iOS May Be Slipping but Apple’s Profit Margin Is Excellent

Back in June, reports showed that Google’s Android surpassed Apple’s iOS platform to become the third most popular smartphone OS in the world. Last week, a new marketing intelligence report from comScore shows not only Apple, but RIM, Microsoft and Palm all losing ground to Android in the U.S. Yet today, Fortune Magazine reports a very different picture when it comes to Apple’s profits with regards to mobile handset sales.

The numbers are staggering. In the first half of 2010, Apple sold only 17 million of the over 600 million handsets sold worldwide. Yet for the same time period, Apple’s share of industry profits was an impressive 39%! That level of profitability is the reason why Canaccord Genuity’s new Apple specialist T. Michael Walkley gave them a “buy” rating with a target per share price of $356.

As you’ll see in the graph (click for a larger version), there is some generalizing with Nokia, Samsung and LG being grouped together but that further supports Walkley’s recommendations. If Apple can surpass profitability by selling only 4.25% of the handsets those three sold in the same timeframe, they are certainly doing something right. Or they’re gouging us unmercifully.

Make no mistake, Apple will surely be very pleased with reports and profits like this but the fact still remains that Android is poised to overtake iOS in the U.S. like it did worldwide. I’m sure they’re very proud of the fact that it takes Android countless handsets on various carriers to achieve this goal but somewhere deep down the desire to stay atop Google must be brewing. To some though, that speaks volumes about Apple considering they only have one current device to fend off the Google monster. Personally, I view both companies as a huge success in their own ways.

[Fortune via MacRumours]

Founder and Editor-in-Chief of iPhoneinCanada.ca. Follow me on Twitter, and @iPhoneinCanada, and on Google+.

  • Demosthenesx

    “If Apple can surpass profitability by selling only 4.25% of the handsets those three sold in the same timeframe, they are certainly doing something right. Or they’re gouging us unmercifully.”

    Or they’re gouging the carriers. I’m guessing the vast majority of those handsets were sold subsidized. That makes me wonder, since I pay the same monthly bill whether I had an iPhone, Blackberry, Android phone, etc. if the carriers hate the iPhone because they “make less” on their monthly plans (i.e., they pay a higher subsidy per device, meaning less profit from the monthly contract).

    Of course, it could just be that Apple has no “cheap” handset, which should have lower profit margins. There’s no iPhone Pearl, for example…

  • Apple’s model has always to be on the higher end of the consumer scale. By not introducing “cheaper” iPhone models and sticking with one model, it enables them to capture customers that are willing to fork out the big bucks for a phone. If you want an iPhone, you need to pay for it no matter what.

    If you want a Blackberry…well, you can get one for free. As for how enjoyable it will be…that’s up to you. 😉

  • Anonymous

    Apple’s always operated on a high cost, high margin strategy (“the Apple tax”), hence these numbers don’t surprise me. Each company has their own strategy and they both seem to be working.

    Apple’s not going to see big market penetration in the smart-phone market unless they lower their prices… and that’s not going to happen anytime soon.

  • Anonymous

    Those that purchase the unlocked phone for the full price really help Apple and their profits. Lots of studies show the price of the iPhone for less than half of the price they charge for it unlocked.

    No surprise really.

  • I dont think the carriers mind to much. They have smartphone plans, then they have iphone plans. im not sure about it now, but iphone plans use to cost more and you would get a little less. if the carriers weren’t happy about it , your bill would reflect that im sure ^_^ heh

  • Nowhere

    think of it this way, Apple only has one phone out on the market and they have made that much profit. Even if they only sold 17 million of their new iPhone, that means they sold 17 milliom of ONE HANDSET! The results are thus sort of biased since there are how many other Android powered phones on the market, as well as palm and Windows Mobile. I think it’s pretty impressive on Apple’s part.

  • Demosthenesx

    I’ve owned an iPhone for two years, and have never been on an “iPhone plan” (although you’re right, they do exist). There’s no “requirement” to be on an iPhone plan to own one, although there is now a requirement to be on a data plan (there wasn’t when I bought mine – Rogers must have hated me!).

  • Yeah heh. I Rememeber trying to get Rogers “smartphone” data value
    pack. They wouldn’t let me, they said I was only allowed the iPhone
    data value pack. I was confused because the iPhone is a smartphone
    lol. So at that time I had no choice but to get the lesser value of
    the iPhone value at the same price

  • Apple now is facing keen competition from Google, it should make more exellent products to meet the customers requirements.