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January 07, 2011

Comments

RattyUK

Apple in 2nd or 3rd place? A company that never made phones before 2007? How can this be?

Phil W

@ RattyUK

You do realise that that only applies for Smartphones ie the ones most closely resembling computers in which field Apple has been playing for decades. So not quite so surprising after all, eh?

Just to be clear in the overall mobile phone market Apple has a market share of less than 4% and is way down the list of manufactures. I sometimes think people lose sight of that. And yes I know that the big profits are in the high end Smartphones and the profits are much lower in the overall mobile phone market, but I don't care about that.

kevin

@Tomi: Are you forecasting about 300m smartphones for 2010, and about 100m for Q4?

@Phil W: Honest question. What exactly do you care about? If it's just overall market share, why do you care about that, especially when market share records past results, and lag too much to be good indicators of future results? Or are you able to make good future projections simply off of market share results? If so, how?

I think understanding where the profits are is a better indicator of future likelihoods (though just one indicator of many), and that's why I care about it as well.

Phil W

Hi Kevin,

I probably need to restate that I am a Nokia employee, but that all my opinions are my own. For that reason I don't care about Apple's profits, however big they are. They are only of concern to Apple employees and shareholders (of which I believe you are one). They don't affect Nokia. However loss of market share does affect Nokia and is therefore much more important to me at least.

I do care about profits in so much as they affect Nokia. To date as Tomi has pointed out, Nokia has made profits (in the handset division) continuously for the past 10 years, so Nokia is not in immediate danger. It is of concern that those profits are slowly declining of course. I believe that the changes (long overdue, I accept) that have and are being made will reverse that trend. What needs to happen is to rebalance the mix of phones to improve the ASP and I think that is what is happening. What Nokia doesn't need to do is abandon its traditional markets to go head to head with Apple at the high end of the market only. That would probably be suicide anyway.

My previous post was a bit of an over reaction to what I saw as another example of mindless Apple worship and the constant barrage of ill informed Media bloggers and for that I apologise.

I like this blog because Tomi makes the most sense of anyone I have read and the bloggers on this site are mostly well informed (as you are) and there is a good debate here.

Jim

Instead of profits for the actual vendor, should we not ask who is making more money for 3rd parties? programmers, service providers and operators?


Would that not show were programmers should direct their energies?

insider extreme

Good Info!

LP

One grave danger for Apple is that it is so dependent on one man. If Job's cancer rebounds, what do you think it will do to Apple's stock price?

Sve

Apple is a beneficiary of a visionary leader to be sure. But it also the beneficiary of decades of development and experience in portable computers. And that is what phones have now evolved to, computers. Apple is the incumbent in this next stage of phone evolution and Nokia is the new challenger. Not many think that the core historic skills of Nokia are up to the task.

Bob Shaw

Lee - Nokia is a strong brand in a mid and lower end segment and as such it commands a premium over lesser or no name brands in these segments. I think there is a fundamental misconception that if you do not play in the higher end segment your profit margins are slim to none. The margins may not be as high as the higher end segment but they are decent and sustainable for a strong brand in these segments. There is a tremendous potential for future growth in the mid and lower end segment and Nokia is going to be a good beneficiary of it but it is going to be realized in a longer time frame than next quarter.

Regarding Apple, it has done extremely well by just focusing on the high end segment. However the high end market tends to saturate very fast compared to the mid and low end market since market penetration is relatively much easier. Going forward the growth in the high end market is going to be significantly small compared to the mid and low end market.

Apple because of its focus on profit margins as opposed to market share has literally locked itself out of the mid and low end of the market segments where most of the growth is going to be in future.

Finally I fully expect that once Nokia stabilizes its market share in the mid and low end segment it is going to attack very hard in the high end segment without Apple having the ability to respond similarly in the mid and low end segment.

Unless something else comes to replace smart phones as the major driver of Apple's stock price, I would say that 2010 was the best year for Apple.

LP

@Leebase: I don't think that innovation is the key (any company can innovate) but the focus that is possible when one man is basically calling all the shots. It is also hard to imagine who could replace Jobs's "reality distortion field".

Bob Shaw

Lee - I did not say that Apple is in trouble. I said that the best year for Apple would be 2010 unless they can find some other product that would replace smart phone as the driver of their stock price.

The market share for Nokia in the mid to low end or Apple in the high end is not going to change substantially going forward despite the competition. Nokia would increase somewhat its market share in the higher end segment with introduction of products in this segment. However the market size is going to increase in all three segments with significant higher growth anticipated in the mid and lower end compared to the higher end. As rising tide lifts all boats, the future profits for both Nokia and Apple is going to come from growth in market size not market share. As I mentioned earlier that the penetration and saturation is much faster for products in the higher end compared to products in the mid and lower end. Therefore I expect more future profit growth for Nokia compared to Apple based on the respective market size growth. Also an additional source of Nokia's profit would be from Nokia’s expected market share growth in the higher end.

Tomi Ahonen

Wow, lots of comments here already. I will respond to all, and will do them in groups. So this is the first set

Hi RattyUK, Phil, kevin, Phil (again), Jim and insider

RattyUK - yes, as I wrote in the blog and Phil explained in his response to you, the ranking for Apple is only for smartphones, which form only about one in 5 phones sold in 2010. Sorry, its not quite as good news as you thought you read in the article.

Phil - thanks for explaining it for RattyUK

kevin - I am have upgraded my projections, now at 105M for Q4 and 310M for full year. And kevin, you know what we are on this blog, this is NOT a stock market analysis blog, the stock prices have very little relationship with how given phones and platforms sell, for all sorts of reasons including the in-built expectations etc. I am not bothering with the stock market predictions, please don't bring those discussions here to this blog. Our readers are interested in the long-term viability of the platforms involved. Who makes more profits or less profits is utterly irrelevant to long term platform success, as long as they make profits.

Phil (second comment) - good comment and nice personal views, thanks. I appreciate your contributions to this blog so please also be aware that I enjoy reading your comments here.. :-)

Jim - good point but we would need reliable third-party sources that cover the full industry, for what you ask for, Today that is impossible to even assemble accurately, because so many of the app stores etc are so new and do not fully report their operational data. But yes, over time, we hope to have that info and I'd be very interested to see that too. And note, I am not reporting the profits on this site, that is not the purpose of this blog...

insider - thanks

Thank you all, I will return with more comments soon. Please keep the discussion going.

Tomi Ahonen :-)

Tomi Ahonen

Attention all who are commenting

I removed all discussion about the stock market. This is NOT a blog about stock prices, and I won't bother to attract that kind of discussion here, about what stock price is correctly or incorrectly reflected today. Go to other stock market blogs to debate those issues.

Leebase! you have been here many times before. You know better. Don't start those discussions again! We on this blog acknowledge clearly that Apple is the most profitable handset maker. That is the extent to what we'll discuss profits here. If you bring the histories of share prices again, I will delete all your comments.

For others who responded to Leebase's pointless discussions here - and I apologie in particular to Phil who was doing a heroic job - I have deleted all related comments by all who are known to me as usual visitors here. For the new visitors, I will respond and explain why we don't discuss stock prices here. You don't need to.

But don't bother to raise the stock price arguments here - and Leebase, you are now 'on probation' - don't make me waste my time of deleting your comments here. I enjoy good discussion but you know fully well that is a pointless discussion and at any one point in time we can find stocks that are overpriced and others that are undervalued - this blog - the time of readers of my blog - and MY TIME - will not be wasted by you or anyone else. Don't go there Leebase.

Tomi Ahonen

KDT

So Tomi,

Two questions.

1. Do you think Nokia is executing well -- even though they are losing market share and seeing declining profits?

2. What affect do you think a CDMA phone will have on Android makers especially the weakest Tier-1 manufacturer -- Motorola who is really only successful in the US and only on Verizon.

kevin

Tomi,

I don't think I deserved the rebuke in your reply. I didn't bring up the stock market; I only responded to someone (I believe, Phil) who raised it.

Altho I know you had banned discussions of profits (and thus I didn't get into it in my post above), I don't remember you banning stock market discussions previously since you used a blog entry to comment on Nokia's stock price and investors a few months ago.

Nonetheless, this is your blog so not a peep more from me.

enyi

Calm down Tomi please and let people air their views. Moderation is not a bad thing but not to the extent that it disregards valid opinions. Profits is the lifeblood of business and has to come into this discussion one way or another. You have said in the past that Nokia has remained profitable while Samsung and its other rivals have lost share. In the same vein I believe Lee was right to point out Apples dominance in profits.

Ease off on the irrational moderation as it makes a good guy like yourself look bad. Leave control and culling to Steve Jobs pls :o)

Yours faithfully

Enyi

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su deposu

So how many is the 'unique' user count? That is 3.7 billion people. It is already over half of the total population of the planet - and considering most of the planet lives in very poor conditions, mobile phones are by a very wide margin the most widely spread technology on the planet. Yes, 54% of all people alive on the planet have a mobile phone.

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past that Nokia has remained profitable while Samsung and its other rivals have lost share. In the same vein I believe Lee was right to point out Apples dominance in profits.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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