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iPhone profits greatly exceed number of phones sold

updated 03:20 pm EDT, Tue September 21, 2010

Apple reaps high margins off each device

Apple's share of cellphone industry profits is vastly disproportionate to the number of iPhones it actually sells, notes Canaccord Genuity analyst T. Michael Walkley. Apple sold approximately 17 million iPhones in the first half of 2010, as compared to the 400 million or so devices sold by Nokia, Samsung and LG combined. In spite of this, Apple took in 39 percent of industry profits, next to the 32 percent claimed by its three rivals. A mere 29 percent was claimed by remaining companies.

The situation exists because of the high margins Apple pulls in from every iPhone, notes Walkley. Whereas most cellphone makers "struggle to post a profit or even 10 percent operating margins," the analyst remarks, "we [Canaccord] estimate Apple boasts roughly 50 percent gross margin and 30+ percent operating margin for its iPhone products." Other notable exceptions to low margins include BlackBerry maker RIM, and HTC, which has been thriving on Android smartphones.








by MacNN Staff

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Comments

  1. dliup

    Joined: Dec 1969

    +14

    duh

    Of course. The other companies are basically giving their phones away to "gain" market share.

  1. lkrupp

    Joined: Dec 1969

    +8

    Reality...

    The haters always harp on how expensive Apple products are, and criticize the profit margins, the so-called Apple tax. Yet people have a choice and they are choosing to buy Apple products. Calling them stupid or lemmings for doing so just doesn't ad up but it's all the haters have to argue about. Their universe is dark and cold, devoid of satisfaction.

  1. chas_m

    Joined:

    +8

    No surprise

    I would wager that if you looked at Apple's computer profits in the same fashion, you'd get an even more surprisingly large piece of the pie.

    Apple has never been interested in the "price is everything" consumer, because you can't make money on those people. Most of the computer makers who have *tried* to cater exclusively to that market either found themselves near bankrupt, or at the bottom of the quality rankings.

  1. ggirton

    Joined: Dec 1969

    +5

    The reason is interesting...

    The reason for this is interesting. Do you know why the iPhone profits greatly exceed the number of phones sold? It is very clever. Although it's kind of complicated overall, basically, it is because when Apple sells an iPhone, they make more than a dollar!

    And, over time, making multiple dollars per phone, it really adds up, so that in the final analysis, the iPhone profits greatly exceed the number of phones sold. And I think the same is true of many of their other products.

  1. Foe Hammer

    Joined: Dec 1969

    0

    You Mean ...

    ... that Apple won't be doing any "buy one, get one free" deals for the iPhone any time soon like everyone else either? And to think I was holding my breath.

  1. legacyb4

    Joined: Dec 1969

    +1

    What an amazing observation!

    This guy obviously went to school from the sounds of it. If you sell something that yields greater than a 1:1 ratio ($s to units), you will obviously have more dollars than units sold at the end of the day.

  1. global.philosopher

    Joined: Dec 1969

    +2

    Apple enjoy making technology

    The real story here is that Apple enjoy the industry. They started as a smalll garage operation and were one of the few companies to succeed in the early days and then not get squashed by the Microsoft juggernaut. They continued on through the lean years and came through in the 2000's better for it. All along they continued doing what they always did....looked at how to create new technologies (hardware and software)...ie. they love to innovate. They charge for their products and get good return on investment because they innovate and then so that they can continue their love for R&D and sell new bleeding edge technologies. Their employees love to come to work each day because they know they are are working for a company that are doing new things everyday. Look at the rest (Samsung, etc)...it must be demotivating working for a company that can only ride on the coattails of other companies work (Apple, Google, etc). They are only in the industry to make money...not because they love technology. They will always be seeking to server the price sensitive consumers and that IS WHY they only get small profits for their work.

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