Image credit: Apple.
Continue Reading Below
Describing Apple's most recent quarterly financial results as "disappointing" might just be an understatement -- they were downright ugly. Apple reported a sharp decline in iPhone unit shipments in its most recent quarter and, as a result of weak demand and a commensurate channel inventory adjustment, iPhone units are expected to drop significantly again in the current quarter.
Although CEO Tim Cook blamed the iPhone declines on a weaker-than-hoped upgrade cycle relative to that seen following the iPhone 6/6 Plus launch as well as broader macroeconomic weakness. Cook pointed to high customer loyalty and record levels of Android switchers to iPhone as positives that bode well for the company's iPhone business over the long term.
That being said, I can't help but note that Apple may be losing share to Samsung. Allow me to explain.
Look at the year-over-year comparisons
Apple reported a drop in iPhone sales from around 61 million to around 51 million in the most recent quarter, a reduction of approximately 16%. In contrast, Samsung reported that sales in its "Mobile" group (smartphones, tablets, etc.) were actually up 8% year-over-year in its most recent quarter.
For all of 2016, Samsung aims to see a year-over-year increase in the profitability of its mobile division "through high-end sales growth and solid profitability of mid to low-end products."
Continue Reading Below
Apple, in contrast, will have seen iPhone sales flat in fiscal Q1, iPhone down in fiscal Q2 and fiscal Q3, with its fiscal Q4 something of an unknown at this point, though analyst consensus calls for a 9.1% year-over-year drop in total revenue, implying further iPhone unit declines.
It's clear that Samsung is seeing better year-over-year growth than Apple is.
Is it share gain against Apple, or ...?
One potential explanation is that Samsung is simply regaining share in the premium tier of the smartphone market, which Apple dominates, from Apple. In fact, given that the Galaxy S7 seems to have been fairly well received and is superior to the current iPhone 6s flagship in a number of key ways (display quality, camera, and weight), this wouldn't be too surprising.
However, it's important to note that Apple isn't the only player in the premium tier of the smartphone market (though it is the largest). Samsung may very well be gaining share against other vendors of Android-based smartphones (i.e. HTC, LG, and so on), which could explain the South Korean consumer electronics giant's year-over-year growth in mobile.
Apple is probably losing share; iPhone 7 needs to be a hit
Although I doubt that Apple would ever admit it, it seems likely that part of the iDevice maker's iPhone woes is due to share loss in the premium tier of the market to the likes of Samsung, Huawei, and others.
Fortunately, I think that with a strong iPhone 7 showing later this year, Apple has an opportunity to grow its share in the premium portion of the smartphone market. Apple will need to make sure that the iPhone 7 is sufficiently advanced/compelling, though, to stay relevant once the Android vendors launch their flagships in the middle of the iPhone 7 cycle.
The article Apple Inc. May Be Losing Smartphone Share to Samsung originally appeared on Fool.com.
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. 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.
Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.