“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.
Related articles:
Apple and Samsung tighten chokehold on mobile profits as other firms’ hopes fade – May 9, 2013
How Apple’s iPhone beats Android in U.S. market share by 2015 – May 8, 2013
comScore: Apple outgrew both Samsung and Google’s Android in U.S. smartphone market share – May 3, 2013
The Church of Market Share revisited – April 26, 2013
iOS dominates Android: 75 cents of every dollar spent on mobile advertising is spent on Apple iOS devices – April 19, 2013
Android owners aren’t real smartphone owners – March 12, 2013
iPhone users watch twice as much online video as those with Android phones – March 12, 2013
Where are the Android users? – March 11, 2013
With 78% share, Apple’s iOS tightening its grip on the enterprise and taking share from Android – March 8, 2013
Apple rules the skies with 84% in-flight share vs. Android’s 16% – March 7, 2013
Apple iPad continues domination with over 80% usage share in U.S. and Canada – March 7, 2013
comScore: Google’s Android, Samsung continue to lose U.S. share to Apple’s iOS, iPhone – March 6, 2013
Apple iOS dominates mobile video viewing with 60% share vs. Android’s 32% – February 13, 2013
Android’s Web share down 13% since November; Apple’s iOS now over 60% – February 1, 2013
Android’s unit share growth has not hurt Apple’s profit share – February 26, 2013
Apple iOS dominates mobile video viewing with 60% share vs. Android’s 32% – February 13, 2013
Android’s Web share down 13% since November; Apple’s iOS now over 60% – February 1, 2013
IDC: Apple dominates worldwide tablet market with 43.6% unit share – January 31, 2013
The Android engagement paradox – November 26, 2012
People buy more Android phone units and do less with them vs. Apple’s revolutionary iPhone – November 14, 2012
Study: iPhone users vastly outspent Android users on apps, respond much better to ads – August 20, 2012
Does anybody have some chump change? I will gladly relieve it off you! 🙂
To anyone that hasn’t read this article, I would recommend taking a look – the author uses some analytics that is fairly common in CPG and tweaks it to provide some impressive insight into how Apple is in a better position that the media portrays.
Mark, you are absolutely correct. The article is good, but MDN’s condensed version lost the important subtleties. For example:
– The article specifically cites Samsung as a “fair share winner”; a company that I have long cited as a primary threat for which Cook seemingly has no answer;
– “There has not been a significant decline in the iPhone fair share profit index”. A-ha! I have long said that Apple should be growing iPhone market share to grow its profits, NOT accepting a stagnating profitability by offering only one current handset against dozens of worldwide competitors.
– The article points out that iPhone global market share dropped in Q1 2013, but declines to explain why it was so. (Answer: Apple is too slow expanding into world markets, severely underperforming the total smartphone growth).
– “Pricing to gain market share simply for the sake of market share is a chump’s game.” True, but pricing to gain market share to keep up with overall market growth is necessary to ensure that the platform remains popular enough to be first in line for future software releases and first on the customers’ shopping list. Apple OS lost the profit war to Windows because it ignored market share. Had Apple priced its Mac personal computers within reasonable range of the cheap Wintel boxes, Apple today would enjoying not merely a winning “Fair Share Profit” on computers, but also a winning “Fair Share Profit on computer software as well.
Sadly, Mac profits are limited by a small market share. Due to mistakes made 3 decades ago. Worse yet, it seems that Cook’s slow development of the iPhone family to respond to the competition will repeat the exact same mistake: ignoring product price competitiveness and, hence, market share.
Final conclusion of the article:
“… it seems likely that Apple will be able take advantage of smartphone growth in emerging markets to further build its smartphone business.” Yes, that’s what I’ve been saying ever since Cook took the reins. Sadly, Cook is taking WAY TOO LONG to make it happen. Meanwhile, lesser competitors are eating away potential sales and, yes, some lost sales today will never come back once they get locked into another platform. Sorry, but denial on this point does not make Apple fans’ wishes true. CEO Cook needs to do a lot better to capture worldwide market share AND profitability for the long run.
Evidence in plain sight: Last TV add for a smartphone exclaimed “Buy one, get one for free.”
Even that statement is deceptive, since the phone may be “free” but not the monthly fee…
I saw a Sprint ad for a Kyocera phone; buy 1 at .99 cents and get 4 free.
I don’t quite understand how market share is a chump’s game. Wall Street appears to value every company by relative market share numbers. If you don’t have market share then that company becomes greatly undervalued which is precisely what’s happened to Apple. Investors don’t want to put money in companies with losing market share. If shareholder value is mainly based on high market share, then it almost makes no sense at all to invest in companies with falling market share. An investor would just be throwing their money away. Market share would appear to be a chump’s game that has to be played in order to maintain shareholder value.