Even as Android Obliterates Smartphone Market and widens its lead, Apple harvests the most profit for now

Aug 7, 2013

Android Obliterates Smartphone Market

By Will Connors


While Google‘sGOOG -0.66% Android operating system continues to distance itself from the competition in the world-wide smartphone market, one-time market leaderBlackBerryBB.T -3.33% is reaching new lows. Android’s market share jumped to 79.3% in the second quarter, from 69.1% a year earlier helped in large part to a rush of new phones from Chinese handset makers. The only other operating system that gained was Microsoft’s Windows Phone, which still has a paltry 3.7% compared with 3.1% last year. But it overtook BlackBerry as the No. 3 smartphone operating system thanks in part to Nokia‘sNOK1V.HE -0.78% new lineup of Lumia phones.BlackBerry, which launched its new BlackBerry 10 operating system in January, has a worldwide market share of just 3%, down from 5% a year ago, according to IDC’s latest market share report released Wednesday. BlackBerry’s showing was so weak that IDC noted in its release that the Canadian company had reached “levels not seen in the history of IDC’s mobile phone tracker.”

The IDC report points out that “it is still early days for the platform” and that “BlackBerry will need time and resources to evangelize more end users,” but at least one phone running on the new operating system, the Z10, has not been a success. Last month BlackBerry started discounting the Z10 less than four months after its launch, and the phone can now be purchased for free on a two-year contract at retailers like Best Buy Co. Inc.

Apple’s iOS is falling further behind Android as the company prepares a new iPhone. While the number of shipments increased 20%, its market share declined to 13.2% from 16.6%.

But market share is everything. Apple is making far more more money from its iPhones than its rivals. Its average sales price, excluding carrier subsidies, was $710 in 2012, compared with an industry average for smartphones that year of $407, IDC estimates.

Samsung, which is No. 1 by unit shipments, and No. 2 Apple account for essentially all of the industry’s profit, Canaccord Genuity estimates. The firm puts Apple’s second-quarter smartphone operating profit at $5.99 billion, with an operating margin of 33%; it estimates Samsung’s profit at $5.63 billion, or 19%, including both smartphones and other handsets. Many others such as BlackBerry and Nokia are losing money in the business, it estimates.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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