“Investors demand content 24/7 and the financial media is more than willing to accommodate their need. The problem, however, with this arrangement is the tendency of media to be lazy, take a simplistic approach and fall into a simple, repetitive narrative,” Bill Shamblin writes for SeekingAlpha.

“It is just too easy (and often more lucrative) to write something along the lines of, ‘iPhone share is down, Apple is doomed’ as opposed to digging into numbers and providing some new insight,” Shamblin writes. “Here, the primary problem with using market share as a measure of business health is it provides no insight into the profitability of the product being sold… To avoid this kind of ‘market share myopia’ it’s important to incorporate a profitability and price metric into our analysis. For this we will use a fair share profit index.”

“Android accounts for approximately 70% of global smartphone shipments and 29% of global profits (IDC, Q4 2012). Android fair share profit index = (0.29/0.70)*100 = 41.4,” Shamblin writes. “Apple iPhone: 2013 Q1 market share = 18%, profit share = 57%. Apple iPhone fair share profit index = (0.57/0.18)*100 = 317.”

How to interpret the results:

• Fair Share Index 100: Company profit share exceeds its market share. The company’s product is differentiated and has some level of pricing power in the market. Every point in market share brings in more than a point in market share of profits.

Much more in the full article here.

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