IPhone Owns 80% of Industry Operating Profit
13/2/2012
IPhone Owns 80% of Industry Operating Profit
BY T. Michael Walkley and Matthew D. Ramsay, VIA:barrons.com.
The iPhone 4S launch has given Apple's phone line a huge boost.
Canaccord Genuity
Our monthly channel checks indicated very strong sales trends for the
iPhone 4S at all three U.S. carriers and overall strong iPhone sales in
international markets. We are increasing our March-quarter iPhone
estimates from 30.1 million to 32.6 million units.
We reiterate our Buy rating and increase our price target to $665 from $650. Apple (ticker: AAPL) remains a top pick.
With the strong iPhone market-share gains during the fourth quarter,
we estimate Apple generated a remarkable 80% share of estimated
fourth-quarter handset-industry operating profit versus 56% in the third
quarter and 48% in fourth-quarter 2010 with only 8.1% global
handset-market share.
Demonstrating the strength of the iPhone's profit-share gains during
fourth-quarter 2011, Samsung's share of industry profit declined from
roughly 26% in third-quarter 2011 to 15% in fourth-quarter 2011 even
though Samsung's share of Android smartphones increased from 35% in
third-quarter 2011 to 39% in fourth-quarter 2011.
Our January checks indicated the iPhone continues to extend its
market-share gains from the fourth quarter. In fact, we believe iPhones
are outselling all other smartphones combined at the Sprint Nextel (S),
AT&T (T) and Verizon Wireless [a joint venture of Verizon
Communications (VZ) and Vodafone Group (VOD)] channels since the iPhone
4S launch.
We are increasing our iPhone estimates for fiscal-second-quarter 2012
or the March quarter from 30.1 million to 32.6 million units.
Considering the March quarter has one less week than the December
quarter and excludes the very strong sales week between Christmas and
New Year's Eve, we anticipate a sequential drop in March-quarter sales
versus the 37.0 million iPhones sold during the December quarter.
Even with this sequential drop in iPhone sales, we believe this is
better than normal industry seasonality and anticipate Apple's iPhone
share gains will continue as Apple and Android continue to take share
from BlackBerry and Symbian. We have increased our 2012 iPhone estimates
from 140 million to 148 million units, as we believe Apple will
continue its strong iPhone momentum and capture market share during
calendar 2012.
In fact, we believe an iPhone 5 with long term evolution (LTE)
technologies and a new iPhone form factor could result in even stronger
iPhone sales than our increased estimates for second-half 2012. In the
near-term, our checks indicate smartphone competitors have delayed
smartphone launches in an attempt to avoid competing with the recent
iPhone 4S launch and ahead of a potential iPhone 5 announcement in
mid-2012.
Only Nokia (NOK) made significant product announcements at the
Consumer Electronics Show with the Lumia 710 launching at T-Mobile and
the LTE Lumia 900 on track to launch in AT&T in March. While
Motorola Mobility Holdings (MMI) announced new products such as the
Droid Razr Maxx and the Droid 4, these products are basically
derivatives of the Droid Razr family. Therefore, with a limited
selection of new smartphones shipping in first-quarter 2012, we believe
Apple will gain smartphone market share during the quarter.
Our monthly handset channel checks and recent earnings reports from
the leading global handset/smartphone original-equipment manufacturers
(OEMs) indicate strong sales of smartphones during fourth-quarter 2011.
However, the timing of the iPhone 4S refresh in October resulted in
Apple gaining a remarkable 900 basis points of smartphone market share
during fourth-quarter 2011.
While we estimate Samsung's share of Android smartphones increased
from 35% in third-quarter 2011 to 39% in fourth-quarter 2011, Samsung's
overall smartphone market share fell from 23.4% in third-quarter 2011 to
22.7% in fourth-quarter 2011 due to Apple's impressive share gains.
OEMs such as Huawei [of China] and ZTE [of China] have taken advantage
of growing smartphone sales in emerging markets, resulting in both OEMs
gaining market share throughout 2011.
Source: IDC.
Three things strike me looking at this table:
The iPhone wasn't the fastest grower. Samsung and its range of
Android-powered phones led, growing more than twice as fast as the
iPhone. That's nitpicking, I realize, since both companies enjoyed
triple-digit unit sales growth. Every other named vendor badly trailed
the industry's 54.7% average growth rate.
"Other" includes some big names. Notice who didn't make the list.
Motorola Mobility was a non-factor, as was LG. Don't expect Google to be
happy about that. While the deal for Moto's mobile group has yet to
close, executives had to be hoping the acquisition would provide
hardware heft in a worldwide fight against Apple for market share.
Instead, it's HTC and Samsung leading the robot revolution -- and
they're both working with Microsoft to deliver Windows Phone handsets.
Nokia needs help now. The former Finnish phenom beat modest
expectations last quarter, but as these numbers demonstrate, time is
running out. Growth won't return unless the Lumina Windows smartphone
turns out to be an unqualified hit.
Android still leads in operating system share globally thanks to the
number of smartphone partners the Big G is working with, but the gap is
closing due to outrageous iPhone sales. Apple is coming for you, Google.
Watch your back.
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