Why the WSJ got the 'iPhone demand is crashing' story wrong

Mark Rogowsky at Forbes has a great article about yesterday's Wall Street Journal 'weaker iPhone demand' report.

The latest rumors about Apple slashing component orders, in fact, come on the heels of supposedly positive developments at competitors. First, we heard “good news” from Nokia, which reported shipments of 4.4 million Lumia phones in the year-end quarter. Never mind that we are talking less than 2 percent market share for Nokia or that sales were boosted by heavy discounting, often down to $99 at retail — less than half what competing phones sell for. This is good news in the land of Nokia

Similarly, Cnet was very excited about Samsung’s announcement that the Galaxy S phone line had crossed the 100 million mark in total sales. The phone is so desirable, “Sales of the flagship Galaxy S3 reached 30 million units in 5 months, and 40 million in 7 months, with average daily sales of about 190,000 units.” You’d think that it’s the hottest thing going with those numbers. Of course, as we were just discussing above, in the quarter just ended, Apple will have sold about as many iPhone 5′s as Samsung has sold Galaxy S3′s in 7 months! This is what the “experts” are already calling trouble and they haven’t seen the numbers yet.

Now, of course, Samsung is also selling the prior generation S2, which Cnet tells us, “…is described as a steady bet after recording sales of over 40 million in 20 months.” So that’s about 2 million a month for that model to go with the 17 milllion S3 phones Samsung apparently moved in Q4. In other words, if we just compare the last two generations of phones, Apple sold somewhere around 35-45 million last quarter while Samsung moved about 23 million. It’s certainly true that Samsung has a number of less-expensive entry models and will outsell Apple in raw numbers. But when one looks at “profit share” and wonders why Apple will continue to earn more of it in smartphones than Samsung, those numbers tell the story.