Apple Tops Handset Profits, Samsung & Nokia Struggle To Keep Up

Nov 11 2009, 11:07am CST | by Robert Evans

Despite being in the smartphone business for just two years, Apple is already kicking the pants off of their biggest rivals. Reuters reports today that Apple is now officially the top profit generator in the entire mobile device industry. Analysts estimate Apple's total operating profit at around $1.6 billion in the third quarter. Nokia, the second place manufacturer, only made $1.1 billion over the same period.

It's not hard to see why. The iPhone sells in high volume, has a very solid profit margin for Apple, and generates extremely high loyalty among customers. People who buy an iPhone tend to replace it with another iPhone. There are comparatively few cases of iPhone users dropping their smartphone for another manufacturer's gadget. It does happen, but users of other platforms jumping ship to go Apple is much more common.

Another reason Apple has the edge over Nokia is feature phones. Nokia sold a total of 108.5 million phones in Q3, but generated less profit than Apple. The Cupertino-based company, on the other hand, only sold 7.4 million devices. The feature phone market is in a period of contraction, and the plummeting economy has shaved profit margins for the devices to a razor-thin level. Nokia is stuck developing and supporting many lines of 'dumbphone', while Apple just has the iPhone to worry about.

Small, nimble companies (which Apple is, when it comes to handsets) will always have an advantage over ponderous dinosaurs in times of rapid change. The smartphone market is poised to grow another 20-30% over the year, and only manufacturers like Apple will be able to reap the full benefits. Nokia has several smartphones (the N900 just launched) but they have too many other interests to capitalize fully on the smartphone boom.

Even companies that focus solely on smartphones, like HTC, are seeing a drop in revenue though. There was a decrease in smartphone growth this quarter, down from 17% in Q2 to 5% in Q3. Apple didn't suffer from the slowdown, but lesser-known manufacturers with a smaller brand footprint certainly did. Once again, Apple's die-hard fanbase proves to be a huge reason for their continuing success.

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Robert Evans
The excitement about new smartphones, tablets and anything mobile drive Robert to unearth the latest rumors and developments in this fast moving space. He adopted 4G as soon as it become available and knows where the mobile market is going.
Robert can be contacted directly at robert@i4u.com.