
IPhone share of phone market: 5% volumes, 20% revenues, 55% profit - lotusleaf1987
http://www.asymco.com/2011/05/16/iphone-share-of-phone-market-in-q1/
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ljlolel
This is a very interesting data point. Although Nokia sells over a billion
phones a year, this proves that you can target a narrow sliver of a huge
market with futuristic innovation and still gain the majority of the profit
available in the whole market.

Moreover, you create real value by innovating and pushing the future forward,
reaping the reward from that. Nintendo has similar strategies.

~~~
raganwald
Agreed, although I suggest that Apple has already proven that "you can target
a narrow sliver of a huge market with futuristic innovation and still gain the
majority of the profit available in the whole market." Macintosh systems
account for 7% of the PC market and 35% of the profit.

More insanely, Apple has a 90% share of the revenue for PCs costing more than
$1,000. Although smaller than the market for PCs costing less than $1,000,
that's still a huge market and Apple has cornered nearly all of the money in
it.

~~~
joebadmo
I think an important part that is perhaps underemphasized is that Apple has
proven that _Apple_ can do this. It's Apple's singular focus on quality that
enables it, and it's surely the hard way to do it.

And Apple can do it precisely because it's hard. If it was simply a matter of
targeting the high end, everyone would be doing it.

Fighting for market share and making infinitesimal margins across a large
market share is the relatively easy and obvious way to do things, and it
involves relatively easy and obvious processes of copying/iteration.

~~~
bane
_If it was simply a matter of targeting the high end, everyone would be doing
it._

Everybody _is_ doing it, but their execution is abysmal. They're trying to go
toe-to-toe with the leader in those segments without the business and
development processes to support it. Apple has singularly focused their entire
company on this problem and have the execution nailed. Motorola, Dell, etc.
are distracted by the low-margin high volume part of their business and can't
focus enough to get it right.

~~~
kenjackson
You can't create a high end when there's a thriving low-end and its all
commodity. Apple does this by prohibiting clones. There's no competition to
pull down prices.

In the PC market Dell would love to go high-end, but they can't because Acer
will ship the same machine, with plastic rather than carbon fibre, and sell it
at 1/3 the price. Apple doesn't have that worry.

~~~
spitfire
Yes you can. Lexus, J Crew, AMC tv and many others have proven you can. THe
poor and tasteless go for the Crap while the wealthy/farsighted go for the
quality/design.

Technology is an echo-chamber. Step outside it and look at what other people
have done, then learn from their success.

~~~
kenjackson
Only JCrew is in a commodity market. Lexus is really more like Apple. While
made by Toyota it generally have very different designs, for example the
LS460. AMC TV is clearly not a commodity at all, even less so than Apple.

JCrew is clearly in a commodity market, but they're not exactly upscale. I'd
consider them the $800 laptop. Not Walmart/Netbook, but certainly not
expensive. And there are expensive clothing manufacturers, but there's a
reason why Gap sells hundreds of millions in jeans, while $500 designer jean
brands come and go like the wind.

------
c2
Reminds me a lot of Porsche's situation a few years ago in the sports car
market.

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Stormbringer
How were they calculating operating margins?

Lots of Apple bashers love screaming about how Apple has huge margins because
the cult will buy any old iPoo, yada yada reality distortion field.

But on the Apple financials call they pretty consistently come in just under
30% on their product margins, and these guys (asymco) have them peaking at
almost 50%.

Is this based on some backyard analyst's estimated component cost breakdown?
In which case it is a worthless guesstimate, or is it based on official
numbers?

~~~
batiudrami
It wouldn't surprise me though. In Australia I can get a Nexus S for AU$29 a
month, while the absolute cheapest I can get an iPhone 4 is AU$47/mo (same
plan/inclusions, both over 24 months), with a total cost difference of AU$432.

Internally, they're essentially the same phone. The iPhone is a better built
phone to be sure, but I find it hard to believe that it costs that kind of
difference. But hey, people still buy them so I can't see the pricing
structure changing for the moment.

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seanalltogether
How is profit being calculated?

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natmaster
In other words, you are paying for the brand, not the product.

~~~
lotusleaf1987
In other words, you probably didn't read the article and would have made this
conclusion despite whatever facts were presented.

~~~
natmaster
It's not really an article, just a presentation of data. I was labeling the
data.

~~~
lotusleaf1987
Article: A nonfictional literary composition that forms an independent part of
a publication, as of a newspaper or magazine:
<http://www.thefreedictionary.com/article>

~~~
natmaster
Literary: of, relating to, concerned with, or characteristic of literature or
scholarly writing: <http://www.thefreedictionary.com/literary>

Charts and graphs aren't writing.

Writing: Meaningful letters or characters that constitute readable matter:
<http://www.thefreedictionary.com/writing>

~~~
lotusleaf1987
I count 6-7 paragraphs of 'scholarly writing.' Scholarly: concerned with
academic learning and research:
<http://dictionary.reference.com/browse/scholarly>

You sir, in the kindest way possible, are 100% wrong. You're entitled to your
opinion, but not your own facts.

~~~
natmaster
Fact: Knowledge or information based on real occurrences:
<http://www.thefreedictionary.com/fact>

Language is a convention, not a fact. You are entitled to your own conventions
(but I'm going to use the ones others accept for the sake of this post), but
not your own facts.

The fact is that if you have more relative profit margins than revenues, that
more of the money people are paying you are not going to the costs used to
produce the product. Thus, you are paying a smaller % of your money toward the
product itself, no matter what value you place in having that product.

You fanboys are seriously rabid, and for the sake of this community, please
learn how to defend things you like in a civilized manner
(<http://paulgraham.com/disagree.html>) as opposed to the emotional knee-jerk
reactions you have. Or leave.

~~~
Steko
I love the admonition to "stay classy" (not a quote) while you name call
people as "rabid fanboys" with "knee jerk emotional reactions".

"The fact is that if you have more relative profit margins than revenues, that
more of the money people are paying you are not going to the costs used to
produce the product. Thus, you are paying a smaller % of your money toward the
product itself, no matter what value you place in having that product."

Newsflash: none of this leads to your conclusion that people are paying for
the "brand" as opposed to the product itself.

People pay more for good products and service and experiences and they also
pay more for brands and some other things. Companies can also increase profits
by cutting down on component costs, leveraging scale, with good recruiting,
and good management in a hundred other ways. The fact that one product is more
profitable then another doesn't imply any of these in particular. The fact
that Apple is so much more profitable generally is taken of evidence that many
of them are in play. Dismissing all of this as "paying for the brand" is just
ignorant.

