Please ensure Javascript is enabled for purposes of website accessibility

Apple's Share of Mobile Phone Industry Profits Gets a Boost

By Daniel Sparks – Feb 13, 2014 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple's competitive advantage is not fading. If anything, data suggests that it is growing.

Two new iPhones for sale during the holidays weren't enough to boost Apple's (AAPL -2.12%) share of global shipments compared to the year-ago quarter. Apple's share of the global smartphone market declined in the fourth quarter of 2013 to 17.9% from 20.9% in the year-ago quarter, according to data from IDC.

The media often uses numbers like these to paint a tragic picture of Apple's slide in market share in the company's most important market. But a look at Apple's share of industry profits based on data from Raymond James analyst Tavis McCourt (cited by tells quite a different story.

Apple is doing just fine

Here are three reasons why:

1. Apple's share of mobile phone profits is increasing. Thanks to a combination of robust iPhone sales in the fourth quarter and continued pricing power, Apple's iPhone segment is still raking in loads of cash for the company. More importantly, Apple has claim to a larger portion of the mobile phone industry's earnings than it did last year. In the year-ago quarter, Apple accounted for 77.8% of the mobile phone industry's earnings before interest and taxes. In the fourth quarter of 2013, that figure grew to 87.4%

2. Apple, along with Samsung, has unrivaled scale advantages. Apple and Samsung's profit data show just how tough it is to make money in the mobile phone industry. Since many other vendors are losing money, Apple and Samsung's share of the industry's profit go beyond 100%. Together, they account for about 120% of the industry's earnings. No manufacturer beyond Apple and Samsung has made any meaningful progress at snapping up a solid sliver of this lucrative market.

3. Apple is beating Samsung where it counts. With Samsung accounting for the other chunk of industry profits, the South Korea-based company is obviously Apple's greatest threat. Fortunately for Apple investors, the data suggests that Samsung isn't gaining on Apple's share of profits. Samsung may be gaining share at Apple's expense in smartphone shipments, but it's losing share of industry earnings. A year ago, Samsung had a 32.2% share of the industry's earnings. In the fourth quarter of 2013, that figure fell to 26.1%.

Market share comes in other forms than shipments
Sure, shipment market share matters. But it's just one way to look at things. Investors should also consider smartphone manufacturers' share of web usage and industry profits to get a better idea of the competitive environment.

Apple's continued dominance in mobile phone industry profits is good news for investors. At the end of the day, it takes shipments and earnings to build a business. And when it comes to capturing earnings in the mobile phone market, Apple is performing exceptionally. More accurately, Apple is performing lucratively.

Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Stock Quote
$141.17 (-2.12%) $-3.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.