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Apple passes Nokia, scares Nintendo

One device, multiple battles

Dollar

Apple has passed Nokia to become the world's most profitable phone maker, and prompted Nintendo's president to note that if his company can't differentiate its games from those on the iPhone, "then our future is dark."

Cupertino's multi-pronged strategy to put an iPhone into the pocket of every smartphoner, mobile gamer, and on-the-go web surfer is working.

According to the market researchers at Strategy Analytics, the iPhone vaulted Apple past Nokia to become the number one handset vendor in the world when measured by profits - and by a wide margin. In the third calendar quarter of 2009, says their research, Apple's phone-based profits totaled $1.6bn, while Nokia pulled in a comparatively meager $1.1bn.

Apple's handset profits are increasing. Nokia's are going in the opposite direction. It should also be noted that Nokia is currently suing Apple for patent infringement - but don't expect that suit to be decided anytime in the near future, at least not soon enough to roil the current smartphone waters.

And Apple isn't content with merely dominating handset-profitability metrics. It also has its eye on pocket gaming - and that's causing a bit of concern over in Kyoto, Japan, home of Nintendo.

An article (paid subscription required) in Wednesday's Wall Street Journal reported that Nintendo president Satoru Iwata recently told a company gathering that "If we can't make clear why customers pay a lot of money to play games on Nintendo hardware and Nintendo software and differentiate ourselves from games on the mobile phone or iPhone, then our future is dark."

Iwata claims that he's not overly worried, telling the WSJ that those trying to stir up competition between Kyoto and Cupertino make him "uncomfortable," seeing as how the two companies have different customers.

That may be true - today - but Apple is certainly trying to take advantage of Nintendo's current slippage and sell both its iPhone and iPod touch as gaming platforms.

After all, at a recent press event Apple senior vice president for marketing Phil Schiller trumpted a year-old article from BusinessWeek that included the prediction: "Apple could be on the cusp of claiming the crown as the world's market leader in handheld gaming."

He then went on to diss both the Nintendo DS and the Sony PSP, saying: "When these things came out they seemed so cool. But once you play a game on the iPod touch, you know, they don’t really stack up anymore."

Iwata, as might be guessed, disagrees, telling the WSJ - rightly - that a dedicated gaming device such as his company's handhelds can offer an experience that a phone just can't match.

That said, casual gamers who simply want to while away some time on the subway or between classes appreciate the fact that they can do so on their multi-touch, accelerometer-equipped iPhones - and then use the same device to surf the web, text friends, and phone home.

Iwata is right: if his troops can't explain to its customers why they should "pay a lot of money" to stay in the Nintendo fold, his company is in trouble - as much trouble as Nokia, which is watching its profitability being gobbled up on the smartphone side of the handheld wars. ®

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