Fascinating chart on mobile phone profits vs. market share (click to enlarge). Usually when you see this kind of a dramatic chart it means a lot of exits and/or change in a market.
Look at the ratio of market share to profits for Apple (AAPL) and RIM (RIMM) vs the rest of the industry. 3% of the sales for 38% of total profits. Think about the capital required by Nokia (NOK) to generate that kind of market share, yet Apple has one third those profits and a minuscule market share. Nokia is going to take the biggest hit here in my view as it continues to make money on plain old mobile phones but smart phone profits drive others much higher.
Nokia has been coming out with these N type phones since I was sitting at a desk back at Omnipoint in 1996 (now T-Mobile). It was pretty easy to get your mitts on the hottest phones since Nokia was a huge supplier and they wanted our network builds for New York, Florida, Michigan, and Mass. We all clamored for the handset because of the bleeding edge features but in the end, the phone was too hard to use. Check out this Nokia Communicator that came out in 1996.
What amazes me? That formula now is exactly the same as it was back then. The products even look the same. Big, clunky, but boy it has great specs-it must be a Nokia Smartphone. Feature rich but minimal integration and usability.
Nokia's success has been about technological collaboration in the development of network standards like GSM and LTE. That process is about big companies "working together" to try and divide up the market rather than the cut throat innovation that takes place that PC players like Apple are used to. You take this patent, I'll take that patent. Ever seen Apple play nice with patents?
Their success in handsets has been a slow plodding cost control based market expansion rather than producing exciting products. They cleaned the competition out with great cost management and a gradual rise to 46% market share.
But they have never had to innovate until now. Now that the PC makers have entered this market, it's a rate of innovation that Nokia is unlikely to surmount. If I could just buy their LTE division I would do so, but who wants that hulk of a handset business? Value trap.
Look at the ratio of market share to profits for Apple (AAPL) and RIM (RIMM) vs the rest of the industry. 3% of the sales for 38% of total profits. Think about the capital required by Nokia (NOK) to generate that kind of market share, yet Apple has one third those profits and a minuscule market share. Nokia is going to take the biggest hit here in my view as it continues to make money on plain old mobile phones but smart phone profits drive others much higher.
Nokia has been coming out with these N type phones since I was sitting at a desk back at Omnipoint in 1996 (now T-Mobile). It was pretty easy to get your mitts on the hottest phones since Nokia was a huge supplier and they wanted our network builds for New York, Florida, Michigan, and Mass. We all clamored for the handset because of the bleeding edge features but in the end, the phone was too hard to use. Check out this Nokia Communicator that came out in 1996.
What amazes me? That formula now is exactly the same as it was back then. The products even look the same. Big, clunky, but boy it has great specs-it must be a Nokia Smartphone. Feature rich but minimal integration and usability.
Nokia's success has been about technological collaboration in the development of network standards like GSM and LTE. That process is about big companies "working together" to try and divide up the market rather than the cut throat innovation that takes place that PC players like Apple are used to. You take this patent, I'll take that patent. Ever seen Apple play nice with patents?
Their success in handsets has been a slow plodding cost control based market expansion rather than producing exciting products. They cleaned the competition out with great cost management and a gradual rise to 46% market share.
But they have never had to innovate until now. Now that the PC makers have entered this market, it's a rate of innovation that Nokia is unlikely to surmount. If I could just buy their LTE division I would do so, but who wants that hulk of a handset business? Value trap.
