back to article Elitist approach still paying off for Apple in mobile market

Android and iOS increased their domination of the smartphone market in 2013, with over 95 per cent of all sales in what proved to be the industry's first billion-unit shipment year, according to the latest research. According to analyst house IDC, Android was able to extend its lead in the space by claiming 78.1 per cent of all …

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Patrick Seitz reporting for Investors.com

"Apple and Samsung continue to soak up all the industry’s profits, McCourt says. Apple claimed 87.4% of phone earnings before interest and taxes in the fourth quarter, he said. Samsung took in 32.2% of industry profits. Because their combined earnings were higher than the industry’s total earnings as a result of many vendors losing money in Q4, Apple and Samsung mathematically accounted for more than 100% of the industry’s earnings."

Kinda paints a different picture of which company is dominant.

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The daftness of the quote underlines the daftness of the conclusion: you can't have a sum of the parts being more than the whole.

Sure, Apple and Samsung are profiting most from the business but that does not mean everyone else is making a loss.

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Apple have always gone for the premium market, be that in PCs, phones or MP3 players. The volumes might not be there, but the profits sure are.

At the end of the day the way the shareholders look at things is if you are nice and profitable, then everything else is just boring details.

Market share by handsets is a useless measure. What matters is profit. The shareholders don't care if you were profitable with 10% of the market share of 90%.

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Holmes

So that's why Nokia are going Android

Either that, or continue to scrap around in the rapidly shrinking 5% "others" section.

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Re: So that's why Nokia are going Android

Did you read the article? Windows Phone is gaining ground, albeit slowly...

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Anonymous Coward

Re: So that's why Nokia are going Android

It's pretty much a rounding error when iOS and Android have so much of the market everyone else is slugging it out over single digit market shares.

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A problem Apple faces is maintaining the share price and that price is based on expectation that they will continue as before which in recent times has involved a lot of growth. It is much harder to get growth by being a niche player selling high priced goods very profitably but with little growth.

All smart phone manufacturers also face a saturating market which is why they are desperate to get into emerging markets, particularly China. However that has to end somewhere at some point and they all settle down to being in a replacement market as exists with PCs right now. Not much growth there but it can be quite profitable if the company is well structured to deal with reality as some vehicle manufacturers are.

Apple has been making noises about wonderful earth shattering new products but they have not yet arrived and only when new products get released will the market determine how successful they are. No business can grow forever and some do very badly at adapting to stable conditions, market analysts do not help either by wanting perpetual amazing growth.

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Incorrect

Apple's share price doesn't predict any future growth at all. Its P/E is very low (below 10 if you back out that massive cash holdings) and is not much higher than that of utilities, and in the same ballpark as industrial giants like Exxon.

Their share price can't really get much lower than it is now for a sustained period of time unless market sentiment said that they were going to shrink in the future.

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Re: Incorrect

The share price of every company on the market is based on investors expectations of future earnings.

Apple is not exempt from market forces.

Apple share price went sky high on some over enthusiastic estimates of future earnings and fell back when they were not realised. If they do come out with some of the magic new products promised then the price will surge again. If, as may well happen based on the history of companies where the founder departs and professional managers move in, Apple settles down to be just another decent company making decent stuff then their share price will stay in the range which reflects the market view of its future earnings.

If Apple is being rated along with the utilities at the moment then that is because the market sees that value as reflecting its earnings potential. Exxon has strengths and prospective future earnings better than Apple is the market judgement despite what Apple fans may think.

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Anonymous Coward

Re: Incorrect

"Apple is not exempt from investor stupidity"

Fixed that for you.

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jai
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A problem Apple faces is maintaining the share price

Is this a problem that Apple faces, or a problem that people who have bought Apple shares face?

If Apple's share price remains the same or drops a bit, but they are still making the most profit (http://news.investors.com/technology-click/021114-689654-2014-mobile-phone-market-to-see-little-or-no-growth.htm) then is it really a problem for the company itself (sure, the upper management will be disappointed as part of their pay is in shares/options isn't it?) but the company isn't going to be unable to function because the share price drops. It's not even as if they need a high share price / rating to allow them to borrow more money - they just dip into the huge cash reserves.

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Anonymous Coward

Apple are pretty smart - when the share price drops they repurchase their own shares - good for them (saves them money on employee share schemes and less future dividends to pay out) and good for their investors as means they now own a proportionally bigger share of the company. Yes I'd generally rather see companies return surplus cash as divided but if they can save money on employee share scheme purchases it's still good.

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Anonymous Coward

Re: Incorrect

At this share price Apple are cheap (IMHO) - I'm almost surprised they do not borrow money to buy back their own shares. Their cash pile is already about 1/3 of their market cap - they are still making huge profits - would almost make sense to be a private company as they do not need the stock market to fuel their operations etc.

Effectively (but in a small way) this is what they are doing with the buy backs.

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Anonymous Coward

Re: Incorrect

Theoretically if Apple could borrow $500bn - repatriate some of it's cash mountain and offset against the interest on the loan it would really cost $300-350bn-ish. Now how many years of profits would it take to repay that loan = about 5-6 and that assumes zero growth.

In reality as a now private company it would have billions more in dividends it no longer has to pay - so it's like buying something over 5-6 years - paying for it out of the profits it generates and owning it and all future profits after that.

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Trollface

Trends

Seems to me that Android is hovering dangerously close to "monopoly" territory now, and its rivals should be supported just to maintain a semblence of competition.

That'd be easier if iOS7 wasn't such a disaster, of course. But I hear good things about Windows Phone 8. Maybe 2014 will be the year of Nokia's comeback.

Oh, and Linux on the desktop, obviously.

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Re: Trends

"Oh, and Linux on the desktop, obviously"

You know, we've been saying that since the 90s. One year, simply by the law of averages, it HAS to be true.

Doesn't it?

Nurse?

Please tell me it will happen

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Re: Trends

"That'd be easier if IOS7 wasn't such a disaster"

WTF?

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Anonymous Coward

Re: Trends

"Doesn't it?

Nurse?

Please tell me it will happen"

I'm never particularly fast on the uptake, at this hour, but I think the comment you refer to was merely sarcastic.....

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Anonymous Coward

Re: Trends

Think it's very much the minority who do not (now) like iOS 7 - yes it was a bit of a change and we know how sensitive some folks are to change - but I've not spoken to anyone recently who has issues with it.

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Happy

Re: Trends

"Seems to me that Android is hovering dangerously close to "monopoly" territory now, and its rivals should be supported just to maintain a semblence of competition.

That'd be easier if iOS7 wasn't such a disaster, of course. But I hear good things about Windows Phone 8. Maybe 2014 will be the year of Nokia's comeback.

Oh, and Linux on the desktop, obviously."

You nearly had me goin' there!!!!

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'Experience the world, TOMORROW, now....'

Quite a simple strategy. Queue the dim lights, the piano music and deep male Brit voice. Start with 'magical' then add a 'first EVER (iPhone) with' ...... carry on to 'revolutionary' (4 inch).... add 'NEVER BEFORE SEEN' (on iPhone) [I can think of a few things there but I digress]

Oh one more thing remember you are the more intelligent and savvy of the human kind.

Insert repeat payment here. Love your purse and heels BTW.

Or converse(tm) shoes and skinny jeans

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So what does Kantar say now?

IDC says Windows Phone managed very small growth in 2013 to about 3 %. Kantar has for months been banging on about Windows Phone gaining 10 % and more in key markets. Hm, who to believe?

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Anonymous Coward

Re: So what does Kantar say now?

"IDC says Windows Phone managed very small growth in 2013 to about 3 %. Kantar has for months been banging on about Windows Phone gaining 10 % and more in key markets. Hm, who to believe?"

Who cares less?

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Anonymous Coward

Seems my posts disappear! I've submitted this 3 times now!

Being seen with 2007 tech in your hand is not elitist. Every chavboi has one.

Execs love iPhone! The same execs who have only just started a migration away from XP 2 months before its declared dead!

iPhone is last decades news. Unless apple can actually offer 2014 tech/features and not just regurgitate the same old iPhone, they will be dead in the water, only supported by the die hards who still believe their choice of phone makes them something special! Poor folk.

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