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  (Source: Art of the iPhone)
Cupertino electronics maker is profiting off its loyal customers open wallets

Research by 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.



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By Funky Santa Clause on 9/27/2010 1:39:22 PM , Rating: 1
Couple of facts for you U.S fanboys.!!

- There is a Nokia branded phone in the pockets of 1.6 Billion people! Thats almost a quarter of the planet! There has never

ever EVER been any brand even remotely as dominant globally, as Nokia is today

- Nokia is beating Apple and everyone else with old models, beware of the new ones..=)
http://graphics.thomsonreuters.com/F/07/GLB_SMPHN0...

- Nokia has lost most of its market share in the US market where Blackberry, the iPhone and various Android phones now are

popular. So by faulty leap of logic, many see that Nokia is somehow 'losing to iPhone' (or Android or Blackberry). In reality

that is a market anomaly that applies to North America only, where only 8% of the planet's mobile phones are sold.. Nokia

utterly dominates the rest of the world (with the exception of those countries where strong domestic rivals control that

country, South Korea, Japan and yes, the USA).

MISSED THE APP STORE

And I should mention the App Stores. While all the silly hype globally in mobile is about apps - I have been repeating and

repeating and repeating, that it is a trivial - trivial - sized non-business (today). It may - it may - become meaningful

somewhere years down the line. We heard from Apple - the leader in app stores - earlier this year, that the total earned by the

Apple iPhone App Store last year was under a billion dollars. A billion out of what, over 200,000 actual apps that exist in the

App Store?

A billion may seem like a "big number" to those who don't understand mobile, but hey, Crazy Frog the ringing tone - yes just

one - one - ringing tone - sold half a billion dollars - in paid downloads to mobile phone users - in one year - three years

before Apple even opened up its app store. Put that into your iPhone app and think again.

http://communities-dominate.blogs.com/brands/2010/...


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