Report: Apple accounts for 32% of handset industry profits

Apple continued to command outsize operating profits in the first half of 2009 relative to its place in the overall handset industry, according to research by Bernstein Research analyst Toni Sacconaghi. The findings mirror similar analysis by Deutsche Bank analyst Brian Modoff.

According to Sacconaghi, Apple's iPhone sales accounted for only 8 percent of total handset industry revenues in the first half, but the company had 32 percent of the industry's operating profit. "Even if we exclude the operating losses generated by Motorola and Sony Ericsson, Apple still accounted for 25 percent of industry profits," he wrote in a note to clients. "[The] iPhone's success is akin to Apple's position in the PC industry--where the company enjoys an estimated 25 percent of industry profits, despite capturing only 6 percent of industry revenues."

So how does Apple manage it? Sacconaghi said Apple's position as a "first-mover" in the smartphone market and the mobile ecosystem it has developed give it distinct advantages. However, in the long-term this may hurt the firm, he cautioned. Apple will continue to outpace the overall handset market's growth, but could be knocked by cheaper phones from rival vendors. "We believe Apple will ultimately need to lower price (and margins over time) to expand its addressable market opportunity, including offering a lower-cost, non-data plan iPhone," he wrote.

Apple shipped 5.2 million iPhones in its latest quarter, which represented a 626 percent increase over the year-ago quarter, when it shipped 717,000 iPhone units. However, that quarter did not reflect full sales of the iPhone 3G, which went on sale in July 2008.

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