updated 05:15 pm EST, Tue November 10, 2009
iPhone pushes Nokia down to No. 2
Apple is now the single most profitable phone maker in the US, Strategy Analytics said today. Although it has just 2.5 percent share and makes just two similar iPhone models, Apple is estimated to have generated about $1.6 billion in operating profit from its cellphones in the summer where market leader Nokia said it had only generated $1.1 billion. Nokia's second-place finish comes despite it being one of the most experienced phone builders and Apple having only entered the category in 2007.
"With strong volumes, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years," analyst Alex Spektor says.
The discrepancy stems from Nokia's flat smartphone market share being compounded by an increasing bias in its lineup towards low- or mid-range regular phones that sell in larger numbers but with much smaller profit margins. Finland-based Nokia has also historically underserved the US market that Apple calls home, often selling its best phones there either months after they ship to Europe or only as full-price, carrier-independent devices that sell very poorly in the American market.
Spektor believes that Nokia can recover if it focuses on the US. He highlights Motorola's recent turnaround as an example and estimates that phones like the Cliq and Droid create four times as much gross profit as one of Motorola's regular devices, giving the copmany every reason to focus on smartphones instead. It would take just 10 million Android phones sold in one year to match half of the profit of its entire Mobile Devices group, the analyst says.