Apple, RIM profit margins far exceed market share

With just 3 percent of the global cell phone market, smartphone makers Apple and Research in Motion command an estimated 35 percent of total worldwide operating revenue — and their share is expected to grow even more.

Deutsche Bank analyst Brian Modoff, as cited Monday by The Wall Street Journal, predicts that this year the two companies will control 5 percent of the total cell phone market, cornering 58 percent of the total operating profits.

The report states that Apple and RIM were responsible for 32 percent of the smartphone market for the first quarter of 2009. Smartphones make up 13 percent of the total worldwide cell phone market.

The companies' massive profits lie in the subsidies. The report states that each iPhone has a $400 subsidy, while the average BlackBerry sale earns $200, as calculated by Modoff. Those totals far exceed the market average of $100.

"Both Apple and RIM have advantages with segments of the market that will make them tough to beat," The Wall Street Journal reports. "The iPhone boasts thousands of consumer applications churned out by outside developers, while Blackberry's e-mail service is popular for its efficiency and security."

Other cell phone manufacturers make virtually nothing, while market leader Nokia – based on the sheer number of phones it moves – manages 55 percent of the cell phone market's profits, off of a 46 percent market share.

But just last week Nokia reported a 66 percent drop in quarterly profits, and investors fear that Apple and RIM will continue to chip away at the handset-maker's market share. Recent Apple and RIM product launches of the iPhone 3GS and BlackBerry Tour, respectively, proved very successful.