maemo.org - Talk - In 3 years, Apple has siphoned most of Nokia Profits...

maemo.org - Talk (https://talk.maemo.org/index.php)

- Competitors (https://talk.maemo.org/forumdisplay.php?f=4)

- - In 3 years, Apple has siphoned most of Nokia Profits... (https://talk.maemo.org/showthread.php?t=60571)

In 3 years, Apple has siphoned most of Nokia Profits...

Fascinating analysis on how Apple - in 3 short years - has transformed the entire smartphone landscape and sucked all the profits away from the former incumbents. It serves to illustrate how marketshare can be extremely deceiving, as it does not necessarily equate to profit and therefore a company's overall viability - hence the rapid strangulation of some of the previous incumbents. What is striking, is the speed and scale of the "wealth transfer". Its almost unbelievable.

http://www.asymco.com/2010/08/17/and...iggest-losers/

Quote:

Looking at the pure smartphone vendors RIM and Apple, the picture is nothing short of astonishing. This before-and-after share-of-available-profit chart shows that the two entrants went from about 7% profit share to 65% in three years.

Apple in particular is capturing about half of the available profits with three percent of the units. It dwarfs all the other vendors, more than double the nearest (Nokia). All that in three years and with the added burdens of only three models, a recession and limited distribution.

WHAT DOES IT ALL MEAN?

Here are my conclusions, enumerated:

1. The lack of a real response. The recurring theme in this series of articles has been that giant multinational incumbents in a vast and rapidly growing industry, enjoying all the advantages that size and incumbency, have had their profits taken from them. And they don’t seem to have put up much of a fight.

2. It’s all wealth transfer. Note the total amount of profit available has not increased markedly; this is not about incumbents growing the pie. Two thirds of what should have rightly been theirs moved from the incumbent shareholders to the entrant shareholders.

3. Speed. This shift of profit occurred over an unprecedentedly short period of time. Three years is no more than two product cycles in the industry and it’s an order of magnitude faster than what happened historically to other industries.

4. Disruption is the diagnosis here. The incumbents were caught in the headlights. Disruptive innovation leads to asymmetric competition and this is what we just witnessed. History has shown that the shift of profits is usually the last stage of disruption and is usually irreversible because ;the change in business models cannot happen at the rate of change of profit transfer.

Quote:

There is a secret to Apple’s profit capture. What allows them to get the outrageous margin is that they dip (indirectly) into the service revenues of the carriers. What I really need to do is expose how Apple is using a hardware product to receive service revenues from mobile broadband carriage fees. To get away with this scheme, you need a product that compels people to move to higher ARPU and do so enthusiastically. There are a few pivotal moments in history when customers move to higher price points (think cable vs. broadcast TV and broadband vs. dial-up). Apple is able to essentially carve a piece of the service pie out.

So the question on where the essential value is gives a clue to how the whole “device” EBIT pie will grow. Imagine a transfer of wealth from operators to (a) device vendor. Then you start to see the bigger picture.

http://lh3.ggpht.com/_S_QOl2ziOgk/TG...vk70/photo.JPG

Re: In 3 years, Apple has siphoned most of Nokia Profits...

I sure wouldn't say all profits, but definitely significant amounts. However, it's not sustainable.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Texrat (Post 790047)

I sure wouldn't say all profits, but definitely significant amounts. However, it's not sustainable.

With expanded worldwide distribution (Verizon, etc), Apple's marketshare will most likely grow from its current 3% base and therefore also its profitshare i.e. for many competitors, it's gonna get worse before it gets better.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

BTW: Are the numbers for Apple only for their iPhone sales or do they also include other iOS device sales (relevant)? What about their non iOS iPod and desktops (irrelevant)?

If I'm not mistaken, iPhone is about 40-50% of their total business. Most likely the portion with the highest profit margin from their stable.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

wonder if those sales figures are also linked to the apple app store?

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Hintry (Post 790050)

I remain sceptical. The price is high and many developing countries simply does not need or want what it offers. Apples profit margin is of course much higher than on smartphones. Same as with other Apple hardware... I am interested to see what the ipods sales have been up too since the release of the iphone. Why does it matter if Apple "took" nokia's profits? In technology you are on top of the world the one day and the bottom the next. What do you think will happen with Apple when Jobs retires?

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Hintry (Post 790050)

Doubt it. We'll see what Android says.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Off Topic - I just saw SIP in the subject and open the thread...shows where my interests lie.

On Topic - skewed results I'm sure but as above, it won't necessarily last for any company that holds the title.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Texrat (Post 790068)

Doubt it. We'll see what Android says.

The erosion of profit share to Apple does seem to have spooked the other competitors and seems to be the reason why so many of them have incorporated Android into their product lines.

Then again if they all keep "tweaking" the UI of their Android products then the fragmentation of Android is going to get worse.

Also, as far as I know there seems to be a reluctance to offer "official" upgrades to Android phones.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Texrat (Post 790068)

Doubt it. We'll see what Android says.

Interestingly the point of the article was to evaluate Android's potential for profitability.

http://www.asymco.com/2010/08/17/and...iggest-losers/

Quote:

If Android is to become the dominant platform, does it depend on the success of its licensees? Who are these licensees and what are the chances that they will be able to align their businesses to what Android offers (a new revenue model based on services and advertising).

One problem I see is that Google is making a bet on those same vendors who are now squeezed in the middle of that last pie chart: Samsung, LG, Motorola and Sony Ericsson. Nokia, Apple and RIM will certainly not take the OS over what they already have as it dilutes their differentiation and margins. That means Android is aligned with the biggest losers in the industry.

So how likely are these disrupted ex-giants to recover and take Android forward? My bet: slim to none. Android does not offer more than a lifeline. It is not a foundation for long-term profitability as it presumes the profits accrue to the network and possibly to Google. Profit evaporation out of devices to Google may be a possibility at some time in the future, but only if the devices don’t need too much attention to remain competitive. But because they’re still not good enough (and they won’t be for years to come), it’s certain that attention to detail is what will be most important to stay abreast of Apple

So here we have the real challenge to Android: partnership with defeated incumbents whose ability to build profitable and differentiated products is hamstrung by the licensing model and whose incentives to move up the steep trajectory of necessary improvements are limited.

In other words, Android’s licensees won’t have the profits or the motivation to spend on R&D so as to make exceptionally competitive products at a time when being competitive is what matters most.

And then of course there's the small matter of Larry Ellison...

http://www.roughlydrafted.com/2010/0...ogles-android/

Quote:

Larry Ellison’s Oracle is a tough as nails, down to business firm. It just recently made progress in a long running lawsuit against competitor SAP when that company cried uncle and declared liability in a software theft suit, although it claims Oracle is vastly overstating its damages. That’s not the kind of company I’d want to be suing me.

With Sun’s own mobile Java VM already having largely failed as a viable mobile platform, Oracle has good reason to want to take a bite out of Google’s ascending Android. As the new owner of Sun’s Java, Oracle is looking for ways to make use of its $7 billion acquisition. What better way than to pull out your Sun patents and kick the number one US smartphone platform in the balls with them? It doesn’t matter that Google isn’t making any money in distributing Android, because Google’s business model is to give away software to provide it with more surface area for its ads.

That means Android conveys a lot of value to Google, so Oracle has big pockets to go after for damages from Google’s decision to open source Java without its permission. How this will play out is anyone’s guess, but it’s not great news for the fledgling mobile platform. After all, if Oracle injects new license fees and restrictions into Android’s core kernel, there’ll be little room left for Google to continue subsidizing its support and distributing the software just to expand its ad opportunities. It’s not like Google makes any money on Android itself.

At the very least, I'd say there are good reasons to be a bit less bullish about Android.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Texrat (Post 790047)

I sure wouldn't say all profits, but definitely significant amounts. However, it's not sustainable.

You know what else is not sustainable, at this rate? Nokia. :P heh
They'd better turn that around FAST if they want to become relevant again.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Money, it's a crime
Share it fairly
But don't take a slice of my pie

pink floyd - money

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Nokia’s profit share reduction down from 63% to 22%.

Quote:

Originally Posted by Texrat (Post 790047)

I sure wouldn't say all profits, but definitely significant amounts. However, it's not sustainable.

Now why does this put me in mind of the Monthy Pyton Black Knight?

Reduced to a limbless belligerent torso shouting “come back and fight, you bastard”.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Rebski (Post 790534)

Nokia’s profit share reduction down from 63% to 22%.

Now why does this put me in mind of the Monthy Pyton Black Knight?

Reduced to a limbless belligerent torso shouting “come back and fight, you bastard”.

Funny, except the comment you quoted wasn't about Nokia, it was about Apple. Regardless, history is already repeating itself. But instead of it being Apple vs. Microsoft Windows, this time it's Apple vs. Google Android. How does profit margin matter to an average consumer? They only care about the price/performance ratio. Over time, that never favors Apple.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Funny, except the comment you quoted wasn't about Nokia,

Perhaps I misconstrued the comment but Black Knight is how I see Nokia, its devotees and apologists.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by Rebski (Post 790759)

Perhaps I misconstrued the comment but Black Knight is how I see Nokia, its devotees and apologists.

Who are these devotees and apologists? How i can join them? Do you have any list what I have to say so that i can be great apologist! Does it include criticizing peoples weak arguments which basically include "Nokia is crap because UI is crap and you are crap" or how this happens? Help me.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by slender (Post 790764)

Didn't you get the Nokia Apologist Agenda and meeting memos? You really should attend. I mean.. I stopped attending a long time ago now, but I'm just saying, ~you might liiiiike theeem! o/~

Re: In 3 years, Apple has siphoned most of Nokia Profits...

An interesting group of articles by Finnish journalist Mikko-Pekka Heikkinen, who conducted a number of interviews with fifteen former Nokia employees, to understand the reasons for Nokia's fall from grace.

Knock, Knock, Nokia's Heavy Fall...
Nokia has lost its way. What on earth happened to the mobile phone path finder?

Part1
http://www.hs.fi/english/article/Kno.../1135260596609
Part2
http://www.hs.fi/english/article/Kno.../1135260599730
Part3
http://www.hs.fi/english/article/Kno.../1135260623867
Part4
http://www.hs.fi/english/article/Kno.../1135260634741

Essentially - Nokia's product development process is bureaucratic, stiff, and painfully slow.

Re: In 3 years, Apple has siphoned most of Nokia Profits...

Quote:

Originally Posted by slender (Post 790764)

Who are these devotees and apologists? .......Help me.

You must be new around here?

Re: In 3 years, Apple has siphoned most of Nokia Profits...

This just goes to show that no one, not Nokia, not Apple nor Google or Facebook are immune to a competitor coming along and taking their slice of the pie, which is a good thing I think

Re: In 3 years, Apple has siphoned most of Nokia Profits...

There are some inconsistencies with that pie...where are HTC or Palm? No market share for them..at all?