The 2012 holiday quarter will prove to be an interesting period for the likes of Apple’s competition. Once dominant RIM and Nokia are bleeding money. Microsoft, once a player in mobile devices, is scrambling for attention and contention. Windows Phone isn’t selling in numbers to compare with Apple or Samsung, and the highly touted Surface tablets have yet become publicly visible.
Google bought Motorola and both continue to bleed money in a desperate attempt to stay relevant as Apple and Samsung lock up most of the revenue in mobile devices, and nearly all of the profits. Amazon and Google are forced by Apple’s dominance in the post-PC tablet era to sell products at cost. That might gain a slice or two of market share, but doesn’t bring anything to the bottom line.
Losing money on every device sold won’t help even as market share grows. What’s going on? Why the desperate tactics?
In a few short years Apple has carved up and digested much of the smart phone industry. Apple owns almost 80-percent of the industry’s profits (the rest goes to Samsun) while the also rans– Microsoft, Google, RIM, Nokia, HTC– struggle for relevance, relegated to the non-profit low end of the market.
How did Apple turn the industry upside down?
Win, win, win.
First, the iPhone was a revolutionary jump from previous smart phones. Second, the iPhone with apps became the de facto standard for modern mobile communication. Everyone connected with the iPhone had a comfortable seat at the table and could partake of Apple’s ability to share revenue and profits.
Cell phone carriers make money when they sell the iPhone (even subsidized, the carriers make money). Carriers lock in customers for a few years, deriving a monthly revenue stream which is often extended in two years when customers grab a new phone and a new contract. The iPhone brings fewer customer support issues, greater carrier loyalty and less churn.
Apple created a winning situation for app developers, too. Almost $6-billion has gone into the iOS developer community in a few short years.
Customers win. Carriers win. Developers win.
Now, compare that to what Microsoft, Amazon, Google, RIM, Nokia, HTC, and Samsung bring to the table. Android is fragmented. Microsoft Windows is different, but not better. BlackBerry is so 1999, and five years after the iPhone shipped their answer is delayed yet again. Only feisty Samsung, with a history of stealing technology to become a player, remains profitable in smart phones.
All the other players are desperate, and so much so that products are given away at or near cost simply to gather a customer base in the hopes that customers won’t notice the disparity between their wares and Apple’s wares.
The real question is, “How long can Microsoft, Amazon, Google, RIM, Nokia, HTC, and friends continue to lose money before exiting the mobile industry?” Microsoft and Google have deep pockets. The others? Not so much.