Witness also the swift obsolescence of non-smartphones.
There are two pieces of good news for Microsoft out this morning.
The first is that, hello, Microsoft stock is up 8% so far this year.
The second is that Nokia reported decent sales of its Lumia smartphones, which are powered by Microsoft Windows Phone 8.
Nokia reported Lumia sales of 5.6 million units last quarter – right in line with estimates.
Asymco analyst Horace Dediu made a chart showing that, thanks to the Windows Phones, Nokia smartphone sales may have finally “bottomed” after years of decline.
In the quarter ending June 2011, Apple spent less than $1 billion on property, plants, and equipment.
By March 2012, the number had spiked beyond $2 billion, beyond $3 billion, and approached $4 billion.
Here’s a chart he made to show what the spike looks like so far:
Here’s the the interesting part about all this massive spending.
No one outside of Apple knows where it’s going.
“The capital is being deployed almost silently and, though vast in scale, barely gets a mention from analysts,” writes Dediu. “Not even a single question has been raised at any earnings call about this spending.”
His theory is that Apple, which prefers an “integrated” approach in everything it does, will soon make more of the components inside its gadgets, like chips.
That would explain why Apple has been so busy hiring former Texas Instruments employees, for example.
The truth is, Apple is a very secret company and it doesn’t have to say, specifically, where it’s spending that money.
For all we know, it could be building TV set factories.
One thing one know for sure is the Apple is always working on products that would cannibalize its current lineup.
Maybe Apple is investing billions in a product that could kill the iPhone, like computerized glasses.
Another great chart from Horace Dediu at Asymco. He looks at the advertising budget of Apple, Samsung, HP, Dell, Microsoft, and Coke. Why include Coke? Because it’s a huge advertiser, and its “primary cost of sales is advertising.”
As you can see, Samsung is blowing all the companies away in advertising and marketing.
Not a bad price to pay, if it means you get to become the world’s biggest smartphone company. Certainly HTC wishes it had Samsung’s marketing budget.
A couple of thoughts on this:
- How is this sustainable for all the other phone makers? What happens to Motorola, RIM, Nokia, LG, et al.? Do they go away?
- If they go under what happens to Android? If you’re wondering why Google is trying to save Motorola, this could be a clue. It doesn’t want to be held hostage by Samsung, the only smartphone maker that’s profitable.
- What happens to Windows Phone? If Nokia continues to lose money and market share, and HTC is just barely profitable, what happens to Microsoft’s mobile efforts?
- Is this really a business Microsoft wants to enter? Microsoft is reportedly thinking about doing its own smartphone. Does it really think it can make money like Apple and Samsung, companies with years of manufacturing expertise?
Apple’s capital expenditures for the last year were $8.3 billion, which is significantly above its rivals, as this chart from Horace Dediu at Asymco shows.
Dediu believes Apple’s capex is significantly above its peers because Apple is investing in data centers like Google, and process equipment like Intel. As a result, its quarterly spending is closer to Google plus Intel.
Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.
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