Apple (NASDAQ:AAPL), the world’s largest publicly traded company, receives a great deal of attention surrounding its recent stock price performance and new product launches. However, value investors are able to treat themselves to a great fundamental graphic of the tech giant and smartphone market.
According to a recent note to clients, Citi Research (NYSE:C) says, “Apple and Samsung are the only investable smartphone brands.” The statement comes from the fact that Apple received 71 percent of last year’s smartphone operating profit share, while Samsung received 16 percent. Other companies such as HTC, Research in Motion (NASDAQ:RIMM) and Nokia (NYSE:NOK) only represented 5 percent, 4 percent and 3 percent, respectively.
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The chart below from Citi via Fortune shows the large weighting Apple and Samsung have in the smartphone market.
In 2012, Citi says the profit pool is 70 percent Apple and 30 percent Samsung. All other original equipment manufacturers trying to compete with the two giants are losing money.
Apple and Samsung are not just the dominant players, they are in the process of wiping out mid level priced units. Citi explains, “Smartphone Market Faces Dramatic Structural Changes- At the high end ($500+), Apple and Samsung continue to dominate. At the lower end, internet/software companies will lead in $200-$300 phones and Chinese brand and whitebox players will annex the sub-$200 segment many with a zero hardware profit model. Given the rising competition, we expect many traditional mid priced $200-$500 smartphones to be wiped out in the next few years, leaving little future for companies that lack high-end exposure.”
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