Apple iPhone More Profitable than Nokia Handsets

Dell, and any other PC makers looking to join the mobile phone market, should take note: Apple’s the official example of what it takes to become king of the mountain in only two years.

A Nov. 11 Strategy Analytics report is showing that in the third quarter of 2009, Apple surpassed the long-time No. 1 Nokia to become the world’s most profitable handset vendor.

“We estimate Apple’s operating profit for its iPhone handset division stood at $1.6 billion in the third quarter of 2009,” Alex Spektor, an analyst with Strategy Analytics, wrote in a summary of his report. “Apple overtook Nokia for the first time, which recorded a lower $1.1 billion of operating profit. With strong volume, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years.”

The Finnish phone-maker has been hard-hit by the global recession. While, in an Oct. 30 Strategy Analytics report showing global mobile handset shipments for the same quarter, Nokia was still the market share leader, it nonetheless underperformed the handset industry average for the fifth consecutive quarter, shipping 108.5 million handsets worldwide. Samsung, meanwhile, shipped 60.2 million handsets during the quarter, which was said to be the first time since 2006 that a vendor other than Nokia had shipped more than one-fifth of the world’s handsets.

“Nokia’s profit margin for its handset division has been shrinking during the 2009 global economic downturn,” wrote Neil Mawston, director of Strategy Analytics’ Wireless Device Strategies service, in the report summary. “Strategy Analytics believes that the United States, where Nokia now trails Apple in market share, is the key to Nokia’s recovery in 2010. A successful fight on Apple’s high-profit home turf can simultaneously help to revitalize Nokia’s margins and to put a check on Apple’s surging growth,” Mawston continued.

On Nov. 10, Nokia introduced the United States to its first phone to run a Linux operating system. The N900, which is untethered to a carrier, is priced at $750 and looks to offer a more hard-core computing experience than most smartphones. It runs the Maemo 5 open-source OS, includes an ARM Cortex-A8 processor running at 600MHz and has 1GB of application memory plus an OpenGL ES 2.0 graphics accelerator. There’s also 32GB of integrated storage, and 48GB of memory can be added with a MicroSD card.

While PC-maker Apple struts its stuff in the mobile phone world, phone-maker Nokia has likewise entered the PC space, with its Oct. 13 introduction of the Nokia Booklet 3G, a slim 2.76-pound netbook with WiFi connectivity, 3G surfing via the AT&T network and a 1.6GHz Intel Atom Z530 processor. And then there’s the real kicker: a promised 12 hours of “true” battery life, which Nokia says is the result of a combination of Intel’s processor and its long-time battery-optimization experience with mobile phones.

"For Nokia to succeed in the U.S., it will have to partner up with a top-tier carrier and piggyback on its marketing activities. Apple iPhone has done it with AT&T and Motorola Droid is seeking to do something similar with Verizon Wireless," Mawston told eWEEK. 

"Nokia will have to become a preferred partner for a major operator with the Booklet 3G or N900 and then market the heck out of it. At this stage, it looks like Nokia still has some work to do on the distribution side in the U.S. and this remains one of its biggest challenges."