Apple Inc. (NASDAQ:AAPL) seems to follow a strategy which draws criticism from market analysts at times, yet which has thus far led to solid ongoing success and profits, as the contrast between sales and revenue in the 2013 Android and iOS smartphone market highlights. Google Inc. (NASDAQ:GOOG) smartphones made up most of the volume in last year’s one billion sales, yet the bulk of profits were quietly raked in by the Cupertino, CA tech firm.
The Android strategy is to pump out huge numbers of cheap smartphones that appeal to even relatively indigent purchasers. The majority of Android manufacturers follow this method of doing business, and it appears to hurt their bottom line at the same time that it wins analyst kudos for the sheer volume of devices sold.
LG Electronics Inc., for example, sold a record 13 million G Flex smartphones in the fourth quarter of 2013, yet posted a $58.5 million loss. HTC, which released its HTC One smartphone last April, also posted losses of $101 million in 3Q 2013, which led to Computer World predicting its possible bankruptcy within two years. The creator of Android itself, Google (GOOG), sold off Motorola, its smartphone producing branch, to Lenovo last month. Samsung was one of the only notable Android gainers, though its profits were less than previous quarters despite (or perhaps because of) record smartphone sales.
By contrast, Apple Inc. (AAPL) has eschewed pursuit of the glitz and glamor of “top market share” in favor of cashing in on more expensive smartphones that actually generate a profit. Apple’s immense advertising cache and mystique obviously make this possible as well, but the California-headquartered company appears to favor substance over style when it comes to earning money on smartphone sales. Though vastly outdone in volume, Apple managed to snare 87.4 percent of worldwide profits, which, in the last analysis, is what really counts.
A decade ago, in 2004, Apple Inc. (AAPL) followed the same strategy with its Macintosh computers, leading to analysts sneering at its upcoming failure due to lack of market share by volume. However, the company’s strategy of keeping its products profitable even at the expense of falling behind other firms in basic market share ultimately proved the springboard to its runaway, continuing success with the iPad.
Flush with cash and powerful in all consumer technology markets, the Apple of today was obviously not injured by its disregard of sales volume during the early years of the 21st century. In fact, many of its competitors from that era are gone or struggling, while the tech giant remains placidly operational – and profitable.
Android phone makers appear to be focusing on building raw market share, even if they bankrupt themselves in the process. While the splashy “advertising value” of this short term market share gives the firms enough leverage to obtain loans and sell shares to cover their losses for a time, it may prove to be a fragile base on which to build lasting success.
Apple Inc. (AAPL), and its iOS iPhone smartphones, remains focused on the quality of sales, rather than mere quantity, a strategy which appears to be successful over the long term and which highlights why this company remains one of the best tech investments available today.
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