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Holly LaFon
Holly LaFon
Articles (8092) 

Buffett's Apple Loses Market Share to Android in October

But iPhone X shows promise

December 06, 2017 | About:

One of Warren Buffett (Trades, Portfolio)’s biggest positions, Apple (NASDAQ:AAPL), lost some of its iOS market share to competitors on the unavailability of the iPhone X for purchase in October, a research firm said Tuesday.

Apple’s operating system for the iPhone, iOS, dropped 7.6% to 32.9% of the market in the three months ending in October from 40.6% in the same period the previous year. Meanwhile, the share of phones running on Android jumped 8.2% to 66.2% from 58%, Kantar Worldpanel ComTech said.

iPhone share also fell 4.3% in the five largest markets in Europe and 7.5% in Japan. China was a bright spot, where market share eked a 0.5% gain in the past three months to 17.4%.

“This decrease is significant and puts pressure on the iPhone X to perform. Considering the complete overhaul that the iPhone X offers, consumers may be postponing their purchase decisions until they can test the iPhone X and decide whether the higher price, compared to the iPhone 8, is worth the premium to them,” Dominic Sunnebo, global business unit director for Kantar Worldpanel ComTech, said.

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(Warren Buffett's shareholding of Apple)

Apple’s highest-end model iPhone X launched on Nov. 3 and sold out within minutes when Apple allowed preorders a week before, despite the $999 starting price, which is $50 more than the previous most expensive iPhone, research firm IHS Markit said.

The difference maker in cost compared to other iPhone models relates to the X’s superior screen and facial recognition technology, enabled by a TrueDepth sensing system. Otherwise, it has the same platform components and similar architecture to the iPhone 8 Plus, IHS reported.

More data from Kantar WorldPanel ComTech suggested there is pent up demand for Apple’s new flagship. As of October, 35.3% of Apple’s base in Europe and the U.S. had owned their iPhone for more than two years. That increased from 30.1% a year earlier.

“In pure value terms, it is likely the iPhone X average selling price will more than make up for a dip in sales of older iPhone models,” Sunnebo said.

IHS Markit thinks sales of the iPhone X will break records in 2018 and expects shipments of the devices to increase for the next four quarter compared to the same quarter last year, a note from Nov. 20 said.

“iPhone X represents a shrewd strategy from Apple,” the firm said. “In a maturing smartphone market, consumers may choose to buy replacement smartphones less often. If so, the higher price of the iPhone X means Apple could gain similar revenue levels and profits at lower shipment volumes. If Apple can increase unit shipments instead, then iPhone X will drive significantly higher iPhone profits.”

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Apple is the third-biggest holding in Buffett’s Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) portfolio. The legendary investor holds 3,900,822 shares of the company, occupying 11.6% of his portfolio. For all of his purchases since the first quarter of 2016, he has an estimated gain of 38%.

"Apple strikes me as having quite a sticky product, and an enormously useful product to people that use it," Buffett told CNBC in February.

Apple shares declined 0.37% on Wednesday to close the day at $169.01 each.


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