Apple Inc. is Obliterating the Competition

Source: Apple.

Apple is firing on all cylinders lately, with the stock rising by more than 70% in the last year on the back of booming iPhone sales and extraordinary financial performance. Even better, Apple is doing remarkably well versus the competition, both in terms of sales and profit, and this is a huge positive for the tech giant's investors going forward.

The top smartphone vendor in the worldAccording to data from Gartner, Apple overtook Samsung as the top smartphone vendor in the world during the fourth quarter of 2014. On a sell-through basis, Apple sold 74.8 million units during the quarter, a whopping 49% increase from the same quarter of 2013, giving the company a leading 20.4% market share.

Samsung still owns 19.9% of the market. However, the South Korean company's smartphonesales fell by 12% year over year during the last quarter -- 73 million devices versus 83.3 million units in the final quarter of 2013. The difference in market share between Apple and Samsung is quite small, but the trend clearly favors Apple.

Lenovo, Huawei, and Xiaomi come way behind Apple and Samsung, with market participation rates of 6.6%, 5.7%, and 5.1%, respectively.

The mobile industry is one of ecosystems, not just devices. Apple is famous for its halo effect, meaning customers who own an iPhone are more inclined to stick with Apple when buying a computer, a tablet, and perhaps even a smartwatch, now that the company is venturing into the industry with the Apple Watch. With this in mind, Apple's remarkable sales growth is a major positive for investors on a forward-looking basis.

Apple's mind-blowing profitabilityApple's leadership in sales is fresh news, but the company has always crushed its rivals' profits, and its leadership in this area is as strong as ever. According to estimates from Strategy Analytics, Apple retained an amazing 89% of all smartphone industry operating profit during the fourth quarter of 2014. The report estimates Android devices kept the remaining 11%, with Microsoft and BlackBerry producing no profits whatsoever.

Offering a similar perspective, Canaccord Genuity calculated that Apple produced $19.45 billion in operating profit during the fourth quarter, accounting for a massive 93% of all smartphone industry operating profit during the period. The research firm estimated Samsung brought in $1.82 billion in operating profit, or 9% of the total.According to these estimates, BlackBerry made only $16 million at the operating level, while Microsoft lost $414 million in mobile during the fourth quarter.

Needless to say, profitability is a crucial advantage for investors, since factors such as earnings and cash flow are the ultimate determinants of shareholders' returns over the long term.

Apple's spectacular ability to turn sales into profit also says a lot about the company's competitive strength and fundamental quality. The Consumer Electronics Association estimates that average smartphone prices have declined from $440 in 2010 to $275 in 2015. However, Apple increased its average iPhone selling price by $50 during the past year, reaching $687 per unit in the quarter ended in December.

It takes a special business to deliver both booming sales and stratospheric profitability on the back of rising prices, especially when most competitors are aggressively cutting prices to protect market share. Apple is obliterating the competition's sales and profits, and this speaks wonders about the company's brand value and competitive differentiation. With this in mind, the long-term future looks quite promising for Apple investors.

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Andrs Cardenal owns shares of Apple. The Motley Fool recommends Apple and Gartner. The Motley Fool owns shares of 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.

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