Apple Results? Beyond Monster Quarter selling 37M units of iPhones to 25% market share

In Bloodbath news we expected a great quarter by Apple but the iPhone has simply blown everyone away including just about all analysts. Apple reported 37M unit sales of iPhones. This is up 116% from Q3 more than doubling sales in just 3 months. The unit sales are up 130% from a year ago. iPhone market share has hit about 25% for Q4 (obviously we don't know exact market share until all companies have reported and we have a full market size, but that is pretty surely within one percentage point either way). This is up from 15% market share three months ago. Wow. Wow-wow-wow. Apple has had a humongous quarter.

And for the full year? The iPhone hit 93.1M units sold. That number means a preliminary market share of 20% for the full year 2011. Very very good for Apple, congratulations! All this while selling the most expensive line of smartphones in the world, and making by far the biggest profits of the industry. Clear perfect quarter for Apple, total perfection.

In the Bloodbath battle it was already certain that Apple was the finalist for top honors both for the Quarter and the full Year title. Nokia was out of it, the only contender the iPhone now faces is the series of smartphones from Samsung. We now know the numbers. Samsung would need to do 37.1M units of sales in Q4 obviously to pass Apple and retain its title as the biggest smartphone seller for the quarter - a tall order, Samsung grew by 40% from Q2 to Q3. Now in light of this massive iPhone 4S quarter, Samsung would have had to increase its growth rate to 48% to achieve that level. And for the full year, the magic number is 37.7M for Samsung, any number lower than that, and Apple will get the annual crown as the first company ever with a name other than Nokia, to be crowned as the biggest smartphone maker in the world. Samsung numbers will come out in a week so now we wait.

PS that argument I made in 2010 that iPhone sales in market share had peaked on an annual level? Obviously I was found wrong this time last year as the iPhone did grow one percent in market share. But just like I wrote with the analysis of the Nokia collapse, that helped Apple resume strong growth and we have seen it now. Much of this growth for Apple in 2011 was due to the voluntary collapse of its strongest global competitor who just in 2010 sold more than twice as many smartphones as Apple in total. But don't take this as Tomi sour grapes about Apple. Apple had to take advantage of the Nokia collapse opportunity. Some of the rivals in smartphones managed that - like Samsung and Apple - others utterly failed to do that like Blackberry and Motorola. So this is also congratulations for Apple for being nimble enough to be able to capitalize when the biggest company in the industry suddenly stumbles and loses more than half of its market in less than a year.

One more note about Apple and Q1 (calendar quarter ie Januar-March quarter). Apple has established a good China quarter pattern after Christmas sales. It surprised every analyst in 2010 (including me) and in 2011 it still caught out many who reviewed Apple. The pattern for most industries is that after-Christmas sales in Q1 fall from the peak in Q4. With Apple having strong China sales, especially with the iPhone, Apple has produced slight growth from Q4 to Q1, so be prepared for that. However, this year 2012 we have two factors that may suppress the iPhone number for Q1 - first, the Chinese New Year came really early this year on 23rd January (ie the Gift-giving season, sometimes Chinese New Year comes well into February). Secondly, the iPhone 4S was not released for China until early January, and then it had that famous disaster in sales in its flagship stores, which closed for several days due to the riots. So Apple had less time to sell the 4S and even out of that, Apple kept some of its stores closed. We might see a slight dip in iPhone sales for Q1 rather than the usual growth from Q4.

Comments

[Tomi T Ahonen]

Hi Lee and Baron (2nd)

Nokia sold 100 million smartphones in 2010. Close to a third of them were in that price range. Not all of it obviously but much of it. Apple would do better today (market share and total profits) if it did split its product line. Rather than have 20% in 2011 being the tiny rival to Android, Apple could have had 40% and be running head-to-head with Android now.

You make a great point about the price level. It baffles my mind and all analysts who publish any info about handset prices and price pyramids, seem to suggest that the iPhone price niche is unsustainable. I am not projecting my own opinion into this argument, as you know, I go by what the numbers say and what is measured. And yes, a year ago, I admitted Apple had confounded all analysts selling more 600 dollar smartphones than the market 'should have been able to sustain' so to speak. And this past year they did that again, exceeding what seemed possible. But that growth is now slow. There IS a ceiling, but Apple seems to push that still a bit higher yet.

Were it not for Nokia collapse, iPhone would not have gained much if any market share in 2011. And you know, I have shown evidence that there is an untapped market of Apple lovers who would jump at a QWERTY iPhone if one was released - and for some current iPhone owners, a QWERTY variant would become their much-loved second phone (replacing a Blackberry or whatever). I have not suggested the QWERTRY version would double iPhone sales (like the Nano would over a full year) but would still add anotehr maybe 10% or 20% - at the top end, as the most expensive iPhone with huge profit margin. Why not take it? But we know it goes against the design 'purity' of the form factor, and perhaps will never come. Who knows.

And Lee? Wasn't it ME? Who said that adding carriers will add iPhone sales? I told you guys what was happening in France in 2008 and said Apple needed to expand beyond AT&T etc. But I have also been a realist, saying doubling carrier availability will not double total sales, for many reasons not the least being the replacement cycle. I HAVE told you Lee that adding distribution is a key to Apple. What I have not agreed with is a significant production bottleneck on a perennial scale.

Baron - your second comment. You know fully well, as long as you keep to talking about the blogged comment (and are not rude to others writing) no matter how critical you are of me, your comments will be kept. If you post something that suggests you didn't read the blog article, I remove all such comments. As long as you Baron play by the clear rules here, you are most welcome to post.

Keep the comments coming..

Tomi Ahonen :-)

[Tomi T Ahonen]

(Again problems posting, sorry)

Hi Baron (1st)

Interesting view on seminconductors. On the iCloud I totally agree. It is a big success by Apple and typical how they come in and radically change an existing (and under-performing) industry sector. Like they did with digital music sales and the App Store etc.

RIM is in trouble yes, I would not say 'totally collapsed' as they did grow unit sales again from Q3 to Q4 and are still generating a profit. Thats not a total collapse such as we see with Nokia (or previously say with Motorola).

On Microsoft you Baron and I disagree. Time will tell, nothing today can prove either us to be correct. But we'll get some early indications when Nokia reports its Q4 results.

The point about TV is good and interesting. On the pocket computer paradigm, I am sure you and I have had this argument many times and the evidence is pretty solid that we do not carry portable computers in our pockets, we carry portable communication devices.

The brilliance of Apple was to take the experience of their failure with Newton and then find why it didn't work, and release the iPhone - not an iNewton, note, it was the iPhone. Phone.

Tomi Ahonen :-)

[Tomi T Ahonen]

Haha thanks Lee

Hey, you are forgetting, that I actually gave a projection here on this blog in February 2011, right after Elop's moment of madness - about who gains most from the Nokia customer give-away. Remember the Nokia give-away, one of the rare postings here where I even drew a diagram of how the customers would be split?

Go read that blog Lee. I said Nokia would end Q4 with 12% market share (its likely to be even worse) and I said Apple was one of the biggest gains out of that give-away, where I projected Apple to jump up to 19%. So I was here eleven months ago, explicitly saying that Elop had made my 'iPhone Peak' projection irrelevant, now there were new customers to divide - AND that Apple was one of the biggest beneficiaries of it. In fact, I projected in February that this Nokia give-away would make Apple the biggest smartphone maker by Q4 of 2011.

Lets not skip relevant postings, shall we? I was the first analyst anywhere to give a projection of how Nokia's customers would be split and I was very explicit that Apple would gain strongly and that Nokia give-away would propel Apple to become the biggest smartphone maker.

Tomi Ahonen :-)

[KPOM]

Apple sold as many iPhones last quarter as Nokia expects to sell Windows phones in all of 2012! Tim Cook said on the call that they'd have sold even more if they could have made enough of them. There were only 6 million in the channel at quarter end.

Anyway, I think the March quarter will see a drop in iPhone sales. The holiday season has passed, and with each quarter rumors of the major redesign will crop up again. That will be offset somewhat by China, but note that historically the iPhone has seen a bump in the December quarter, though obviously nothing of the magnitude that we saw last quarter.

This could be the beginning of the new upturn in iPhone market share. In the US, iPhone and Android were neck and neck in Q4, and Cook said a comparison of iOS/Android to Mac/Windows was flawed. iPhone is now by far Apple's largest business, accounting for more revenue than all of its other products combined.

[darwinphish]

Tomi:
Your belief that Apple's market share gains directly result from Nokia's collapse is based on some assumptions, not all of which might be true. Perhaps the biggest assumption is that every iPhone bought is potential Nokia lost sale. Though this might be true in some cases, this ignores competition from non-consumption. That is, an iPhone buyer might have been deciding between an iPhone or nothing (or no smartphone). Put another way, absent the iPhone, how much growth would there have been in the smartphone market, particularly the high end? To use your automobile analogy, if I buy an Audi A6 I probably wasn't shopping for a Honda Civic.

As for the mobile computer vs smartphone distinction, its worth noting Apple sold about 25M non-iPhone iOS devices in Q1, just under 10M of which were iPod touches. I wonder how many of these took sales away from smartphones.

[Tomi T Ahonen]

Hi KPOM and darwinphish

KPOM - haha, funny, that is exactly what I wrote on Twitter. 37M iPhones in Q4 of 2011, is what Morgan Stanley expects all Nokia Lumia sales to be in 2012 (and I believe that 37M number is way too optimistic still).

Yeah, China may be a problem because they had so few days to sell into the New Year's Gift-giving season. But even so, the Chinese absolutely love the iPhone, will buy plenty of iPhone 4 models and will buy a nice amount of 4S models past January 23 till March 31. I expect a 'flat' quarter in terms of unit sales for iPhone give or take a million.

The US market is really on a tipping point for Apple. They are so strong right now, but the Android army is vast and varied. But if Apple wanted to, they could take on Android and perhaps even outsell Android for full year 2012 (if they did the Nano etc..)

darwinphish - I am sorry if I suggested that as the only reason. Its definitely the only one. Nokia is one reason why the iPhone grew but clearly for example iPhone huge gains in the USA market could not come from Nokia/Symbian which had too small a share of US market to begin with. But China for example has been a huge shift from Nokia (had 70% of China market, N8 and E7 were bestsellers this time last year) where Apple is now the bestselling smartphone brand. So I certainly didn't mean that the Nokia collapse was the only reason the iPhone has sold well. But it is a major reason why.

On the iPad and iPod sales vs smartphones, sure there will be some as there is some overlap, but you remember my theory about 'ringing in the pocket' - a stand-alone media player (iPod) or portable PC (iPad) cannot replace the primary utility of our mobile handset, hence our primary smartphone won't be replaced by iPad or iPod. Perhaps the second phone might be for some users, on that we don't have any meaningful research data yet.

Thanks, keep the comments coming

Tomi Ahonen :-)

[cycnus]

Tomi,

Seeing on how the quad core tegra 3 on Android would flood the market shortly, don't you think that we should also see a big UPPPPPP in android market share starting at the beginning of 2012?

[KDT]

"They are so strong right now, but the Android army is vast and varied. But if Apple wanted to, they could take on Android and perhaps even outsell Android for full year 2012 (if they did the Nano etc..)"

Android has never outsold the iPhone on AT&T, it was a just reported that the iPhone outsold all Android devices last quarter on Verizon, and with the huge guarantees that Sprint made on the iPhone, they will be pushing it hard. According to some of the analysis firms, Apple is outselling Android in the US.

[research paper help]

Very nice post!! Thansk a lot!

[JK]

Amazing results to say the least...

Tomi, maybe you could comment on some recent trends that relate to your blog.
-Verizon reported a 5% drop in margins directly tied to the subsidy for the iPhone.
-While it's ARPU barely budged from $53 to $54
-Same results with AT&T
-Sprint has publicly said they won't make money on the iPhone until 2015. Yet to stop from losing subs they had to subsidize the iPhone big.
-Mary Dillon, the CEO of US Cellular the 6th largest US carrier, turned down the iPhone because it wasn't profitalbe for them.
This is not just happing in the US market either, where carrier margins are under pressure from subsidizing the iphone and yet ARPU is not moving up substantially. The phase "dumb pipe" and "the tail wagging the dog" is brought to mind...
Have we seen this story before in the anals of mobile history?

[cycnus]

@LeeBase,

Granted the american were not really only see the tip of the iceberg. but other part of the world might have different taste/need. And i4s sales in France and several other country were not great compared to samsung and other android phone.

With the introduction of ICS (android 4.0) and quad core, the android might hit the equilibrium and maybe the american user might start flock to iphone too.

@Tomi,

Is the Q4 is really great because lots of people were holding to upgrade the iphone since Q2/Q3? because you said the market share of apple is 20% for the full year, same as the year before.... not gaining market share??

[cycnus]

sorry.... wrong sentence...
Granted the american were not really only see the tip of the iceberg

should be....
Granted the american were only see the tip of the iceberg

[Alfonso]

I think Lee got it right. I only have two small additional points to make;

1. It will be interesting to see how Apple will manage to maintain their market share moving forward. Clearly there was a huge held up demand for the iPhone amongst loyal Verizon and Sprint customers and I think to some extent that this quarter is a "one time" effect from this. I suspect that the next one will look a little bit more "normal".

2. The reason Apple is avoiding introducing nano or physical keyboard form factors has nothing to do with design purism. There is a huge value in avoiding fragmentation of the user interface design. Given Apple's premium business model, having a very polished and consistent interface with one single version to maintain is much more valuable to the consumer (and the developers) than a huge selection of form factors. Android is all about choice and differentiation rather than quality, so the logic works a bit different there.

[KPOM]

Nokia just released earnings, which I'm sure Tomi will post about. They sold 1 million Lumias, but have ratcheted back projections of Symbian even further.

Anyway, AT&T announced that they activated 7.6 million iPhones last quarter. Verizon activated 4.6 million (out of 7.7 million smartphones total), so that's 12.2 million of the 37 million. Figure Sprint has about 2-3 million. So that means that 22 million were outside the US, which bodes well for Apple. China is opening up, and India is another big opportunity.

[darwinphish]

@Lee
Where did you get "50% of Apple's sales were the 4 and 3GS". I don't doubt it, I am just looking for the source. Thanks.

[cycnus]

@Lee,

I wonder if you live in wonderland (USA?)

assuming this is USA number.....
the 50% or 90% were because it was the iphone 3G/3GS/4G user that were upgrading to new iphone 4S.

Let use the 90% shall we.... that mean, apple only got 10% new customer that were from other platform (?BB? or feature phone or dumb phone).

Well,
the rest of the world (ROW) is not the same market as USA. In lots of other country people buy phone full price, and if apple having a BRAND NEW PHONE at different price point would help increase the sales, because iphone 3G/3GS/4G might not be able to compete with the brand new phone that have the same price point on price/performance.

WHY?
First, priority change, therefore spec must be tweaked. In tomi words, if apple were about to discontinue 3G/3GS then the new iphone nano should have something removed from 3GS, but something added from 4S.
Second, having a phone that were just released is different felling than having something that were released 2-3 years ago..... one of the example is guaranteed software/OS support. 3G is almost EOL, with 3GS will be EOL in 1 year (EOL = end of life... in support).
Third, same reason as the second, but in term of prestige. Having a brand new iphone nano would be cooler than having some devices some one already thought it loose it's coolness.

[KPOM]

The Nokia giveaway benefits Android more than anyone else. We saw that during the first 3 quarters of 2011. As Nokia's share plunged, Samsung's rose. Apple was mostly flat until Q4 when it exploded. The 4S had the combination of being extremely popular in established markets, plus being released on several new carriers. It also coincided with the holiday season and had some pent up demand after being released 3 months later than the iPhone 4 was in the 3GS' life cycle. No single factor explains the iPhone's popularity last quarter. It's a combination of several factors.

[cycnus]

@LeeBase,

In USA, Apple (and Android) were eating RIM share.
In Europe/Asia, Apple (and Android) were enjoying the Nokia giveaway market share.

It's as simple as that.

[cycnus]

@LeeBase,

You're forgeting other platform that Apple eat in NORTH AMERICA... such as Microsoft platform, Palm, and also feature phone.

[buy an research paper]

This is absolutely awesom! Great work! thank u