Apple Captures 80% of Mobile Phone Company Profits (AAPL, SSNLF, RIMM, NOK, MMI, GOOG, MSFT)

Investment firm Canaccord Genuity said today in its daily newsletter that Apple Inc. (NASDAQ: AAPL) garners about 80% of the operating profit among all handset makers. Of $14.4 billion in industry profit, Apple’s take is $11.5 billion. Samsung Electronics (OTC: SSNLF) finishes second with 15% of the profits, or about $2.2 billion.

Handset makers Research in Motion Ltd. (NASDAQ: RIMM), Nokia Corp. (NYSE: NOK), Motorola Mobility Holdings Inc. (NYSE: MMI), Sony Ericsson, LG Electronics, and HTC Corp. trail far behind in profits, with only Nokia, Samsung, and HTC posting any profit at all. Sony Ericsson posted an operating loss of -$317 million in 2011 and Motorola lost -$19 million. LG managed to break even.

In market share by operating system, Apple’s iOS trails the Android operating system from Google Inc. (NASDAQ: GOOG), with 19% to Android’s 48% at the end of 2011. Canaccord Genuity estimates that at the end of this year, Android will hold 57% share to Apple’s 22%. The wild card here is Nokia’s coming introduction of new smartphones using the Windows Phone operating system from Microsoft Corp. (NASDAQ: MSFT).

Compared with profits, though, operating system market share doesn’t mean much, especially because Google distributes Android for free. And that free software is probably the only thing that allows Samsung and HTC to make a profit at all.

What gives Apple its staggering profit share is the company’s ability to price its iPhones at a premium other vendors’ offerings. Apple is clearly forcing its competitors to race to the bottom and compete with one another on price. Ericsson has already abandoned its joint venture with Sony. Why Sony plans to continue losing money probably has more to do with management egos than anything else.

Motorola, which is about to be acquired by Google, is also in a precarious position. Because Android doesn’t cost any of its competitors anything, the Google/Moto tie-up gains no advantage from the acquisition. HTC, which has fouled up its inventory management, might not have enough time to sort itself out. LG can hold on for a while because it is large enough to absorb some losses (-$266 million in the first 3 quarters of 2011), but there’s really no reason for the company to continue to bleed to death.

Samsung saw its share of the industry’s total operating profits fall from 26% in the third quarter of 2011 to 15% in the fourth quarter. And it looks like the third quarter was the aberration, probably due to impatient consumers who would have bought the iPhone 4S if it had been available by late September.

Samsung is expected to grow its market share from 19.5% in 2011 to 26.3% in 2012. That doesn’t really help much though, as Samsung’s problem is that its profit share is quite vulnerable. The company simply doesn’t have the thought leadership position in the smartphone marketplace and there is no way for the company to price its phones to yield maximum operating profits. Its position remains at the front of the line of also-rans.

Canaccord Genuity raised its price target for Apple to $665/share today, and we have more coverage on that here. Apple shares are up about 3.6% just before noon today, at $493.72 after posting a new 52-week high of $495.12.

Paul Ausick