How Are These Tech Titans Affected By Alterations in the Smartphone Landscape?
Ryan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
On June 4, Comscore, a market-research company focused on technology markets, released data regarding the United States smartphone industry in the 3 months ending in April. According to the report, 138.5 million people owned smartphones in the U.S. during these three months, which is up 7% since January. This statistic represents 58% mobile market penetration.
The report encompassed statistics regarding the market share accredited to the largest OEMs (original equipment manufacturers) during 2013, which the chart below displays.
As is depicted, the leading smartphone manufacturer, Apple (NASDAQ: AAPL), increased its market presence in the United States, rising from a market share of 37.8% in January of this year to 39.2%, representing an increase of 1.4 percentage points.
Comscore also released data regarding the market share possessed by each of the major platforms offered in the U.S, which the chart below displays.
Google’s (NASDAQ: GOOG) Android platform held the top position, but fell from a market share of 52.3% in January to the 52.0% mark in April.
Apple’s iOS platform held strong at the number two position, and increased its market share by 1.4 percentage points, from 37.8% in January to the 39.2% level by April.
The number three position was maintained by the fading 7.1 OS of Blackberry (NASDAQ: BBRY). The company’s U.S. platform market share fell a considerable 0.8 percentage points, from 5.9% in January to the 5.1% mark in April.
Microsoft’s (NASDAQ: MSFT) Windows 8 smartphone platform held the fourth spot in the U.S, but fell from 3.1% in January to the 3.0% level by April.
Financial Significance of the Smartphone
The global smartphone market severely influences each of the major companies highlighted in this report by Comscore, but the dependence each company possesses on the market varies as a result of the amount of revenue generated from their smartphone segments.
In 2012, Apple generated $80.47 billion in revenue from its iPhone and related products and services segment, which accounted for 51.41% of the company's overall revenue. Apple controls both the hardware and software aspects of its iPhone, as is prevalent through its presence in both the platform and OEM categories.
Google takes a unique approach to the smartphone industry. The company makes its Android software available to manufacturers, and in return, is allowed to run advertisements, which generate revenue for the company, on the devices running their platform. The Android platform is operating on over a half of a billion devices currently. The advertising segment produced $43.69 billion in revenue 2012, which represents 87.08% of overall company revenue, however not all of the revenue was a result of advertisements made on the Android platform.
Blackberry’s exposure to the smartphone market is found throughout the company’s entire business operation. Blackberry possesses a grasp over both the software and hardware aspects of its smartphone, much like Apple. The $18.43 billion in revenue generated by the company in 2012 can all be attributed to Blackberry’s smartphones and related services and software.
Microsoft’s exposure to the smartphone market is through its Windows 8 software, which is available on several brands of smartphones. In 2012, the company’s Windows division produced $18.37 billion in revenue, representing 24.91% of the overall company revenue of $73.72 billion.
Where to Position Your Money
Thus given the current market conditions in the U.S. smartphone market, which, if any, of the highlighted companies present overall attractive investment opportunities?
Apple’s top line is projected to rise from 2012’s $156.51 billion to 2015’s expected $195.01 billion, representing consistent 7%-8% year over year growth. Net income for the company is anticipated to decrease from $41.73 billion in 2012 to the anticipated $40.46 billion by 2015, representing -1% growth annually. Presently, the company holds a price to earnings ratio of 10.18, and pays out a dividend yielding 2.86%. In total, Apple earns 5 out of 5 stars, and is a screaming buy on any considerable pullback.
Google’s top line growth is predicted to remain in the 22.5%-25% range annually through 2015, with revenue increasing from 2012’s $42.72 billion to $79.85 billion by 2015. The bottom line for the company is expected to grow in the 17.5%-20% range annually through 2015, with net income rising from 2012’s $10.74 billion to 2015’s anticipated $18.43 billion. The company presently holds a price to earnings ratio of 27.48, and does not pay out a dividend. Overall, Google earns 5 out of 5 stars, and is a strong growth play possessing sterling fundamentals.
Blackberry’s top line is projected to rise from 2013’s $11.07 billion to 2016’s expected $12.12 billion, representing consistent 2.5%-5% year over year growth. Net income for the company is anticipated to rise from -$646 million in 2013 to the anticipated $893 million by 2016. Presently, the company holds a negative price to earnings ratio, and does not pay out a dividend. In total, Blackberry earns 2 out of 5 stars, and is a fundamentally flawed company possessing unstable fundamentals.
Microsoft’s top line growth is predicted to sustain in the 5%-7.5% range annually through 2015, with revenue increasing from 2012’s $73.72 billion to $89.95 billion by 2015. The bottom line for the company is expected to grow in the 15%-17.5% range annually through 2015, with net income rising from 2012’s $16.98 billion to 2015’s anticipated $27.45 billion. The company presently holds a price to earnings ratio of 18.38, and pays out a dividend yielding 2.58%. Overall, Microsoft earns 4 out of 5 stars, and is a solid and stable long-term investment on any considerable pullbacks.
The Foolish Bottom Line
The U.S. smartphone market underwent considerable changes in the three months ending with April. These alterations can result in millions of dollars being lost for one company and millions of dollars being gained for another. Over this three month period, Apple was the only major winner, gaining more than 1% in market share in both the OEM and platform categories. The importance of the smartphone industry is undeniable, and with changes constantly occurring in the industry, investors must be aware of the alterations, and position themselves accordingly.
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Ryan Guenette owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!