iPhone rules phone profits

Apple has achieved disproportionate influence in the cellphone market this year, says Bernstein Research analyst Toni Sacconaghi. Calculating figures from the first half of 2009, Sacconaghi notes that while Apple was only the fifth-largest cellphone maker, with 8 percent of revenues, it did manage to obtain 32 percent of operating profits. "Even if we exclude the operating losses generated by Motorola and Sony Ericsson, Apple still accounted for 25 percent of industry profits," says the analyst.

"iPhone’s success is akin to Apple’s position in the PC industry -- where the company enjoys an estimated 25 percent of industry profits, despite capturing only 6 percent of industry revenues," he adds.

Market control is thought to be attributable to Apple being the first with a tightly-integrated mix of phone and software distribution. "With the iPhone and its Apps Store [sic], Apple has established a formidable smartphone ecosystem, which history suggests is very difficult to overcome," says Sacconaghi. The iPhone platform could in fact become a standard, he argues, in the same way that many media players now attempt to imitate the iPod.

It is argued that a number of single-purpose devices, including the iPod, will eventually become merged to form products like the iPhone, integrating technology such as cameras and GPS receivers. Apple has the advantage of more easily migrating people to such advanced products; Sacconaghi cautions, however, that while Apple may presently be able to out-accelerate the rest of the cellphone market, it could have to lower prices to go any faster. Helping would be a cheaper, dataless iPhone, the analyst comments.

by MacNN Staff