Apple has long gobbled up an outsized share of the smartphone industry’s profits. But in the fourth quarter, the iPhone maker’s slice of the profit pie reached comically largely proportions.
In the holiday period, Apple made about $19.4 billion in pre-tax profits from selling its lineup of iPhones, estimated Michael Walkley, a financial analyst who covers Apple for Canaccord Genuity, in a report issued Sunday. That represented about 93 percent of the total operating profits generated by the entire industry, which was an all-time high for Apple, Walkley wrote.
“We believe Apple’s iPhone 6/6 Plus smartphones dominated December smartphone sales at unprecedented levels,” Walkley wrote in his report.
In the fourth quarter a year earlier, Apple soaked up 75 percent of smartphone industry profits, according to Walkley. For all of 2014, profits from iPhone sales accounted for 79 percent of profits.
Apple reported record earnings last month on huge iPhone sales growth. The company sold 74.5 million iPhones in the quarter, which was up 46 percent from the same period a year earlier.
According to Walkley’s report, Apple was one of only two companies whose slice of the smartphone profit pie was larger than 1 percent. Samsung, which gleaned about $1.8 billion in profits from selling its lineup of Galaxy phones, accounted for 9 percent of total industry profits. That was Samsung’s smallest portion of industry profits since 2008, Walkley wrote.
The six other companies mentioned in Walkley’s report either posted profits that were so small that they essentially had a 0 percent share of the pie, or they lost money on their smartphone sales, meaning that their share was actually negative. Microsoft was the worst in that regard; according to Walkley’s analysis, the software giant lost about $414 million on its smartphone sales in the fourth quarter, giving it a -2 percent share of industry profits.
“Other leading (smartphone manufacturers) continue to struggle,” he wrote.
Apple’s expanding portion of the smartphone industry’s profits has come despite the fact that its share of total smartphones sold actually was flat last year, according to Walkley’s estimate. Apple sold 192.7 million iPhones in 2014, which accounted for 15.5 percent of the total smartphones sold. That’s the same share Apple had in 2013, when it sold 153.5 million, according to Walkley.
Other estimates have indicated that Apple’s share of smartphone device sales actually fell last year.
Walkley forecast that Apple’s strong iPhone sales will continue this year, as existing iPhone owners upgrade their phones to the new models and the new big-screened iPhone 6 and 6 Plus models lure away Android users.
“We believe these trends should grow Apple’s iPhone installed base and bodes well for future strong iPhone replacement sales, earnings, and cash flow generation,” he wrote.
Photo of Apple’s iPhone 6 and iPhone 6 Plus models courtesy of the company.
