Mobile

Android share of smartphone profits plummets to 11 percent

Apple's iOS now controls approximately 89 percent of the smartphone industry's worldwide operating profits.

Smartphone industry profits are going one way: toward Apple. James Martin/CNET

Google's Android mobile operating system might be the dominant force worldwide, but when it comes to scoring profits for hardware makers, it may be a downer.

Android nabbed just 11.3 percent of all smartphone profits during the fourth quarter of 2014, according to data from research firm Strategy Analytics. That's a significant slide from a 29.5 percent share in the prior year. Apple's iOS took 88.7 percent in the fourth quarter, rising from the 70.5 percent share it had in the same period in 2013, the figures released Thursday show.

The amount of profit each operating system generates is a mirror image of worldwide device shipments. During the fourth quarter, Android owned 76.6 percent of the worldwide smartphone market, topping Apple's 19.7 percent share, according to research firm IDC. (Shipments -- usually not the same as sales -- generally mean the number of devices a company sends to retail outlets. Sales are the actual number of items purchased by consumers.)

But selling smartphones is, for most companies, a for-profit business. And at least so far, Android is not proving to be all that profitable. What's worse, profits in the smartphone business are actually on the rise, growing 31.4 percent year over year to $21.2 billion. So, not only has Android lost profit share, it's leaving a significant amount of money on the table for Apple's iOS to scoop up.

The issues facing Android profitability are numerous. Unlike Apple, which makes a handful of smartphones, there are a slew of Android devices by various hardware makers all vying for customer attention. And with price points ranging from free to a few hundred dollars on contract and so many companies trying to attract customers, it's hard for any one company to generate a sizable profit.

Nowhere is that more apparent than at Samsung, which at one time, was generating 95 percent of Android smartphone profits. The company, which will unveil the Galaxy S6 on March 1, has been a leader in the Android smartphone space, but profits over the last year have been exceedingly difficult to generate. The company reported a 64 percent drop in fourth-quarter operating profit for its IT and Mobile Communications division, which includes smartphones.

Samsung has been saying for months that it's facing "intense" competition and has been forced to spend more on marketing to keep sales going. Those marketing costs cut into profits.

Meanwhile, Apple last month posted its best quarter ever as customers spent $51.2 billion on smartphones during the three-month period ended December 27. Apple didn't break out profit during the period, but Strategy Analytics says that the company netted an operating profit of $18.8 billion during the fourth quarter. All Android devices combined could only muster $2.4 billion in profit.

"Apple's strategy of premium products and lean logistics is proving hugely profitable," Strategy Analytics executive director Neil Mawston said Thursday.

Mawston went on to say that Google might be a little worried by his company's findings. He argued that if major vendors, like Samsung, continue to have trouble generating "decent profits from the Android ecosystem, they may be tempted in the future to look at alternative platforms such as Microsoft, Tizen or Firefox."

While that is certainly possible, there is one issue: no other platform, including Microsoft's Windows Phone, tallied a profit in the fourth quarter.

Neither Google nor Apple responded to a request for comment.