The biggest news from the recent Apple Hit Parade of Misleading Headlines was Samsung becoming the most profitable cell phone maker. There’s no way you could have missed the Apple bashing in article after article based upon… drum roll, please… fiction, not fact.
As it turns out, Samsung’s theft of Apple’s intellectual property has helped make the company very profitable, but this most recent attempt to dethrone Apple from anything doesn’t meet one important criteria. Facts.
Facts vs. Fiction
If you’ve ever wondered why Mac360 doesn’t devote many pixels to news it’s because the news changes every day. I know what you’re thinking. ‘Sure, Kate. News changes every day. Like, duh!‘
But that’s not what I mean. As a group of Mac-loving writers we prefer not to regurgitate all the news you read elsewhere because that same news isn’t really news. Often, it’s nothing more than plain vanilla fiction.
A company called Strategy Analytics said, ‘Samsung has finally succeeded in becoming the handset industry’s largest and most profitable vendor.’
That ‘Samsung Topples Apple‘ meme was repeated ad nauseam. The problem is this. It’s fiction, not fact. Strategy Analytics joined a growing number of research firms looking for public notoriety with some fast and loose research.
In other words, they guessed how much of Samsung’s profits went to handsets, vs. their guess about Apple’s iPhone profits, and from those guesses derived the fact** that Samsung dethroned Apple.
Lies, Damned Lies, Statistics
Research is just a more expensive way to say guess, and that’s what really happened. Here’s the problem. Guessing is easy. Real research takes time and effort, and Apple bashers just don’t have the time, and certainly not the inclination, to dig up those pesky facts that don’t fit their latest ‘Apple is doomed’ narrative.
Apple publicizes how many iPhones are sold each quarter. Samsung does not. Apple only makes smartphones. Samsung makes smartphones and a gazillion cheap-assed plastic phones. And chips. And screens. And, just like Apple, plenty of other products which add to the profit pile.
The public financial statements for both companies are not detailed enough to make the statement Strategy Analytics made. So, it’s not a fact. It’s an eye grabbing headline. Unfortunately, when facts are finally revealed, all most people will remember is Strategy Analytics’ fiction.
Samsung doesn’t even bother to tell anyone how many smartphones are shipped, while Apple does. Neither company tells how much profit is in each product segment, either. In fact, Apple and Samsung made almost exactly the same amount of profit in the most recent quarter (after taxes), although Apple made more in operating income. Apple set aside almost double the amount for taxes as Samsung.
Like Apple, most of Samsung’s profits comes from handsets, smartphones, tablets, PCs, and network equipment, but the company also makes plenty of profits on screens and chips, but far less on TVs and appliances.
Cheat On The Count’
Another problem with Strategy Analytics’ research (which turns fiction into non-existing facts) is that it compared an entire Samsung division (which includes handsets, smartphones, PCs, etc.) with an estimate of Apple’s iPhone profits.
Why not compare Samsung’s Android OS devices with Apple’s iOS devices? Wouldn’t that paint a more accurate picture of how each company competes with the other? Of course, the results of that comparison wouldn’t fit the narrative of ‘Apple is doomed’ would it?
I remember a disc jockey on the radio here in New York who bellowed, ‘Here’s the 5th of three songs in a row. That’s how we play more music on WAXQ. We cheat on the count.’
Think about the math for a moment. Apple’s margins range from 35-percent to 40-percent, while Samsung’s margins barely top 20-percent. How is it again that Samsung’s smartphone profits top Apple’s iPhone profits? Samsung makes it up on volume, shipping well over twice as many phones as Apple, at lower prices, therefore, lower margins.
To be fair, both companies are sucking the rest of the industry’s profits dry. It’s a good thing that Google and Microsoft have deep pockets, otherwise, their days would be more like Nokia, BlackBerry, Sony Ericsson, et al. Numbered.
The facts are this. Samsung did not dethrone Apple as the most profitable smartphone maker (Apple doesn’t make cheap handset phones). Both companies are diversified and making plenty of money. Apple seems to do it the old fashioned way. Selling quality products that customers want to buy. Samsung seems to do it the modern ‘yellow journalism’ way by supporting research that turns fiction into fact.
If researchers want to compare guesstimates, compare how many iOS devices Apple sells with Android OS devices of any other company, then estimate their respective profits.