financial analysis for smartphone industry

Topics: Mobile phone, Dividend, IPhone Pages: 16 (3742 words) Published: September 2, 2014
Smart Phone Industry
1. Introduction
After a heat discussion, our team chose the smart phone industry for the following two reasons. Firstly, telephone is a significant communicating instrument around the world today. International Telecommunication Union predicts that the number of cell phones would exceed the number of human beings in 2014. Secondly, with the increasingly functions of smart phone, it plays a vital role in the relevant industries. The flourishing development of smart phone industry also accelerates the development of other industries such as the cell phone battery industry and cell phone game industry. 1.1 Industry Analysis

We are talking about smart phone industry specifically. The newly formed competitive market includes hardware manufacturing, operating systems and content. Looking back on the history, leaders of those fields have changed a lot, as Nokia, Motorola and RIM have been transcended by Apple, Samsung and other brands. Apply Porter’s five force analysis to smart phone industry. Starting from threat of entry, software faces this more because of open platforms. Floods of capitals are required for R&D and operation levels, thus this threat is moderately high. Substitutes like PDAs, Netbooks and laptops have entered the market causing the threat. Threat also comes from suppliers, fragmented supply and the difficulty of vertical integration have impeded company profiting. But the threat is low overall. Meanwhile, buyers also impact threat by various demands and higher bargaining power. All these four threats result in a high threat of rivalry. Brand and concentrated market also matter. For the industry status, in 2011, the smart phone application market was about USD 6.7 billion which is expected to be USD 155 billion with CAGR of almost 55% from 2011 to 2017. In addition, worldwide sales of smart phones to end users totaled 968 million units in 2013, an increase of 42.3 percent from 2012. Sales of smart phones accounted for 53.6 percent of overall mobile phone sales in 2013 which accounts for 75.8% of the overall mobile handset revenue. 1.3 Firm description

We choose six companies in smart phone industry to do some analysis. They are Sony, Apple, Samsung, HTC, Black Berry and Nokia. The firms we choose represent different level of performance in the industry. Apple and Samsung are outstanding firms with higher net income and greater profitability. NOKIA, SONY and Blackberry are firms once created brilliant achievements but suffer from ailing business in the past 3 years. HTC is a newly brought-in competitor with advanced technology in developing smart phones. The six firms experienced different types of history. Samsung struggled with poor quality and inferior products in its earlier times. Apple seemed to grow gradually since it was established. On the contrary, Blackberry and NOKIA were once outstanding in the industry. SONY (SONY Ericsson) left behind when transforming from mobile phones to smart phones. HTC has a short history. Most of the firms experienced several important mergers or acquisition in the past 5 years. Badly-performed firms shrink while well-performed ones expand their business by proper selling plans or acquisitions. Some important events are as follows. Microsoft declared to acquire Nokia’s mobile business and large amounts of patent portfolios with 7.17 billion dollars. Blackberry made an announcement that the corporation agreed to be acquired by Fairfax Financial Holdings at the price of 47 billion, though the selling plan turns out to be failed. SONY and Ericsson were incorporated into Sony Mobile Communications. 2. Past performance analysis

Note: Risk free rate: US. Government bond rate for 5 years
Expected market return: historical industry return for 5 years 2.1 Samsung
2013 is a fancy year for Samsung, possessing the biggest market share in smart phone for 31.5% ahead of 15.5% for Apple. For the first 3Qs in 2013, PE ratio decreased from 9.09% to 6.99% and it...
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