Money Matters, Simplified.
Apple overtakes Nokia, becomes leading handset maker
by Ishita Sood - November 11, 2009 - comments
Apple Inc. recorded a third quarter operating profit of $1.6 billion, while Nokia had operating profit of $1.1 billion
New York, November 11 -- World renowned Apple Inc., the maker of computer software products, has surpassed Nokia to become the world's most profitable handset maker.
According to Strategy Analytics, Nokia recorded a $1.1 billion operating profit, whereas Apple’s iPhone recorded a $1.6 billion for the third quarter of the fiscal year.
"With strong volumes, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years," commented Strategy Analytics analyst Alex Spektor.
Apple enters market just in two years
Apple is now the single most profitable phone maker in the U.S. In spite of having only a 2.5 percent share in the market, (compared to 38 percent of Nokia), it has generated a large amount of profit.
Nokia, however, lost six percentage points of smart phone market share in the third quarter as it posted its first quarterly loss.
Apple can now get competition from Google’s Android
Analyst Mark McKechnie wrote, “We estimate each Android unit contributes 4x the gross profit of a feature phone unit and that 10 million Android units will contribute nearly half of the gross profits in MOT’s handset division.”
Apple recorded a 25 percent increase in revenue last quarter with the IPhone getting sold in more than 80 countries. It was also sold in Nokia’s biggest market, China. Currently, Nokia’s handsets are available in more than 150 countries.
Nokia can recover
Nokia, the Finland based company, needs to come out strong in competition with Apple and show that it still remains the most experienced phone-maker.
Spektor highlights Motorola’s example of turnaround, and believes that Nokia can recover if it focuses on the U.S. market.
Nokia has underserved the U.S. market, selling its best phones either months after they ship or at full price. Its sales have fallen by 31 percent this year in the U.S. alone.
“Nokia’s profit margin for its handset division has been shrinking during the global economic downturn in 2009,” said Analyst Neil Mawston. “We believe the United States, where Nokia now trails Apple in market share, is the key to Nokia’s recovery in 2010.”
“A successful fight on Apple’s high-profit home turf can simultaneously help to revitalize Nokia’s margins and help put a check on Apple’s surging growth,” he added.