Saturday, July 27, 2013

(28-07-2013) Analyst: Samsung Finally Overtakes Apple for Mobile Operating Profits - PC Magazine - W4llppr

Analyst: Samsung Finally Overtakes Apple for Mobile Operating Profits - PC Magazine Jul 27th 2013, 19:08

Apple iPhone 5 (AT&T)

Time to mail back the trophy, Apple.

Research firm Strategy Analytics is estimating that Samsung's second-quarter operating profits have finally overtaken Apple's to the tune of $5.2 billion to $4.6 billion. We say estimating, as these are figures that the companies don't specifically report – although Samsung did indicate that the company's mobile division hit $5.6 billion in profits in its Q2 earnings statement, the slight disparity in figures comes from non-mobile sales.

So, what helped carry Samsung to its second-quarter success over Apple in the mobile market? According to Strategy Analytics' Neil Shaw, a senior analyst, Samsung combined high sales volumes and high wholesale prices while simultaneously trimming the fat on its overall costs.

Apple, which had previously been the world's most profitable smartphone vendor since the third quarter of 2009, is currently facing two main threats to its profit margins: A lower percent of iPhone 5 sales compared to the company's other smartphones, which Apple will attempt to bolster by allegedly introducing the company's first trade-in program and possibly splitting the iPhone 5 brand into a high-end and mainstream smartphone. Additionally, Apple is having to deal with stronger competition from its manufacturing rivals.

"Samsung is performing well in the US market, while Huawei, ZTE and other local brands are growing vigorously in China. Apple is now under intense pressure to launch more iPhone models at cheaper price-points or with larger screens to fend off the surging competition and recapture lost profits in the second half of 2013," said Strategy Analytics executive director Neil Mawston in a statement.

According to Apple's third-quarter earnings report, its total international sales are struggling a bit: Revenues are down $600 million year-to-year in Europe, $800 million in China, and flat in Asia Pacific. Japan's up $500 million, one of the few silver linings Apple has managed to generate among the international markets.

Senior vice president and CFO Peter Oppenheimer, didn't appear fazed when answering questions on the company's recent earnings call regarding Apple's international sales. Take China, for example:

"I think it's important to put it in perspective. If you combine the (result story) that we have in Greater China, our revenues there were $4.9 billion for the quarter, and so that's about 14% of the Company, which is very significant. A few years ago that was in hundreds of millions, and so we've grown our business there significantly," Oppenheimer said.

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