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Wed, 11 Nov 2009 Apple proves more profitable than Nokia with highest operating profit

The economic downturn and Nokia's lack of an American footprint are to blame

Lexton Snol PC Advisor

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Apple surpassed Nokia in the third quarter of 2009 as the mobile phone maker with the highest operating profit according to a new report.

A report from Strategy Analytics (via Reuters), and Silicon Alley Insider revealed Apple surpassed Nokia in the third quarter as the cellphone maker with the highest operating profit.

In contrast Nokia's profit margins are minute. Its profit was $1.1 billion on sales of 108.5 million phones, generating revenue of $10.36 billion or €6.9 billion.

The economic downturn and Nokia's lack of an American footprint are to blame.

Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 per cent decrease from the second quarter of 2008, according to Gartner.

However, smartphone sales surpassed 40 million units, a 27 percent increase from the same period last year, representing the fastest-growing segment of the mobile-devices market.

"Given the higher margins, smartphones offer the biggest opportunity for manufacturers. It is the fastest-growing market segment and the most resistant to declining average selling prices," said Carolina Milanesi, research director at Gartner.

Nokia's portfolio remained heavily skewed toward low-end devices. Its flagship high-end N97 smartphone met little enthusiasm at its launch in the second quarter of 2009 and has sold just 500,000 units in the channel since it started to ship in June, compared to Apple's iPhone 3GS, which sold 1 million units in its first weekend.

"The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors with a more promising outlook in ASPs and margins," said Milanesi.

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Shaun said on Thu, 12 Nov 2009

If you're a shareholder in Apple, this is good news. If you're a consumer, it's not good news as it's further evidence Apple products are overpriced with margins that could be seen to be a rip off.

@Shaun said on Thu, 12 Nov 2009

By jove, I think you are on to something!

I suggest Apple starts making no profit, or a loss. That way the shareholders will lose out big time as their investments become worthless, Apple will shrink to a rump and go out of business and the consumers will win!!

Oh, hang on...

@@Shaun said on Thu, 12 Nov 2009

Isn't there a happy medium here?

Apple always has been a high-end, high-margin company but it's also one that is looking to increase market share. The strategy at the moment is a successful one - the outfit is bouyant whilst so much of the rest of the computing and phone industries suffer.

But the so-called Apple premium is looking greater than ever [well, in recent times in any case] and the firm is awash with cash.

Although I don't think there is much pressure from a business point of view for Apple to change its strategy there's obviously plenty of room for manoeuvre.

Many analysts feel that Apple could increase market share, customer satisfaction and maintain profitability by paring down its margins to some degree.

Jaded said on Thu, 12 Nov 2009

Interesting comments. Apple is increasing market share, in a fairly organic way. I'm not sure a flush of new customers would necessarily help them, but rather risk overloading the supply chain, the support teams etc.

@@@Shaun said on Thu, 12 Nov 2009

"But the so-called Apple premium is looking greater than ever [well, in recent times in any case] and the firm is awash with cash."

Shame they don't use that cash in test & development!!!

Daniel said on Thu, 12 Nov 2009

now now - ofcourse they do test and dev - all firms have their share of failures (Sony batteries etc)and they depend on 3rd party vendors to deliver. Analysts always have to have a say so I suppose they can also tell the golden margin ..specially since they do not have to live with the decision. I find the iPhone expensive others find it good value, some have bought the first iPod and that one was around the asking price of an unlocked iPhone!

David Hendry said on Thu, 12 Nov 2009

So are the figures quoted above Apples's or Nokia's? My read is that its Nokia's but without the Apple figures this article has little value - for all we know the author is making it up!

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