Report: iPhone grabs 32 percent of smartphone profit

Apple's iPhone may not have the largest share of the smartphone market, but it certainly grabbed a hefty piece of the profits.

According to Bernstein Research analyst Toni Sacconaghi, who was quoted in an AllThingsD post, Apple managed to take 32 percent of the overall profits for the smartphone market. Sacconaghi also said in a research note to clients that Apple achieved that percentage of profit while only accounting for 8 percent of the industry's revenue, according to the report.

Sacconaghi goes on to talk about the advantages Apple has in the smartphone market, particularly the ecosystem it has developed in the App Store over the past year. Apple said in mid-July that it had 65,000 apps in the store and users had downloaded more than 1.5 billion apps in the first year the store was operational.

The iPhone's popularity is evident in the company's quarterly earnings posted on July 21. Apple reported selling 5.2 million iPhones, a 626 percent increase over the same period last year.

"Apple has the potential to become a de-facto standard of sorts in the consumer smartphone market, much like it became in the portable media player market with iPods, due in large part to its first mover advantage and tight software and hardware integration," said Sacconaghi, in the AllThingsD post.

The integration is something that Apple has lauded as an advantage it has over its competition for many. From the days of the Mac and applications like iPhoto and iMovie, to the iPod's integration with iTunes and the music store, Apple has always tried to give users a simple way to interact with its hardware and software.

[The_happy_switcher]

Me shareholder and me happy. Keep crushing those profit estimates. Here's to hoping Microsoft continues it's downward spiral into the gates of hell. How's that Vista SP3 service pack coming, aka Win 7?

[Mr. Dee]

1.2 billion Windows based systems versus 42 million smart phones? If Windows 7 is Service Pack 3, what would call Snow Leopard? A Patch?

[Perry_Clease]

I too own AAPL stock and am pleased with the current price. It should go higher when the upgrade to Snow Leopard is released.

[BogusBasin]

Ford is better than Ferrari. How do I know? Because they sell more of them.

Right Mr. Dee?

Amen

[kojacked]

"Ford is better than Ferrari."

Ford and Farrari sell to two different markets. Apple and Microsoft are direct competitors in many markets.

There's your clue for the day. Amen.

[Squashman2]

Windows 7 is doing just fine and it has nothing to do with Apple's iPhone. I am pretty sure that Windows 7 will outsell the iPhone if you want to make an apples to oranges comparison.

[loose_screw]

Apple has been pretty evil lately with its nazi app store crap. I have both Apple and Microsoft products at home, and I hope both continue to exist for a long time to come.

[tektaktyks]

in the us or worldwide?

[Seaspray0]

I would suspect worldwide. When companies report sales, they typically report all sales no matter which country the sale was in.

[CrashPad63]

Good article to pus hto the public to highlight Apples real evil. Money money money. The care not for us the consumer just money. I on the other hand would rather go without a smartphone than give this shyster another thought. Jobs quit now before you drag Apple down futher.

[netPirate]

Hah...Jobs has totally dragged Apple down. They are obviously doing terrible with him at the helm.

[The_happy_switcher]

Apparently you must be unaware that Apple is a FOR profit organization. Maybe as long term holder of Microsoft stock you're not actually used to seeing a stock actually go UP, huh?

[ballmerisanape]

Your right. What were they thinking when they set forth on their mission to make and sell products that people want. It's a crazy idea. They should have gone bankrupt so our government could take them over give iPods away for free.

[kojacked]

I think crashpad and the_happy_switcher should make babies. They might actually have a balanced point of view and not be so hateful.

[CrashPad63]

Heheh Yeah Jobs is the downfall. He brought them down before, will again. Nobody but nobody can be this ignorant about his practices for long, even the harden Apple freaks will come to see this man for the meglamaniac he is.

[The_happy_switcher]

*** is 'meglamaniac'?? Spell much?

[viper396]

@The_happy_switcher whats wrong switcher? Can't handle it when Apple is personified as "evil"? Seems you can't take the crap you're shoveling.

Neither Apple nor Microsoft give a damn about you. Why the overzeolous, fanatical attempt to fight a battle that's not your responsibility? As corporations even Apple and Microsoft get along better then most of the obsessed fanboys who use their products.

[Seaspray0]

What I would like to know is what the price would be if apple cut their profit margin to the industry standard.

[yrousseau]

From http://mobchina.blogspot.com/2009/07/apple-reveals-52m-iphone-sales-in-q2.html:

"While the year-on-year jump in iPhone sales is a huge 626%, that's largely down to the fact that the iPhone 3G didn't come out until July last year, meaning that sales weren't spectacular during Q2 of that year."

[elllroy]

the headline is wrong, but what can you expect: it is a blog, right?
apple didn't grab 32% of smartphone profits but 32% of ALL phone profits worldwide. that means 1 out of 3 dollars of profits globally for all handhelds sold goes to apple. can you imagine that?

[DrtyDogg]

It's wrong in another sense too. The dollar amounts Apple reports as iPhone income also includes accessories, Apple's and 3rd parties. Not that it makes it less impressive, but it is worth a footnote(Apple includes it as a footnote in their report).

[zaxxon1999]

what model smartphone has sold more then the iphone 3G 16 Gb in the US ?

[Seaspray0]

Probably none, but then again, you're looking at only one model. By corporation, blackberry currently sells more smartphones than any other corp. If you look at the entire cell phone market worldwide, nokia is the leader.

[Seaspray0]

A brief web search brought up this article...

http://www.mobileburn.com/news.jsp?Id=7569

Blackberry curve has the #1 spot on smartphone sales.

[SpiritWater]

Cheers to Apple and Microsoft! May both US of A companies thrive in this global economy and bring many US of A jobs for many decades to come. In this down economy be grateful to God that we have Apple and Microsoft as two healthy wealth producing companies.

[jameskatt]

Ford and Ferrari both sell cars. It is the same car market. However, Ferrari sells at the high end, just like Apple does. Cheapskates buy Fords. Ford and Ferrari are competitors in the same market, just at different price points.

[a3th3r]

This is still an absolutely terrible analogy. It may be the same "car market" but Ford and Ferrari tailor to completely different audiences. The average Ferrari sells for significantly higher than the median family income in the US. Apple and Microsoft sell relatively similar priced items in the same market to a similar audience, the key difference being Apple builds its own hardware and Microsoft sells only software.

Also note that more expensive does not always translate into higher quality or a better product. Recent surveys actually show that most people feel you get more value per dollar with Microsoft products than Apple.

[wcolbert]

Apple dominates the premium market. 91% of the laptops sold above $1000 are Apple. They are in the same market, but apple is in the medium-premium market. Ferrari is a bit extreme for the analogy, but I think BMW would suffice as the prices start in the high 20's.

Also a3th3r, not sure where you get your data, but Apple has been dominating product quality reports. What ms product quality stats are you talking about? They make software not hardware in the computer space so your statement doesn't seem to make much sense.

[Baloo81]

@wcolbert: I think you're using a source that's very misleading. While it's true that 91% of premium laptops were sold to Apple in June - according to NPD - that's the same month Apple announced its new models and price cuts. Price cuts that were almost certainly a result of the MS "Laptop Hunters" ads, the point of which were that you can get a much higher value with a Windows machine at the same price point as a Mac. The real indicator here is Apple's total market share, which is hovering right around 7.6% for both laptops and desktops. Since 91% of premium sales went to Apple, it's really not an indicator that Windows machines can't compete at that price range - it's that they don't have to since almost none cost above $999 any longer due to hardware price cuts. If you look at the specs for a typical Apple laptop you can get an equivalent Windows machine somewhere in the $600-$750 range. I know, I know - somebody's going to hop into the forum and start talking about the Mac unibody construction, how superior OS X is, etc. but I'm going to tell you that doesn't matter to the average consumer. They're going to look at the Mac and realize its components are inferior to the cheaper Windows machine the next aisle over, and -especially in this economy - that's going to be their deciding moment. Apparently 7.6% of the market feels that Apple is a worthwhile proposition, and such is their choice. The average consumer doesn't agree. In my opinion, posting this is sort of like bragging that you choose to be overcharged.

The other major problem with the premium market argument is that there are a huge number of high-end users that are waiting until the release of Windows 7 before they make any new purchases. This is especially important among enterprise users, most of whom refused to adopt Windows Vista. I agree with what I know is the standard Mac argument at this point - it's a problem of Microsoft's making. Absolutely, they rushed a product to market before it was truly ready for consumer use, they didn't understand what the market really wanted, etc. But all indicators are that consumers loved the W7 beta and release candidate. Businesses will also see it as an excellent proposition, especially thanks to its XP mode, and we should see widespread adoption throughout the fall and holiday season. With the economy on the upswing, this will almost certainly mean an increase in the premium laptop category as well. Just my two cents, and the way I see the market going forward.

[bling57]

I disagree.
windows laptops/netbooks are like fast food.

1. "Billions and billions served"
2. The "specs" are better on both. more calories/sugar/fat and more ram/processor/hard drive
3. The price is super cheap. hard to find a better price/calorie ratio than with fast food.
4. Predictability: HP/Dell/Asus and Wendy's/McDonald's/Burger King - same components in different wrappers
5. They both fill you up, but the feeling doesnt really last that long.
6. Sometimes I need some antacid for an upset stomach or BSoD.

Thats not to say that I dont enjoy fast food every once in a while - and maybe you can find some great relatively cheap fast food - (Chick-fil-a and Zaxby's come to mind for me). I just think we should take the time to try cooking some new food or trying a new restaurant now and again. Its going to be a little expensive and might take some getting used to - you might even order something you dont like (DisplayPort, glossy screens), but thats the only way you are going to discover new recipes you will love for the rest of your life. And I hope that the best of those new recipes eventually end up in restaurants too - benefitting everyone.

I have a Windows desktop and a MacBook Pro - In five years if I end up buying a Windows laptop that uses some of the great software and hardware on my MacBook for a much cheaper price along with tons of calories I will be pretty happy - and thankful Apple existed to drive competition.

[kashiqi]

Well i think apple is the best phone ever they have changed the concept of mobile phone as they come up with the softest but reliable touch screen system. And Now they are coming up with new Apple Tablet PC which will be out next month here in UK. Yes it is true. Here is the information http://www.domesticutilities.com/apple.htm

[Seaspray0]

The tablet is being considered and is by no means a definite at this time.

[EvanSei]

the iPhone is at the moment clearly the best smart phone on the market, and the consumer can see that and thats why apple has such a high control over the market. and just so you all know I own apple AND microsoft products