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5/7/2013
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Apple, Samsung Chew Up Smartphone Profits

Samsung eats into Apple's profits in Q1, but the two smartphone giants' closest competitor took only 1% of the sector's profits.

Samsung Galaxy S 4: 11 Clever Tricks
Samsung Galaxy S 4: 11 Clever Tricks
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BlackBerry, HTC, Nokia and Sony together account for 0% of all the profits in the smartphone industry. LG can brag to these companies about its success, because it holds about 1% of the industry's profits. Motorola, well, it is in the hole and has -1% of the smartphone industry's profits due to its continued losses. Huawei, Kyocera, Pantech and ZTE's collective profits don't even hit the scale.

It almost makes you wonder why these companies bother at all.

The rest of the profits -- all of them -- belong to Apple and Samsung, according to data from Canaccord Genuity. Globally, Apple captured a whopping 57% of the profits in the smartphone space during the first quarter of 2013. Samsung followed with 43% (the numbers add up to more than 100% due to rounding). It's hard to believe, but this quarter's numbers are actually a decrease from the fourth quarter of 2012, when Apple and Samsung took 103% of the profits.

[ Could a government stamp of approval change the smartphone market balance? Read BlackBerry, Samsung Get Pentagon Nod Of Approval. ]

"Due to operating losses from smaller scale competitors, Apple and Samsung's combined share of industry profits have exceeded 100% in previous quarters," said Canaccord Genuity's T. Michael Walkley. "While Apple and Samsung continue to dominate the share of industry profits, improving cost structures and results from other OEMs have reduced Apple and Samsung's combined share to 100% from levels above 100% the past several quarters."

As it happens, Samsung made significant gains against Apple when comparing the companies' fourth-quarter profits. Apple held 72% of the profits during the last three months of 2012 (69% for the full year), while Samsung grabbed 29% (34% for the full year). This quarter's numbers reflect a large swing in Samsung's favor.

Walkley thinks this swing might accelerate during the second quarter of this year. "During the June quarter, we believe softer iPhone sales combined with strong Samsung Galaxy S4 sales could result in Samsung surpassing Apple for the top share of handset industry profits," he said.

The Galaxy S4 has reached most U.S. carriers in recent weeks. The Apple iPhone 5, meanwhile, has been around for about eight months already, and a refresh isn't expected until September or October. Last year, the Galaxy S3 arrived at about the same time, and sales outpaced the iPhone 4S during the third quarter. Samsung may be setting itself up for a repeat of that performance.

Beyond the Apple-Samsung battle, the hoped-for third ecosystem is nowhere in terms of profits nor market share. U.S. carriers would like to see another platform, be it BlackBerry, Windows Phone or other OS, gain strength against Apple's iOS and Google's Android. Based on profits and market share, that's not happening anytime soon.

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PJS880
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PJS880,
User Rank: Apprentice
6/5/2013 | 3:07:55 PM
re: Apple, Samsung Chew Up Smartphone Profits
Is it any wonder that
the 2 companies that re leading the mobile industry and basically have a chokehold
on the mobile device industry is reaping all the profits in that market? Apple
is probably winning because the devices cost a little more. The last I read
Samsung was in the lead with sold numbered devices. It does make you question
why the others in the industry even bother when they are in the red and not
making a cent.

Paul Sprague

InformationWeek Contributor
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