Apple’s Smartphone-Profit Juggernaut

Apple (NASDAQ:AAPL) claimed a stunning 75% of the profits earned from smartphone sales during the fourth quarter of 2011. That’s right, 75%. The Cupertino, Calif.-based technology giant did it with a global market share of only 9% during the period, according to research by Asymco and IDC.

Overall demand for smartphones during Q4 grew nearly 55% year over year—a lot faster than analysts had expected. Demand for the iPhone 4S allowed Apple to reclaim its smartphone-profit leadership status with a near 24% share in the category. This happened despite the fact that the iOS 5 device isn’t compatible with the high-speed 4G LTE (Long-Term Evolution) wireless network supported by AT&T (NYSE:T) and Verizon (NYSE:VZ) (though future iterations are expected to be 4G compatible), and doesn’t match the larger screen sizes offered on many other smartphones.

In terms of units shipped, Samsung (PINK:SSNLF) still reigns as the overall smartphone market leader, thanks largely to its Galaxy series of phones, which use Google’s (NASDAQ:GOOG) Android 4.0 operating system. Samsung shipped 94 million smartphones in 2011, including more than 30 million in the fourth quarter.

An assist from RIMM

Apple’s market share got a small boost when Research in Motion’s (NASDAQ:RIMM) BlackBerry global network suffered an outage last October. Frustrated by their inability to get emails from business associates on the go, and by delays in product rollouts, millions of BlackBerry’s business customers switched to the iPhone.

Apple’s market share and profit also got some help from contract agreements with carriers AT&T, Verizon, Sprint (NYSE:S), and T-Mobile, which pay Apple higher subsidies for the iPhone than they do for other smartphones.

Few consumer-driven companies make big money during economic downturns, especially if they’re trying to appeal to a broad market by offering high-end items. But Apple has managed it with constant innovation and a willingness to exploit not just the features of competitors’ products, but also its own. With each product offering Apple addresses a customer complaint or it delivers some new feature that consumers quickly decide they cannot do without.

The iPhone 4S improvements included Siri, the now-famous intuitive voice assistant, and a better camera to go along with the iPhone’s ability to communicate seamlessly with users on other Apple devices. Everyone expects that the next-generation iPhone and iPad computer tablet will at least offer 4G connectivity, as well as smudge free services.

But it’s unexpected features that likely will have people talking about the products and lining up to buy them—a byproduct of Apple innovation that seems to have kept competitors almost obsessively focused on what Apple will do next.

Article printed from InvestorPlace Media,

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