fund market analysts Canaccord Genuity gave Apple, Inc. stock (AAPL)
a "buy" rating and a price target of $356 per share.
What's more interesting, though is the details behind the
recommendation.The Cupertino, California-based electronics
maker has an
impressive profit margin compared to its competitors.
While this was a pretty commonly known fact, the analysts offer some
intriguing numbers that reveal just how amazing Apple's profit margin
is.Apple in the first half of 2010 sold 17 million mobile
handsets. Samsung, LG, and Nokia sold 400 million handsets
(this figure includes all phones, not just smartphones). And
other manufacturers sold 190 million handsets. That means Apple
produced roughly 2.8 percent of the mobile units sold in the first
half of the year.However, it made 39 percent of the mobile
handset industry's total profit, while Samsung, Nokia, and LG posted
a 32 percent cut of the total profit, and the remaining companies
made a 29 percent cut.Producing only roughly 3 percent of
your industry's products, but making close to 40 percent of your
industry's profit is virtually unheard of in any business. But
that's precisely what Apple is doing with the iPhone.So why
is the iPhone so profitable? The answer is complex. To
start, because many customers are so enamored with the phone, AT&T
has reportedly given Apple an extremely lucrative contract to grow
its subscribers numbers. Thus Apple makes much more pure profit
per phone.Apple also tends to feature slightly inferior
hardware to its top-of-the line Android competitors. For
example, it tends to have a smaller screen, lacks a microSD expansion
slot, etc. And Apple is extremely aggressive in negotiating its
manufacturing prices, pushing companies
like Foxconn to deliver higher volumes at lower prices.At
the end of the day, Apple may make as much as $400 USD in profit --
or more -- off each iPhone. By contrast Android smartphones
tend to have much smaller margins.What that means is that
Apple should have plenty
of cash on hand to invest in growing its business and
improving its hardware to bring the fight to Android. On the
flip side, Google has a similarly lucrative market -- internet
advertising – in which it remains virtually unchallenged.
Thus Google, too has a vast cash flow and the resources to make the
fight in the smartphone operating system market a fierce one for the
foreseeable future.Of course, if these numbers are true, what
they also mean is that Apple doesn't really need to
win the smartphone war. It merely needs to hang onto its
current market share and keep
raking in cash from its loyal customers.
quote: I think no one is surprised by this.
quote: Now however, they have gotten large enough in certain sectors that they are soon to be hit with multiple private, and government based lawsuits due to their practices. That is why most companies simply cannot follow their obscene pricing strategies....
quote: At one point it seemed as if there was a new suit against Apple every day.
quote: However, their own practices of limiting their software to their own hardware is in itself a form of monopoly. Just like you cannot get a computer not made by Apple to legally run their OS, you can't get a device not Apple branded to run iOS. Therefore, an entire market is controlled by Apple,
quote: Except possibly the other hand set makers.