“Last year, when everyone was clamoring for a so-called cheaper iPhone, Apple CEO Tim Cook said, ‘We’re not in the junk business.’ This was the market Samsung flooded with cheaper alternatives to Apple’s high-end devices,” Richard Saintvilus reports for The Street. “According to data released by research firm IDC, Samsung has already shipped 85 million smartphone units in the first quarter… more than the combined total of Samsung’s next four competitors, including Apple. Samsung’s tactic has been clear. It wants to give customers two or three products from which to choose before Apple releases its new iteration. In many respects, this tactical move has worked to perfection… All told, Apple was being attacked in both hardware and software, which explains Apple [shares] 40% decline from Apple’s peak of $705 to below $400. But that’s as far as the credit should go. None of this maneuvering has meant anything to Samsung’s bottom line.”
“Consider, Samsung just reported its first-quarter earnings results, which revealed its second consecutive quarter of declining year-over-year profits. Although the results were inline management’s prior guidance, Samsung is now feeling the effects of high-end device saturation. Operating profit came in at $8.2 billion, reflecting a 3.3% year-over-year decline,” Saintvilus reports. “Likewise, in the January quarter, although Samsung did post an impressive profit of $8.24 billion and a 1.5% year-over-year rise in revenue, there was still a 2.5% decline in mobile revenue. By contrast, in Apple’s comparable quarter, not only did revenue increase 5% year-over-year, net income climbed 7%. And this was due to an 17% surge in iPhone unit sales.”
“And despite a $40 sequential decline in average selling prices, this had little impact on Apple’s gross margins. Management figured out ways to adjust the mix to achieve profitability goals. More than anything, Apple’s strong margins has spurred the recent run-up in its stock,” Saintvilus reports. “The volume has meant very little to Samsung’s bottom line… The fact that Apple still has margins hovering around 37% is a testament to the quality of the company’s products and management’s ability to market to those who can see the value in those products. This is also why Apple does not have to enter the junk business or care about market share. Apple is the only one making any money and putting points on the scoreboard… it’s not a close race. It never has been.”
Read more in the full article here.
MacDailyNews Take: Don’t worry, slavish copier, maybe you can make it up on volume – you know, just like Mikey Dell.
It’s always nice to see someone comparing Samsung to Apple in the only race in which they’re both entered. Profits are the name of the game, not unit shipments for unit shipments’ sake.
As our own SteveJack wrote on April 28th:
Imagine being entered in the marathon, but being measured by how high you jump during the race! You’d feel like Apple. Being measured in the wrong way, based on the criteria of an event in which you’re not interested, much less even competing, and not versus individual racers, but against a lumped together “team” that doesn’t exist – it’s total nonsense!
Apple dominates the long race in which they are entered: The race for valuable customers from whence dominant profit share springs. Market share is a race that, by itself, tells us little to nothing about Apple’s fitness.