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Apple iPhone division more profitable than Nokia

http://www.reuters.com/article/COMSRV/idUSN1051937420091110

"More profit on 7.4 mln iPhones than Nokia's 108.5 mln"

Why is Apple the only company that doesn't focus purely on marketshare?  It seems like marketshare is entirely the wrong metric -- who cares if you own 80% of the market if you make less profit than someone owning 10% of the market?
Permalink Send private email Wayne 
November 11th, 2009 2:22pm
You make it up in volume.
Permalink SaveTheHubble 
November 11th, 2009 2:22pm
You make what up in volume?  I'm talking total profits here, not profit per item.
Permalink Send private email Wayne 
November 11th, 2009 2:23pm
That's the old chest-nut -- "We lose money on every deal, so we have to make it up in volume!" -- usually said by Crazy-Carl or somebody on a TV commercial.

The serious answer to your question is, if YOU control the OS, the hardware, the software, and the media that runs on all of that, you too can charge exhorbitant prices and make fabulous profits on the few sales you make.

This has been Apple's secret formula since the Macintosh -- the Apple-II was created as an open platform which spawned an entire industry, but didn't make Apple as much money.

It's allowed them to continue to own a niche market, but at very profitable rates.
Permalink SaveTheHubble 
November 11th, 2009 2:31pm
> You make what up in volume?

The numbers.

Take that any way you like...
Permalink Herald Guppy 
November 11th, 2009 3:01pm
The lesson here is that you need to create an unstoppable army of mindless drones who will joyfully buy your products even if you product is a physical slap in the face.

Nokia could probably take lessons from the Catholic Church if it wants to compete with Apple.

Personally, I much prefer their products.
Permalink Colm 
November 11th, 2009 3:07pm
Nokia is based in Finland.

Apple is based in the USA.

Nokia cells phones.

Apple sells apps & music to be used on their phones.

Nokia has institutional inertia that prevents them from thinking of these kinds of innovations.

Apple has the infrastructure & relationships in place from iPod/iTunes.

Apple was willing to lock themselves in with one provider (AT&T).

Nokia sells to any and all providers.
Permalink A. A. Hatt 
November 11th, 2009 3:08pm
Apple is really clever at being more profitable in industries where it has a relatively small market share.

It's interesting because usually when one goes the "luxury item" approach, there's such a small market no one is really making much, like with Lambourghini. They charge a lot for each car but they don't sell many and so the owners aren't billionaires.
Permalink CC 
November 11th, 2009 4:48pm
"you too can charge exhorbitant prices"

Apple's prices aren't exorbitant though, they are reasonable. Many of their computers are priced below what you can buy *similarly configured* computers elsewhere. but they do charge crazy prices for add ons like more RAM or a slightly larger hard drive. This is a form of value pricing, to get a good deal, you buy the memory and hard drive after market and slip it in yourself, which usually involves some exotic disassembly work.

If they were exorbitant you wouldn't have all college students in the US with MacBooks and iPods.
Permalink CC 
November 11th, 2009 4:54pm
> Why is Apple the only company that doesn't focus purely on marketshare?

Great question.
Permalink .. 
November 11th, 2009 6:51pm
Nokia has a gazillion different models.  Each of which comes with a certain amount of fixed costs.  More models, more cost.

Apple has 2 models.
Permalink xampl 
November 11th, 2009 8:28pm
Because Nokia also competes in markets Apple doesn't.
Permalink Colm 
November 11th, 2009 8:50pm
Why bother competing in those markets?  Nokia isn't making any more money than Apple.
Permalink Send private email Wayne 
November 11th, 2009 8:56pm
Right, a $1.1 billion profit is pretty rubbish.
Permalink Colm 
November 11th, 2009 9:12pm
Nokia makes phone in several countries. Each plant hires thousands of people. These plants likely received government money, and closing them could well become a political issue.

GM and Ford have to make cars in Canada, even the overall cost is higher than USA.

Apple outsources all manufacturing to a Chinese company.

Nokia makes far more phones than Apple. The comparison is not apple to apple.
Permalink Rick Tsang 
November 11th, 2009 9:34pm
I think what happens is you know how to do one thing -- make product X.  Phones, Operating Systems, Cars.

And it's relatively easy to optimize that process for BIGGER and CHEAPER.  so that's the natural path for a company.  To look at a market and successfully segment it and attack the high margin piece and then maintain pricing against competitors who are skilled at the BIGGER and CHEAPER.  Hard to do.  At some point it's just too tempting for you (or for them) to say: "enough futzing around. fuck it, I'm going to make a million of these and I'm going to sell them damn cheap."
Permalink .. 
November 11th, 2009 9:43pm
"Right, a $1.1 billion profit is pretty rubbish."

I didn't say that. Maybe they're taking a loss in some of these markets?  Apple being in fewer markets could be an advantage for Apple -- they're not bothering with less profitable areas.

"Nokia makes far more phones than Apple. The comparison is not apple to apple."

That's the whole point of this conversation: Nokia makes over 10 times the number of phones as Apple, but has less profit over all.  You do make some good points though.
Permalink Send private email Wayne 
November 11th, 2009 9:46pm
In the end, all that matters is overall profit, and they're just barely below apple in that.
Permalink Colm 
November 11th, 2009 9:51pm
>I didn't say that. Maybe they're taking a loss in some of
>these markets? 

Possibly, although more likely Apple has managed to carve out an obese profit margin by making the phone "jesus would use", not because Nokia's making losses.

Most mobile phones are very unsexy, and compete on cost - hence low profit margin.
Permalink Colm 
November 11th, 2009 9:54pm
"Most mobile phones are very unsexy, and compete on cost - hence low profit margin."

Indeed.  The PC market is exactly the same.  Most PC's are very unsexy, compete on cost, and have very low margin.
Permalink Send private email Wayne 
November 11th, 2009 10:54pm
Does that explain their focus on the consumer side of things and relative failure in the enterprise markets?  Do individual consumers pay a premium for brands that business users don't?
Permalink .. 
November 11th, 2009 11:08pm
Dealing with Enterprise customers (or even regular business customers) requires compromise.  Apple doesn't compromise.  You don't want a one-button mouse?  Tough shit, get it from somebody else.
Permalink Send private email Wayne 
November 11th, 2009 11:23pm
>>> Nokia has institutional inertia that prevents them from thinking of

They're much bigger now, but in the past, Nokia had nothing to do with electronics and made, among other things, the best rubber sailing boots money could buy.  (I still have a pair, they're 20 years old.)
Permalink Ward 
November 12th, 2009 2:40am
>Indeed.  The PC market is exactly the same.  Most PC's are
>very unsexy, compete on cost, and have very low margin.

Indeed.... uh, wait, no that's not actually true.
Permalink Colm 
November 12th, 2009 6:49am

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