Barring exceptional execution from Nokia, We believe Samsung will have the distinction of being the number one supplier of mobile devices (cell phone and smart phones). Ten years ago the company had a negligible market share compared to the likes of Nokia, Motorola and Sony. Building on its success from the Korean market, Samsung gradually penetrated other Asian markets, eventually developing a strong presence in Europe and the America’s. A couple of years ago Samsung became the number one supplier of mobile devices in the US ahead of Motorola and Nokia.
Samsung’s success can be attributed to:
- Short product cycles
- Excellent design
- Variety of products
- Lower cost products for emerging markets
- Strong branding
Moreover, its success in the smartphone segment started with the Blackjack (yes! it was windows based) series. In the last copleof years the Galaxy S has achieved the distinction of being called the best android smart phone. The company has taken significant share from HTC, Motorola and some share from Apple.
Given that Google is in the process of acquiring Motorola, I will not be surprised to see Samsung offer more handsets with Windows 7/8 and its own OS.
We have heard rumors that Apple was in discussion with Verizon to launch the iPhone. However, it was only in 2011 that Verizon started offering the iPhone. It has come to my attention that Verizon’s insistence on having an icon or two offering its own services and its refusal to offer the subsidies that AT&T offered could have been the deal breaker.
I realize that AT&T had an exclusive on the iPhone as it helped with development of the first generation iPhone. However, Apple could have given some concessions to AT&T on the rebate and launched the iPhone on Verizon in 2008.
Apple has sold around 150 million phones since the launch of the iPhone. I believe the number could have been close to 200 million if Apple had started offering the iPhone on networks like Verizon that use the CDMA network. I strongly believe that the following would have happened if Apple had launched a CDMA iPhone in 2007 or early 2008:
- Limited Android’s market share to less than 25%. Remember, the first Android phone, the T-Mobile G1 did not launch till October 2008. More than fifteen months after the first iPhone went on sale and three months after the iPhone 3G went on sale.
- Apple’s cumulative revenues could have been $30 billion (50m X $600) higher. I am assuming the average selling price per phone of $600(conservative).
- Apple’s stock would be higher than $500 as the $30 billion in lost revenue would have generated additional earnings of $6-$7 billion at the minimum.
The biggest hurdle to offering the phone for GSM and CDMA could have been getting versions of both phones produced have plagued virtually every release of the iPhone.
To be clear this post is not meant to be a rant against Apple which has executed exceptionally in the last decade. It is a simple – What if?
I am truly amazed by the results that Apple posted today. Here is a summary of unit shipments IPhone’s and IPad’s:
IPhone – 37.04 million units. A 117% increase over the previous quarter and 128% increase over the year ago quarter.
IPad – 15.43 million units. A 39% increase over the previous quarter and 111% increase over the year ago quarter.
Here is the revenue breakdown by product:
Software, Service and other:$0.84b
It is noteworthy that 75% of Apple’s revenues come from the iPhone and the iPad. iPhone accounts for 53% of revenues and the iPad accounted for approx. 20% of revenues. The iPhone did not start shipping till June 2007 and the iPad started shipping in April 2010. Both these products account for 72% of revenues. I am not aware of any other company that is able to generate almost three-quarter’s of its revenue from products that did not exist five years ago.
Unless there is a major disruption, I can envision Apple hitting $200 billion in revenues in a couple of years. Many have opined which company would achieve a $1 trillion market capitalization. My bet is on Apple. My thesis on Apple is rather simple. In the next 3-5 years, the company will:
- Achieve at least 10% market share in the mobile device (cell and smart phone) market. Currently, Apple’s share is about 5%.
- Achieve 15%-20% market share in desktop and portable computing. Currently, the share is around 10%.
- Maintain dominant share of over 75% in tablets
It is truly impressive to note that a company that offers only five product lines (MAC, iPhone, iPad, Ipod and Itunes) is able to generate over $46 billion in revenues. If the much rumored iTV is to be released do not be surprised if Apple’s revenues increase by another $1o-$15 billion in the first year of its launch.
To help you understand the magnitude of the revenue. The $46.3 billion in Apple’s December 2011 quarter is:
- Higher than Google’s entire 2011 revenue of $37.9 billion
- More than double than Microsoft’s December 2011 quarterly revenues of $20.89 billion
- 20% more than GE’s December 2011 quarterly revenues of $37.97 billion
The formula for insanely great profits comes from insanely great products. I often wonder why other companies do not embrace Apple’s proven model of creating products that are elegant and simple.
Hat tip to the Apple team.