Say what you will about Apple, but one thing’s for sure, they sure know how to make money.
In a recent report on the cellphone industry, Deutsche Bank analyst Brian Modoff found that even though Apple’s worldwide share of the cellphone market only comes in at 1%, it accounts for 20% of the industry’s profits. This large discrepancy is attributable to the uniquely high subsidies Apple receives from AT&T for each iPhone, a figure estimated to be as high as $400 per phone.
Also raking in the dough is RIM, which has less than a 2% share of the cellphone market but accounts for over 15% of the industry’s profits. Taken together, Apple and RIM account for less than 3% of the worldwide cellphone market but account for an astounding 38% of its profits.
If there were ever a report that highlights the shortsightedness of focusing solely on market share, then this is it.
The Wall Street Journal writes:
Both Apple and RIM have advantages with segments of the market that will make them tough to beat. The iPhone boasts thousands of consumer applications churned out by outside developers, while BlackBerry’s email service is popular for its efficiency and security.
That hasn’t stopped others from trying to jump in. Smart-phone pioneer Palm Inc., once counted out of the race, is getting attention for its new Pre device. But it is unclear how many developers will leap to write programs for a phone with limited distribution.
All this portends badly for computer companies trying to break into the cellphone market, like Acer or Dell. They will need to tout their scale, production prowess and slim margins to gain a foothold.