Samsung is not eating Apple's lunch

Posted by AdamReid on July 30, 2012 07:44 pm 8

(republished from ConsideringApple)

Interesting article over at Yahoo! today (from the Associated Press) entitled “iPhone appeal dims as Samsung shines”. Now I have no problem with the contention per se, but the basis in which the opinion is reached is certainly a head scratcher. The first thing mentioned is the oft-quoted IDC report for Q2 ’12 that showed Samsung shipping almost double the amount of smartphones than Apple. A careful reading of the report would lead to a different conclusion of the headlines reached, but we’ll discuss that later. First back to the AP article. In spite of the headline the author actually stated the obvious:

When Apple reported financial results for its latest quarter last week, a new phenomenon was revealed: Buyers started pulling back on iPhone purchases just six months after the launch of the latest iPhone model.

and…

Most of Samsung’s sales comprise cheaper smartphones that don’t compete directly with the iPhone.

Yet he didn’t reach the logical conclusion: Samsung’s success did not come at the expense of Apple, it came at the expense of Nokia. The fact remains Apple and Samsung aren’t really “rivals” as they aren’t playing the same game. Allow me to explain using the same report causing the doom-and-gloom prognostication amongst sensationalist writers.

First, is the fact that sales are up year over year, and not by an insignificant margin. Maybe its the fact that I’m a full time business analyst rather than tech reporter, but I know when I’m preparing a report to chart the healthiness of a company year-over-year comparisons provide a much better insight than sequential quarter comparisons as year-over-year accounts for the same time sensitive circumstances from the same period of the previous year.

Second, as the report states (and logic dictates) buyers do no exist in a vacuum, and buyers have become aware of the yearly release schedule for iPhones. This has led to slumping sales immediately preceding the presumed release of the next iPhone. So did sales fall after the 2nd quarter in which the latest iPhone was on sale? Of course they did, logic demands it. After all, the very same report clearly states “the decline is not unusual as iPhone shipment volume is highest in the first two quarters after its release.” So with sales growing yearly but declining quarterly does it make sense to declare “the once-sexy iPhone is starting to look small and chubby” or as Business Insider put it “that iPhone already looks outdated compared to the Samsung phones that have come out since, which may be causing more customers to flock to Samsung”? Of course not. Simply put, the numbers don’t back it up.

So iPhone sales are up yearly but down quarterly as they usually are because customers are shrewdly waiting for the newest iPhone release, Samsung is largely king because of sales of their less costly devices, and Nokia’ sales are at a all time low because of Samsung encroaching on their territory. This should be enough for any reasonable person to understand that Samsung’s success isn’t coming at the expense of Apple (Apple’s sales are still up, their marketshare is still growing), but sadly it isn’t. Which brings me to my final point: the sales figures show this is hardly the case. Lets first look at notoriously coy Samsung’s own sales figures 10 million of their flagship in 2 months. Now this is hardly an insignificant feat, but it is also a far cry of the 4 million in 1 week figures of the “disappointing” iPhone 4S. And those not-insigificant sales had to come from somewhere right? Well looking at HTC’s disappointing sales and Motorola’s tepid turnaround while Apple continues to flourish I’d say the logical conclusion is that Samsung’s triumph is not over Apple, but over Nokia in the low end and Motorola, HTC and other Android vendors in the high end.

…or we can ignore facts and engage in flaming speculation for page views.