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Apple's Profits Crush Nokia's (And Everyone Else's)

Based on the performance of both Apple and Nokia in the most recent financial quarter, Apple is now the most profitable maker of cell phones. It earned $1.6 billion in profits compared to Nokia's $1.1 billion. Nokia, by the way, sells hundreds of millions more phones than Apple does.

Right now Apple is offering just three iPhone models -- two of which are really the same phone. The iPhone 3G continues to be for sale, and the iPhone 3GS comes in 16GB and 32GB flavors. All other specs are the same. In comparison, Nokia has hundreds of different models actively for sale in pretty much every market where cell phones are available.

It's a curiosity, then, that Apple was able to surpass Nokia in profitability by a wide margin. Alex Spektor, Analyst at Strategy Analytics, said, “We estimate Apple’s operating profit for its iPhone handset division stood at $1.6 billion in the third quarter of 2009. Apple overtook Nokia for the first time, which recorded a lower $1.1 billion of operating profit. With strong volumes, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years.”

Strategy Analytics looked strictly at both firms' handset divisions, and discounted their other business units. Apple also sells computers, accessories, and software. Nokia also sells software, services and networking equipment.

Apple's huge advantage here has to come from R&D expenditures. With just two models in the market, its R&D spend has to be an order of magnitude less than what Nokia spends to design, engineer, manufacture and ship hundreds of millions of phones around the world. Surely myriad other factors are playing a role here that put Nokia at a disadvantage when it comes to this type of comparison.

It's still pretty amazing to think, however, that one phone can generate more profit than hundreds.

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