Apple’s iPhone is causing outrage in the mobile industry with its outrageous performance. Apple’s focus on an exclusive product and prestigious brand has allowed the company to claim more profits than all its major competitors combined, with a mere fraction of market share. Apple’s iPhone is so popular the “Antennagate” issue of last summer had virtually no effect on sales. Analysts are saying Apple’s domination of the mobile industry makes it unlikely that Android, which depends on devices that compete on price, could ever pose a threat.
Apple turns innovations into cash
Apple’s domination of the mobile industry was reported on Sept. 21 by Fortune on CNN.com. Fund market analyst Canaccord Genuity gave Apple stock a “buy” rating and price target of $356 per share. The analyst’s recommendations included data showing how Apple is turning its innovations into cash. The company sold 17 million iPhones in the first half of 2010–a 3 percent market share. Samsung, Nokia and LG–the world’s three largest handset makers–sold 400 million units combined. Apple collected 39 percent of the mobile industry’s profits during that time. Samsung, Nokia and LG shared 32 percent of industry profits. Canaccord Genuity pointed out that most handset companies struggle to make a profit or even 10 percent operating margins. It estimated that Apple makes about 50 percent gross margin and more than 30 percent operating margin for its iPhone.
What’s behind Apple’s business model?
Producing 3 percent of an industry’s products to make almost 40 percent of the industry’s profit was unheard of until Apple came along with the iPhone. Jason Mick at Daily Tech outlines a few practical reasons why Apple makes more profit per phone than its competitors. Mick writes that because the iPhone is so popular, AT&T has given Apple an extremely lucrative contract to grow its subscriber base. Apple also uses cheaper hardware than top-of-the-line Android competitors. Plus, Apple is extremely aggressive in negotiating with manufacturers for higher volume and lower prices. This strategy gives Apple plenty of money to innovate in the battle against Android. But Mick said why bother? All Apple has to do is keep its loyal customers happy.
The unstoppable iPhone
Apple has been able to maintain a high level of customer satisfaction despite Antennagate. The “Death Grip” reception issues that fanned much media attention upon the release of the iPhone 4G didn’t phase the company. Consumer Reports started the Antennagate furor in July when it said it would not recommend the iPhone. It still won’t. But Computerworld reports that Apple’s iPhone took first place for the fourth consecutive year in J.D. Power and Associates’ smartphone customer satisfaction rankings.
Daily Tech: http://www.dailytech.com/Apple+Sells+28+Percent+of+Mobile+Phones+Makes+39+Percent+of+Profits/article19699.htm
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