How Did Apple and Samsung Bag 100% of Smartphone Profits?

Although they are the bitterest of opponents, together they would be an unbeatable profit powerhouse. According to “value share” data provided to AppleInsider by Canaccord Genuity, Apple (NASDAQ:AAPL) and Samsung (SSNLF.PK) together made up 100 percent of the smartphone industry’s profits in the first calendar quarter of 2013.

The manufacturers on Canaccord Genuity’s list are Apple, Samsung, LG, Nokia (NYSE:NOK), BlackBerry (NASDAQ:BBRY), Google’s (NASDAQ:GOOG) Motorola, Sony (NYSE:SNE), and HTC. Despite the big names, they were not all big earners, and Motorola actually lent value share to every other company, as its losses created a curve for the results.

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With $8.03 billion in operating income, Apple accounted for 57 percent of the total smartphone market’s profits. Samsung followed closely behind with about $6.02 billion, giving it a 43 percent share. Combined, that totals 100 percent of the profits, even though there were still 6 other companies.

Motorola had an operating income loss of $179 million, giving it a negative-1 percent value share. This made the extra headroom for Apple and Samsung to make up 100 percent of the value share even while other companies had positive results.

Compared to Apple and Samsung, the other companies earned next to nothing. Nokia had an operating income of $5 million, BlackBerry beat that with $17 million, Sony topped that slightly with $19 million, and HTC had a very minimal $1 million operating income. All 4 companies had a value share of 0 percent.

LG was the lucky company that got to make up for Motorola’s negative share. LG had an operating income of $123 million, giving it a 1 percent value share.

Despite Apple coming out on top, Samsung might have been the luckiest company of all. Though Apple had a 57 percent share of the profits, this was a drop from the 72 percent share it had in the December quarter. Its operating income fell by over $4 billion, and its operating margin slipped from 40 percent to 35 percent — likely due to cannibalization by its older legacy iPhones on its latest iPhone 5. In contrast, Samsung brought its operating margin up 2 percent to 22 percent, raised its operating income by almost $1 billion, and boosted its value share from 29 percent to 43 percent.

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Many of the other companies are operating on very thin margins compared to Apple and Samsung, which put them at a major disadvantage when it came to driving profits. Still, many of them showed stability, while Apple dropped steeply. While Apple may not manage to sink as low as the others, it’s battle with Samsung is getting much closer.

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