With 8.7% market share, Apple has 75% of cell phone profits(tech.fortune.cnn.com)
tech.fortune.cnn.com
With 8.7% market share, Apple has 75% of cell phone profits
http://tech.fortune.cnn.com/2012/02/03/with-8-7-market-share-apple-has-75-of-cell-phone-profits/
19 comments
That is an astounding graph. I didn't consciously realize this till the example of Apple made it clear a few years ago, but market share is actually an unambitious thing to aim for. When people treat market share as a proxy for profit share, they're implicitly assuming all the competitors are roughly equivalent. But Apple shows that if your products are sufficiently more desirable than competitors', you can make market share and profit share diverge.
It’s very dangerous to use a single metric as a proxy for something else that is obviously related to it but not directly so. We see this here with market share and profit share. We’ve seen similar things like lines of code and productivity.
There’s an apocryphal story told about an IBM salesman. He was the sales leader year in and year out, selling almost as much as all the other fellows in his office combined. One day, his manager retires and Armonk sends out a hot shot MBA to run the sales team. The MBA summons the top salesman.
“I’ve been running some numbers. Your sales are very good, but you’re only averaging 1.2 calls a day. The other guys are doing 3.7 calls. Imagine how much you could sell if you could get your average up to 3.7!”
The sales guy realized he was going to have to train another manager. “Oh? I was wondering how much the other guys could sell if they did a better job of qualifying leads and got their averages down to 1.2..."
There’s an apocryphal story told about an IBM salesman. He was the sales leader year in and year out, selling almost as much as all the other fellows in his office combined. One day, his manager retires and Armonk sends out a hot shot MBA to run the sales team. The MBA summons the top salesman.
“I’ve been running some numbers. Your sales are very good, but you’re only averaging 1.2 calls a day. The other guys are doing 3.7 calls. Imagine how much you could sell if you could get your average up to 3.7!”
The sales guy realized he was going to have to train another manager. “Oh? I was wondering how much the other guys could sell if they did a better job of qualifying leads and got their averages down to 1.2..."
Here's a very real, very dangerous example: conversion rate as a proxy for profit per visitor or # of unique people signing up.
A web page that gets users to visit an average of 2 times before buying instead of an average of 3 times seems to have a vastly improved conversion rate (depending on how you measure), but is not improving sales one whit.
A web page that gets users to visit an average of 2 times before buying instead of an average of 3 times seems to have a vastly improved conversion rate (depending on how you measure), but is not improving sales one whit.
I'm not sure the example you gave measures conversion at all. Isn't it measuring avg visits against a single fixed purchase?
A bad, very common (in my experience) definition of conversion rate is "goal actions/# of visits". It seems like you're thinking of conversion rate as "goal actions/# of unique visitors", which is a better definition, but still frequently at odds with profit.
I think people tend to over analyse this stuff which is why bottom line numbers need to remain the focus (and so often don't). Anything before the bottom line figure is about understanding the result and aiding improvement but not defining the success of the activity. Also focusing on the final outcome avoids the distraction of people cherry picking statistic to make their campaigns look successful when they present results, which many people buy into unquestionably when they see a nice looking graph.
Market share is very important in one business strategy: de-facto standard platform and monopoly rents (see: Microsoft).
If you (or one of your competitors) is planning on playing "monopoly" then marketshare becomes an important metric... either you are aiming for dominant marketshare, or proving that your competitors don't have it. This is why, despite profits being more important, market share is viewed as so important.
If you (or one of your competitors) is planning on playing "monopoly" then marketshare becomes an important metric... either you are aiming for dominant marketshare, or proving that your competitors don't have it. This is why, despite profits being more important, market share is viewed as so important.
They can only diverge so far though. For example, Apple needs a reasonably sized slice of the pie to maintain the App Store. If they had 0.1% of the market, there would be drastically fewer people willing to write apps.
Another thought- market share is often desirable not only for profit, but influence in that market.
Clearly Apple has demonstrated you do not require market dominance to influence or even drive the market, but their success in that regard does not appear to be easy to replicate.
Clearly Apple has demonstrated you do not require market dominance to influence or even drive the market, but their success in that regard does not appear to be easy to replicate.
Large market share might also lead to more stable profits, though I'd want to look at empirical evidence before saying for sure. Large profits on small market share reeks of an unstable situation, because at least in theory very high margins shouldn't be stable in the face of functioning competitive markets. My guess would be that high profit margins can evaporate overnight more easily than large market share can evaporate overnight (look at how long AOL has been cashing in on the very slow draw-down of its once-large customer base). Though it probably depends on how fast the market typically turns over. On the other hand, arguably Apple is in something of a luxury goods segment, and economists have long recognized that luxury goods operate in strange ways when compared to "normal" neoclassical markets.
Yes, but AOL is a subscription service. Phones last 2-3 years tops. In that time frame if your product is made obsolete you can lose your pants overnight regardless of whether you sell 10s or 100s of millions of units today. Large marketshare is no guarantee of anything in the fickle tech world (look at Nokia), so I'll take profit over marketshare.
It should be noted, however, that many reports have concluded that Apple-customers are (much) more likely to pay for software and apps. This certainly plays a role in which platform developers choose, assuming they want to make money this way.
Basically, if profit is your goal, pursue the profitable users.
Ah, but market share for smart phones or market share for app purchases? Those are also divergent.
I don't think people do treat market share as a proxy for profit share. You don't really need a proxy for profit share because it's easy to measure. And if market share is publicly avilable information, so is probably profit share. It does make some sense to treat market share as a proxy for market power, though -- business people do this all the time.
An alternative interpretation of the article is simply that Apple is targeting a more profitable segment of the market -- smartphones.
It happens to be the case that this segment has grown really fast and have both the highest margins and the highest total profits. This is perhaps not the case in most industries, which may be interesting.
An alternative interpretation of the article is simply that Apple is targeting a more profitable segment of the market -- smartphones.
It happens to be the case that this segment has grown really fast and have both the highest margins and the highest total profits. This is perhaps not the case in most industries, which may be interesting.
The remarkable thing about Apple of late is not that they target a profitable niche (which is a given with their product pricing), but how much they grow their niches. They did it the iPod, iPhone and iPad.
If Apple stopped selling these things tomorrow would other vendors capture the surplus? Or would people just go back to spending more money on other things?
Whether Apple exists or not, it doesn't seem like other vendors can raise their margins because they are in such a foot race. Apple has somehow risen above the fray through a combination of doing integrated hardware and software better than anybody and mastering the supply chain. Where HTC and Samsung are trying to one-up each other on screen size, Apple holds onto their margins selling a smaller screen for a higher price. This seems crazy until you actually use the latest Android phone and you're like "Why the F can't they get the screen to work half as good as an iPhone".
If Apple stopped selling these things tomorrow would other vendors capture the surplus? Or would people just go back to spending more money on other things?
Whether Apple exists or not, it doesn't seem like other vendors can raise their margins because they are in such a foot race. Apple has somehow risen above the fray through a combination of doing integrated hardware and software better than anybody and mastering the supply chain. Where HTC and Samsung are trying to one-up each other on screen size, Apple holds onto their margins selling a smaller screen for a higher price. This seems crazy until you actually use the latest Android phone and you're like "Why the F can't they get the screen to work half as good as an iPhone".
While this is extremely positive for Apple, it isn't necessarily bad news for Google and Microsoft--their profits and losses simply aren't captured by this chart. It compares profit from a firm that makes both software and hardware with firms that only make the hardware.
As was noticed a long time ago on roughlydrafted.com (before it became a pure fanboi site without anything interesting to say), it's exactly the same in the PC market. Apple grabs something like 80% of the market in PC over 1000$, hence they grab almost all of the hardware margin; then Microsoft grabs most of what remains, and all PC makers are fighting over breadcrumbs.
Yes, but they're much happier making budget hardware, handing over the majority of their profit to Microsoft and fighting tooth and nail over bread crumbs than they would be otherwise. Gotta pursue your dream dont'cha know. It's a freedom thing. Also, even if they make a loss, they will make it back in volume. (since that appears to be their actual business strategy, whether to place sarcasm tags around the preceeding sentence is left as an exercise for the reader)
Small nitpick: roughlydrafted was _always_ a pure fanboi site with little or nothing of interest to say.
Small nitpick: roughlydrafted was _always_ a pure fanboi site with little or nothing of interest to say.
He's certainly a fanboi, but he's been very insightful too.
he suffers from Gruber-syndrome.
Which is to say, that he will argue till the cows come home that market share is udderly (sic) irrelevant...
...right up until Apple gets a market share lead in something, when he will whip out the megaphone and start screaming about how "we" are winning now.
He's almost as bad as the people who - in complete disregard of the facts, keep slamming Apple no matter what they do.
Which is to say, that he will argue till the cows come home that market share is udderly (sic) irrelevant...
...right up until Apple gets a market share lead in something, when he will whip out the megaphone and start screaming about how "we" are winning now.
He's almost as bad as the people who - in complete disregard of the facts, keep slamming Apple no matter what they do.
Apple went from 4% market share with 50% profits sometime in 2010, to 8.7% market share with 75% profits. Which seems to imply they are also making their devices, on average, cheaper.
Is this the start of them slowly adjusting their prices to grab some more market share? Especially now that they actually have phone models to serve multiple segments of the mobile phone market?
Is this the start of them slowly adjusting their prices to grab some more market share? Especially now that they actually have phone models to serve multiple segments of the mobile phone market?
Or pie got larger, which seems more likely.
Most of the price of the device is negotiated with the carrier, not the consumer. So a "free" device is really $600, and a "$199" device is $800.
Most of the price of the device is negotiated with the carrier, not the consumer. So a "free" device is really $600, and a "$199" device is $800.
Or the profit everyone else was making went down. Apple could make a dollar of profit on $50 billion sales and if everyone else was losing money, that'd still be 100% profit share. Still wouldn't be good for an Apple investor. As much as market share is a poor metric, profit share has similar problems.
That was the iPod gameplan. By the time the Shuffle came out at $50 to compete with the $50 SanDisk stuff, they had already dominated every single price segment above that.
Remember, they still sell the 3GS. Those phones are old enough that they probably cost next to nothing to make, but Apple still sells them for a few hundred (from the subsidy).
Having the older 3GS and 4 also means they can pull in customer who wouldn't have paid the $200+ for the latest model. How much of Samsung's profit came from people buying their $0-$100 (on contract) phones? How much did that go down when the 3GS became free on contract?
They may not just be making more, but cutting into their competition in areas that were previously safe profit centers.
Having the older 3GS and 4 also means they can pull in customer who wouldn't have paid the $200+ for the latest model. How much of Samsung's profit came from people buying their $0-$100 (on contract) phones? How much did that go down when the 3GS became free on contract?
They may not just be making more, but cutting into their competition in areas that were previously safe profit centers.
Yeah. I was thinking about it later in the afternoon (when I was more awake) and I realised my math is wrong. At face value, this would indicate that they are making $31 for every $1 that their competitors make. As opposed to $24 to the dollar when they had 4% market share and 50% profit.
So either they are increasing prices (not happening, we can see the price on their website), so they are increasing their margins in some areas.
I was originally thinking about the relative percentages, which is not right.
So either they are increasing prices (not happening, we can see the price on their website), so they are increasing their margins in some areas.
I was originally thinking about the relative percentages, which is not right.
This reminds me of something mentioned in a (very interesting) lecture that hinted there is some deeper fundamental reason for apple's advantage. The clip is: http://www.youtube.com/watch?v=9RYXqCtsZsc (watch from 21:00 for the exact part).
It claims that Apple has some major advantage in terms of capital cost for the devices themselves. It mentions their chips but I don't see how they can have such a major advantage.
I'd love to hear if anyone has any insights into how they might be able to have radically lower costs.
The guy seems pretty credible.
It claims that Apple has some major advantage in terms of capital cost for the devices themselves. It mentions their chips but I don't see how they can have such a major advantage.
I'd love to hear if anyone has any insights into how they might be able to have radically lower costs.
The guy seems pretty credible.
He's talking about the supply chain optimization. One example is the dram chips used to build the iphone came from Samsung. They were sourced at quantities so large they are actually cheaper for Apple's iPhone than they are for Samsung's own phones. Streamlined products where the only segmentation is storage space make this possible. They can actually request such a large order their competitors can't match and get squeezed to the end of the manufacturing line while also paying more. To match they have to spend more. This hurts even more if your'e not controlling the distribution.
To the average non-techie all they have to decide is what color and storage size they want. This makes the device friendlier to consumers and takes away stress of understanding the hardware choices. The customer is actually happier if they don't have too many choices. People pay as much for this as they do the curated apps.
To the average non-techie all they have to decide is what color and storage size they want. This makes the device friendlier to consumers and takes away stress of understanding the hardware choices. The customer is actually happier if they don't have too many choices. People pay as much for this as they do the curated apps.
I've read elsewhere that Apple also started fronting the capital for the plant investment required to build the components they need, in return for very favourable lock-in agreements ("We will always be able to buy your product at 10% less than anyone else." That kind of thing.)
In short, Apple is thinking big & thinking long term all the time & they are reaping the benefits. Even if you don't like the products (and I personally find the whole walled garden thing somewhat creepy) you have to recognise that their strategic thinking is what's lead them to this dominant position in terms of profits.
(There's also the taking advantage of something approximating slave labour in China thing of course, but sadly that's hardly limited to Apple: like everything else they just seem to be better at it than anyone else is.)
In short, Apple is thinking big & thinking long term all the time & they are reaping the benefits. Even if you don't like the products (and I personally find the whole walled garden thing somewhat creepy) you have to recognise that their strategic thinking is what's lead them to this dominant position in terms of profits.
(There's also the taking advantage of something approximating slave labour in China thing of course, but sadly that's hardly limited to Apple: like everything else they just seem to be better at it than anyone else is.)
It’s worth pointing out that this isn’t profit share of the entire global market, but profit share of the space occupied by 8 competing phone companies. There is of course a lot to be gleaned from this chart, but I’d like to see the same with an ‘Other’ bracket too.
I wonder if the innovator's dilemma will apply here, with cheap Android phones (and Windows too) catching up with the iPhone and they can no longer charge a premium.
I doubt it, for several reasons.
1) The premium is invisible at the point of purchase... the iPhone 3GS is free, and the iPhone 4 costs $99.
Where Apple seems to be getting its profits are in the prices paid by the networks. I'm sure Verizon would love to pay Apple the same rate for the iPhone that it pays for, say, the HTC Rezound. But if Verizon drops the Rezound from their lineup, no one will care. If they drop the iPhone, they're going to lose share, because a substantial chunk of those customers will slowly bleed off to AT&T.
And AT&T is not going to play hardball with Apple. AT&T has witnessed first hand what having Apple in your corner does to your marketshare, and they will not fuck with that.
2) Android doesn't actually have a price advantage. IPhones aren't more expensive to build than Android phones, nor are the licensing costs cheaper. Apple has strong supply chain and patent advantages here, matched perhaps only by Samsung.
3) Achieving parity with Apple is proving pretty difficult. Android has strategic innovations in licensing and openness, but Apple has strategic innovations in supply chain, battery life, credit card database, and design that are entrenched. Entrenched in that even if Google/Samsung put their organizational oomph behind matching them, it's not certain they would succeed.
1) The premium is invisible at the point of purchase... the iPhone 3GS is free, and the iPhone 4 costs $99.
Where Apple seems to be getting its profits are in the prices paid by the networks. I'm sure Verizon would love to pay Apple the same rate for the iPhone that it pays for, say, the HTC Rezound. But if Verizon drops the Rezound from their lineup, no one will care. If they drop the iPhone, they're going to lose share, because a substantial chunk of those customers will slowly bleed off to AT&T.
And AT&T is not going to play hardball with Apple. AT&T has witnessed first hand what having Apple in your corner does to your marketshare, and they will not fuck with that.
2) Android doesn't actually have a price advantage. IPhones aren't more expensive to build than Android phones, nor are the licensing costs cheaper. Apple has strong supply chain and patent advantages here, matched perhaps only by Samsung.
3) Achieving parity with Apple is proving pretty difficult. Android has strategic innovations in licensing and openness, but Apple has strategic innovations in supply chain, battery life, credit card database, and design that are entrenched. Entrenched in that even if Google/Samsung put their organizational oomph behind matching them, it's not certain they would succeed.
Are those figures just from USA? As article doesn't mentioned it I assumed they are worldwide which makes your observations misleading. IPhone is available to "unlocked" purchase in many countries (and it is really expensive phone then[1]) and even if you buy it with contract it doesn't get that cheap everywhere. So in many countries, the premium is very visible.
1. http://www.flickr.com/photos/choreographics/4836719813/sizes...
1. http://www.flickr.com/photos/choreographics/4836719813/sizes...
>AT&T has witnessed first hand what having Apple in your corner does to your marketshare, and they will not fuck with that.
I'm pretty sure AT&T/Cingular was the largest wireless provider before the iPhone. Perhaps the iPhone kept them going while they would have been bleeding to Verizon*, but it's hard to say.
I'm pretty sure AT&T/Cingular was the largest wireless provider before the iPhone. Perhaps the iPhone kept them going while they would have been bleeding to Verizon*, but it's hard to say.
> I'm pretty sure AT&T/Cingular was the largest wireless provider before the iPhone.
Verizon was.
Verizon was.
I'm pretty sure AT&T/Cingular was the largest wireless provider before the iPhone.
Nope: http://www.engadget.com/2007/04/11/verizon-retakes-us-wirele...
Nope: http://www.engadget.com/2007/04/11/verizon-retakes-us-wirele...
Hmmm... so much of those numbers are confused not by actual subscriber decisions though, but by mergers (Cingular/AT&T then Verizon/Alltel). It's very difficult to say how the iPhone affected market share because companies were busy buying and selling subscribers. I'd like to see new user contracts between June 30, 2007 (iPhone release) and now. But... not enough that I'm going to go digging.
Apple entered the phone market because the performance of the existing, fragmented system was so low that it essentially required a fully integrated solution (OS, phone hardware, cloud, application/media store) to repair it. The performance of "iPhone" was and continues to be significantly higher than the competition, leading to all of the industry's profits pooling to them.
The best angle of disruption now would be for higher performance individual solutions (i.e non-integrated components) to emerge that work together seamlessly (through defined standards).
From my perspective, it does not appear that non-Apple players have defined enough standards around each component such that consumers can easily move between various solutions (OS, hardware, cloud, app/media store) that could, on their own, be considered better than any of Apple's pieces.
Until that happens, I don't think we will see disruption. Trying to out-integrate Apple is probably not a wise competitive choice at this point. Apple continues to buy more of the value chain (e.g. Anobit), suggesting they believe more performance can be wrung out of an integrated system and help them maintain a significant competitive advantage across price, functionality, convenience and reliability.
The best angle of disruption now would be for higher performance individual solutions (i.e non-integrated components) to emerge that work together seamlessly (through defined standards).
From my perspective, it does not appear that non-Apple players have defined enough standards around each component such that consumers can easily move between various solutions (OS, hardware, cloud, app/media store) that could, on their own, be considered better than any of Apple's pieces.
Until that happens, I don't think we will see disruption. Trying to out-integrate Apple is probably not a wise competitive choice at this point. Apple continues to buy more of the value chain (e.g. Anobit), suggesting they believe more performance can be wrung out of an integrated system and help them maintain a significant competitive advantage across price, functionality, convenience and reliability.
probably not, because apple's primary innovation isn't technical, it's fashion. as long as apple can maintain the iPhone's position as a desirable fashion item they'll be fine.
Android already has a higher market share (flooding the market with cheap phones) for a couple of years now.
I take any comparison between Apple and Samsung financials with a grain of salt. The two companies have vastly different reporting requirements and ownership/control structures.
To a lesser degree, this also applies to the other not-US companies listed.
To a lesser degree, this also applies to the other not-US companies listed.
It's also interesting how well Samsung has protected its profits.
Q4 2008 was the only time they really struggled, but their Android devices seem to have done well in gaining the share back quickly and protecting it well.
Q4 2008 was the only time they really struggled, but their Android devices seem to have done well in gaining the share back quickly and protecting it well.
And, more surprisingly, the same for is true RIM, except the last quarter. Nokia is the big looser.
So this proves yet again that Apple products are ridiculously priced :)
It proves the opposite, that Apple's products are priced appropriately as evidenced by their increasing profits. Read: http://en.wikipedia.org/wiki/Subjective_theory_of_value
In Austria people take Android smartphones for free with their contracts but outside of a hardcore geek circles I have never heard of anyone paying up front for one. They are simply cheap enough to be a substitute for featurephones.
I know people earning less than 1500$ per month who pony up 300eur and 40 per month for an iphone.
At least here Apple has won the smartphone wars.
Is this because Apple sells so many more high-end phones than (say) HTC? Or is this because HTC has lower margins on its high-end offerings?
Small nitpick...
"As the iPhone's share of the market in terms of units shipped has grown from 3% in second quarter of 2010 to 8.7% last quarter, Apple's share of the profits has swelled from 39% to 75%"
Eyeballing the graph, it doesn't look to me like Apple's share of the profits was 39% in Q2 2010, more like 60%. Anyone else see this?
"As the iPhone's share of the market in terms of units shipped has grown from 3% in second quarter of 2010 to 8.7% last quarter, Apple's share of the profits has swelled from 39% to 75%"
Eyeballing the graph, it doesn't look to me like Apple's share of the profits was 39% in Q2 2010, more like 60%. Anyone else see this?
It appears to reach from around the 50% mark on the graph to the 90% mark.. so 39% looks ok to me
Obligatory comment about competing on features/image/design/story/etc.. anything but price.
I cannot agree with this, at least not entirely. While it is a risky path to tread, historically market leaders have leveraged price to very great effect against newcomers, and newcomers have done the same to crack open closed markets.
See Hyundai, for example. For the past few years they have been leveraging price to gain entry to the North American auto business. It's working.
See Hyundai, for example. For the past few years they have been leveraging price to gain entry to the North American auto business. It's working.
Also worked for Wal-Mart and Amazon. Everyone else (local bookstores, boutique retailers, etc.) is desperately trying to compete on everything but price, but Wal-Mart and Amazon continue to steamroller them primarily by winning on price.
Good points. I guess my comment was a bit too all-inclusive.
lessons learned:
1., There is no such thing as a loss leader. If it doesn't make money, cut it. Apple TV is considered a hobby - but it is profitable. Yes, there is a grey area, but at Apple it is very small.
2., Your company runs on money, not market share. This has to be the focus. How can you guarantee the constant influx of enough money? Satisfied customers pay more, pay more often. The quick buck loses you money long-term.
3., Focus. You can't manage hundreds of products. you confuse your customer. Do a few things and do them extremely well. Makes it also easier to market, analyze, etc.
1., There is no such thing as a loss leader. If it doesn't make money, cut it. Apple TV is considered a hobby - but it is profitable. Yes, there is a grey area, but at Apple it is very small.
2., Your company runs on money, not market share. This has to be the focus. How can you guarantee the constant influx of enough money? Satisfied customers pay more, pay more often. The quick buck loses you money long-term.
3., Focus. You can't manage hundreds of products. you confuse your customer. Do a few things and do them extremely well. Makes it also easier to market, analyze, etc.
1., There is no such thing as a loss leader. If it doesn't make money, cut it. Apple TV is considered a hobby - but it is profitable. Yes, there is a grey area, but at Apple it is very small.
Pretty sure Apple itself contradicts this. Afaik, the iTunes music store was in fact run as a loss leader for some time, before Apple was in a position to argue for better terms. For all I know, it might still be a loss leader (though I doubt that).
Pretty sure Apple itself contradicts this. Afaik, the iTunes music store was in fact run as a loss leader for some time, before Apple was in a position to argue for better terms. For all I know, it might still be a loss leader (though I doubt that).
first thing that came to mind http://en.wikipedia.org/wiki/Pareto_principle
What is the time lag on this graph? How much of Apple profits are from amortized phone contracts that are now 2yrs old?
As of Q1 2010, Apple uses reporting that accounts for the revenues and profits of phones in the quarter that they're received. (http://investor.apple.com/financials.cfm - the Form 10-K/A explains the changes on accounting principles on the Form 10-K from how they used to be (amortized over 8 quarters) and how they are now (all reported in the quarter where they're received.))
I think that's a sign that you're paying too much for an iPhone.
I don't doubt that Apple has vastly greater profits than any of its competitors, but stats like this are cooked to make the ratio seem even more impressive than it already is. The notion that a feature phone and an iPhone are substantially in the same market is silly. It's akin to categorizing ThinkPads and land line handsets as part of the same market. Of course, journalists optimize for the most dramatic headline, not the most informative or truthful article, so we're not going to see many apples-to-apples comparisons on this subject in the tech press.
Also I have a non-rhetorical question. Apple, and several of the competitors graphed here, have many lines of non-smartphone products. Is this graph tracking the profit/loss of their smartphone divisions only, or profits of the company as a whole? If the latter, then the comparison is silly, isn't it? And if it's the former, how does this analyst account for costs shared among multiple divisions, such as iOS development (which is a cost that's shared with their iPad and to some extent even their Mac divisions)?
Also I have a non-rhetorical question. Apple, and several of the competitors graphed here, have many lines of non-smartphone products. Is this graph tracking the profit/loss of their smartphone divisions only, or profits of the company as a whole? If the latter, then the comparison is silly, isn't it? And if it's the former, how does this analyst account for costs shared among multiple divisions, such as iOS development (which is a cost that's shared with their iPad and to some extent even their Mac divisions)?
> I don't doubt that Apple has vastly greater profits than any of its competitors, but stats like this are cooked to make the ratio seem even more impressive than it already is.
The chart isn't misleading--it shows what it purports to show: the share of total profits in the cell phone market. The chart suggests that Apple has managed to capture a big %-age of the total profits in the market by targeting a high-margin niche, which is in itself a useful observation.
The chart would be misleading if it were, say, comparing profit per phone (which would for no reason make companies that sold a lot of cheap phones look worse than companies that sold fewer expensive phones) but that's not what this chart is doing.
The chart isn't misleading--it shows what it purports to show: the share of total profits in the cell phone market. The chart suggests that Apple has managed to capture a big %-age of the total profits in the market by targeting a high-margin niche, which is in itself a useful observation.
The chart would be misleading if it were, say, comparing profit per phone (which would for no reason make companies that sold a lot of cheap phones look worse than companies that sold fewer expensive phones) but that's not what this chart is doing.
Your first paragraph is fallacious.
If the graph includes feature phones then that will necessarily dilute Apple's profits since they do not make a feature phone. Therefore that makes Apple's numbers appear less impressive.
I don't have an answer to your questions, but I'm sure Mr. Dediu would be happy to answer them transparently. He's not a journalist cooking sensational stats, he's a serious amateur analyst who tries to make revealing graphs with an intellectual honesty that is refreshing and a community-driven feedback process that is producing better punditry than most of the professionals. I know a lot of people have a chip on their shoulder about Apple, but it is possible to be both interested and impressed by Apple and also still be a rational observer.
If the graph includes feature phones then that will necessarily dilute Apple's profits since they do not make a feature phone. Therefore that makes Apple's numbers appear less impressive.
I don't have an answer to your questions, but I'm sure Mr. Dediu would be happy to answer them transparently. He's not a journalist cooking sensational stats, he's a serious amateur analyst who tries to make revealing graphs with an intellectual honesty that is refreshing and a community-driven feedback process that is producing better punditry than most of the professionals. I know a lot of people have a chip on their shoulder about Apple, but it is possible to be both interested and impressed by Apple and also still be a rational observer.
The headline manufactures drama from the contrast between "8.7% market share [in units sold]" and 75% of profits. This is the silly part of the coverage.
It's not Dediu's fault that Elmer-Dewitt at CNN Money chose to be ridiculous, so your defense of Dediu's integrity is beside the point.
It's not Dediu's fault that Elmer-Dewitt at CNN Money chose to be ridiculous, so your defense of Dediu's integrity is beside the point.
> This is the silly part of the coverage.