[Abaronos]

Seoul | June 27, 2012 | The Chosun Ilbo

Apple announced humungous earnings results on Tuesday, with net profit for the first three months
of this year nearly double those of a year ago. The company said first-quarter revenues totaled a
staggering US$39.2 billion, up 59 percent, while operating profit amounted to $15.4 billion, up 97 percent.
Its operating margin was 39.3 percent, which means it made a profit of almost $40 for every $100 worth
of products it manufactured and sold.



Main rival Samsung Electronics is estimated to have achieved $39.4 billion in revenues and $5.1 billion
in operating profit in the first quarter. It's operating margin is only 12.9 percent. But that includes money
made from semiconductors, TV sets and LCD screens as well as smartphones and other mobile gadgets.
Apple managed to achieve similar revenues by selling only finished mobile devices iPhone, iPad and iPod.
Samsung's operating profit was only one third of what Apple made.



The Wall Street Journal said the secret to Apple's success is focusing on a single product rather than
rolling out many different models. Apple has stuck to a policy of unveiling only one new iPhone model a year,
whereas Samsung rolls out around 200 new products each year, some of which sink and some of which
swim. Apple also focuses on design and brand management as part of its strategy of pursuing high margins
by dominating the premium market.

In contrast, Samsung has bet on volume by taking on both the premium and mid to low-priced smartphone
markets. Its aim is to supply whatever consumers want. Samsung is expected to beat Apple in terms of
mobile phone sales volume during the first quarter of this year to become the world's No. 1, selling between
41 million to 44 million handsets compared to 35.1 million for Apple. But it costs more money to make a wider
range of products, so Samsung's profit rate lags behind Apple's. Shin Jong-kyun, the head of Samsung's
mobile phone division, said Apple's earnings results were "incredible" and conceded his company had a "long
way to go."

Another factor behind Apple's success is the creation of a huge stable of content via its App Store. iPhone
users tend to remain loyal customers and buy new models. It focuses on staying in tune with the demands of
customers through the App Store and a directly controlled retail network.

Will Apple's strong performance continue? Experts say its winning strategy stands at a crossroads. As
smartphones are becoming popular in China, India and other emerging markets, Apple will not be able to
maintain its market share by focusing only on premium products, they say.