look like shit. Well, the iPhone has done that for years. Even more like shit, let’s say. 

This is how you need to make a phone in the post-iPhone world. I fully intend to try this phone out to see how it stacks up against the iPhone.

See, it’s not that hard. Make something that looks awesome with a clear attention to detail and people like me will want to try it out. Hopefully this quiets the notion that anything that’s not the iPhone will get no love simply because it’s not the iPhone. (Sadly, it won’t.)

The iPhone is a great product. To beat it, you need to be better than it. No one has done that yet — but even worse, it hasn’t looked like anyone was even trying until now.

Coincidentally, it was exactly 5 years ago today when the iPhone was first unveiled on stage during the Macworld keynote in 2007.

Neck & Neck

The cynics will say these NDP U.S. smartphone sales numbers show little beyond a surge when the iPhone 4S was released. But a few key points:

1) Look at the back data: iOS is closer to Android than it has been at any point in the past year-plus. Where was the huge surge last year for the iPhone 4? 

To me, this is all about Verizon. Now that Apple has the largest U.S. carrier (and Sprint, the third largest) on board to sell the iPhone, it’s a more level playing field. 

2) But it’s still not a completely level playing field because T-Mobile isn’t on board (and with the breakup of the AT&T/T-Mobile deal, that probably won’t happen until Q4 next year at the earliest).

More notably, things will never be level as there are hundreds of Android devices for sale in the U.S. There is one iPhone (3 models with a few different configurations). Look at the chart again. 1 phone nearly outsold hundreds of phones. Big launch or not, that’s amazing.

3) Speaking of the different models. The top 3 smartphones overall in terms of sales? iPhone 4S, iPhone 4, iPhone 3GS. Coming in 4th, we finally have one Android phone: the Galaxy S 4G. Did I mention the iPhone 3GS is two years old?

4) It’s not like Android didn’t have a big new launch of its own. We’ll see what the December numbers are like next month, but I somehow doubt the Galaxy Nexus contributed to a surge in the same way that the iPhone 4S did. The bigger question: did it outsell any of the iPhone models?

5) This all speaks very well for Apple’s upcoming quarterly results.