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Apple, Samsung: All your handset profits are belong to us

Apple and Samsung, combined, account for a staggering 95 percent of the handset industry's profit, which isn't great news for everyone else.

The smartphone business has come down to a two-horse race: Apple vs. Samsung Electronics.

The companies are the only two that matter, at least from a profitability perspective. Combined, Apple and Samsung accounted for a stunning 95 percent of the handset industry's profits during the fourth quarter, according to a study Canaccord Genuity sent out by email.

By itself, Apple accounted for 80 percent of the profits in the period.

Profitability is a crucial measuring stick for handset makers, and hold significant sway on how companies approach the business and the kinds of products they device. A big profitability setback at HTC, for instance, caused the company to radically rethink how it launches products and sparked the emergence of the One line of smartphones.

The numbers from Canaccord Genuity don't paint a pretty picture for everyone else in the industry. Most of the companies, which are largely relying on the Android operating system, have faced competitive pressure and the inability to set themselves apart from the crowd. In all, Research in Motion, HTC, and Nokia continue to see market share losses.

Apple, with its proprietary iOS operating system and the powerful iPhone brand, hasn't had trouble attracting customers. In the March quarter, the company has further consolidated its strength at the U.S. carrier, the firm said. The iPhone is outselling all other smartphones combined at AT&T and Sprint Nextel, and is roughly selling as well as all Android smartphones combined at Verizon Wireless.

Samsung, however, has shown to be a step above its Android competitors, thanks in large part to its Galaxy S franchise. The company has used its wide distribution chain, marketing heft, and partnerships with carriers to create a flagship brand, with the Galaxy S II a particular blockbuster hit.

More bad news for everyone else: Apple and Samsung could further consolidate their profits in the first quarter, Canaccord analyst T. Michael Walkley said in a research note published today. He added the iPhone is starting to gain market share in Western Europe and emerging markets.