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Apple Grabs 70% of Global Smartphone Profits in Q4 Despite all the Talk of Samsung being the New Mobile Leader

T 01 - Patently Informative
With all the talk in the press about Samsung being the king of smartphones, the real stats show a much different picture. It was reported last week that Apple has surpassed Samsung to become the top mobile-phone maker in the U.S. and a new report issued by Hong Kong's Counterpoint Research clearly acknowledges that Apple nabbed 70% of the global smartphone profits, Samsung 25% and Nokia 2%. How great is Samsung's leadership when they could only muster about a third of Apple's profits while offering 5 to 10 more smartphone models than Apple? It just goes to prove that Samsung's so-called smartphone leadership is in bravado alone pumped up by the press who thinks that market share is the only measure of leadership.  


The Korean sourced report states that Apple and Samsung Electronics took 95% of the total operating profit, up from 66% in the fourth quarter of 2011. Yet despite an increase in the number of smartphone subscribers, mobile operators saw their earnings rate dip at the tail of discounted rates and subsidies.

In the fourth quarter of 2012 when the full-blown sale of the iPhone 5 kicked in, Verizon Wireless and AT&T, the two major US mobile carriers, saw their fourth-quarter net loss widen to 4.2 billion US and 3.86 billion US, respectively.


It is also true of Korean mobile carriers. KT and LG U+ posted a weak operating profit margin owing to various kinds of subsidies and rising marketing costs that came amid increased investment in 4G LTE services. This is why KT and others like Lenovo are whining about carrier subsidies holding back their sales.


Counterpoint Research's Peter Richardson noted in his report that "Mobile carriers in the US and other advanced markets are cutting their subsidies due to deteriorating revenue structures. China is the only market where subsidies are on the rise. Thus, the fate of mobile phone makers will hinge on their responses to the Chinese market this year." 


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From the article: "In the fourth quarter of 2012 when the full-blown sale of the iPhone 5 kicked in, Verizon Wireless and AT&T, the two major US mobile carriers, saw their fourth-quarter net loss widen to 4.2 billion US and 3.86 billion US, respectively."

Both Verizon and AT&T reported that their loss increased due to Hurricane Sandy, and Pension Costs. The statement above insinuates that it was due to selling more iPhones, and fails to mention the statements issued by the companies, regarding why their loss increased in the 4th quarter of 2012. Without the hit on earnings due to Hurricane Sandy, and Pension Costs issues, both company would have made a profit.$3.9b-sells-8.6m-iphones/


Profits don't mean anything to Wall Street when it comes to smartphones. Only having major market share matters. They've made sure that Apple can't win because only Android can have major global market share due to the lower cost of the entering the platform for both companies and consumers. The whole goal of Google's Android was to capture major market share by putting Android OS on as many devices as possible. Apple's goal with iOS was to put iPhones into as many consumers' hands who were willing to pay a higher price for a higher quality device and have the best experience possible. That goal in itself would not allow major global market share. It's like comparing Toyota with BMW and expecting BMW to sell as many vehicles globally as Toyota in BRIC nations. That's completely unreasonable and I think it would be insulting to tell BMW to just build cheaper vehicles and lower their standards to gain market share.

It's Wall Street that has decided a low-cost platform is worth more in value and has a better chance of long-term survival. They've decided that iOS has no future and that everyone will decide to use Android due to its low cost. Wall Street is basically saying that only Android will survive and iOS will die. That's seems like a pretty far-fetched assumption. I honestly don't understand why Wall Street is trying to undermine Apple, an American company to boost Samsung, a S. Korean company. Such a decision really seems anti-American.

Hedge funds are only in it for the quick money and don't really care about companies, per se. They're not real investors, but money movers.

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