Apple passes Nokia as most profitable cellphone maker

iPhone maker Apple Inc. has become the world's most profitable cellphone maker, a prominent tech consultancy suggests.

"With strong volumes, high wholesale prices and tight cost controls, the [computer] vendor has successfully broken into the mobile phone market in just two years," Strategy Analytics analyst Alex Spektor said.

The Cupertino, Calif.-based company raked in $1.6 billion US in profits out of iPhone sales during the third quarter of 2009, Spektor's analysis suggests. That bested the $1.1 billion in profits he found Finnish telecom giant Nokia earned during the same period.

Although profitability of the iPhone units remains a closely guarded secret in Apple's quarterly results, the consultancy has tracked profitability among cellphone sellers since 2007, and the third quarter was the first time Nokia was supplanted at the top of the list, Spektor said.

"It really comes down to the product mix," he said in an interview. "Nokia phones average about $90, globally, while Apple averages about $600 globally."

"So for every phone Apple sells, Nokia has to sell six or seven," just to keep up in revenue — never mind profits, Spektor said.

The per-unit revenue the companies earn does not necessarily correspond to the retail price consumers pay for the phones.

Nokia slipped into second place as margins have been hit hard by both the economic downturn and a stagnant presence in the United States, Spektor said.

It remains the dominant phone maker in much of the developing world, where profit margins are much slimmer. Media reports estimate that Apple's Chinese partner, China Unicom, has only sold 5,000 iPhone units since the device was unveiled in China.

"The vast majority in China will be looking for imitation products because of the price point, so if you have something that looks like [the iPhone and] offers comparable features, you're going to do well," Spektor said.

But a rebound in the key U.S. market is key to Nokia's long-term strategy, the consultancy says.

"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," Strategy Analytics director Neil Mawston said.

Apple has leapt to the top of the profitability list among phone sellers despite the fact that the computer-maker only entered the cellphone market roughly two years ago with the release of the first iPhone in June of 2007.

Worldwide, Nokia sold 108.5 million wireless devices in the third quarter of 2009, down 8 per cent from last year's level.

In the same period, Apple Inc. sold 7.4 million iPhones worldwide, company data reveals, a seven per cent increase over the same period last year.