With so many smart phones being
sold and seemingly everyone having one, it's hard to imagine that business
would not be booming for most of the companies in the industry. However, when
looking at the revenue of most of these companies, selecting one that actually
makes money in the space is more like playing the board game Clue, but instead
of Colonel Mustard in The Observatory with a rope, the winning answers are
Apple in the US and China with the iPhone, and Samsung in Global and Emerging
markets with the Galaxy Line.
Truly
the rest of the manufacturers are the victims in this analogy. Samsung and
Apple really are the only people making money in the space, which is somewhat
fitting since their devices are a lot better than most of their competitors'
devices on average. They also sell more of them, spend more on advertising and
research and development, and have higher profit margins.
According
to a report, Apple had the highest operating margin in the smart phone space at
33 percent. Samsung lagged behind in second place at 19 percent, while LG fell
to 2 percent, just a touch above Sony and HTC who both have operating margins
on 1 percent. Nokia, Blackberry and Google's Motorola all suffered losses of 1
percent, 7 percent and 22 percent respectively.
Some
manufacturers have decided that they might leave the space, which is what Sony
is considering with their weak earnings from the sector. They still produce the
camera for the iPhone and sell the Xperia Z3 which has a monster 20mp camera
and is available as waterproof for up to 30 minutes and 5 meters, so there is
hope yet for the company if earnings reports turn around.
Google
has decided to flip Motorola after they were not able to turn its fate around
and are exploring partnerships with other companies like HTC and LG who have
proven more successful in the market. Google did manage to keep its Aurora
project from the Motorola deal as they explore the space of modular
electronics.
LG
released the Flex last year, so perhaps their angle to break out into more
profits is durable and bendable devices that are still powerful. This is an
especially interesting direction for cell phone design and it should be
exciting to see how LG goes about using it to create great products for us,
their customers.
The
final question here is what are the profit margins that LG, Motorola, Sony and
HTC getting from their phones. That's a question for another time, but remember
that other companies are making excellent phones, it is not just Apple and
Samsung, though advertising can easily make you believe otherwise.
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