Strategy Analytics' Apple and Samsung market share analysis is fair

Must everything be partisan? In the US Congress, Democrats and Republicans spilt over nearly every issue. Today's strangest debate isn't political, but analytical -- sides supporting or opposing Apple and bloggers and journalists parlaying games of oneupmanship. It's all about how much tablet market share Samsung snatched from Apple during calendar fourth quarter, if any. The debate is simply pointless.

Earlier today, Bloomberg reported on data from Strategy Analytics stating that Android tablets captured 22 percent market share in Q4, based on 2.1 million shipments, essentially punching market leader iPad smack in the touchscreen. By Strategy Analytics' reckoning, iPad's market share dropped from 95 percent to 75 percent in a single quarter.

About three-and-a-half hours later, Bloomberg competitor Wall Street Journal struck back with seemingly damning information from Samsung's January 28th earnings call. Samsung shipped 2 million Android-based Galaxy Tabs during fourth quarter. In response to an analyst question regarding "sell-in" versus "sell-through," Samsung's Lee Young-hee described sales as being "quite small." But there was no qualification on what "quite small" really means. Did Samsung only sell a few thousand units or were sales simply below expectations and the answer one of embarrassment, of losing face?

The Apple fan club immediately jumped on the WSJ bandwagon to proclaim blogs and news sites reporting the share drop as being flat out wrong. About an hour after WSJ posted, Jay Yarrow wrote at Business Insider: "Despite crowing about shipping 2 million Galaxy Tabs, Samsung is now admitting that it's not selling very many of the seven-inch tablets." That's a mischaracterization, particularly in context of Yarrow's post, which ends: "As expected, the only viable threat to the iPad on the market today has hardly made a dent."

Oh yeah? Samsung's earnings call came before Bloomberg's report today; Samsung responded to an analyst question three days ago. LOL, I tried to comment at Business Insider, which rejected my response as spam. That's what led me to write this blog post.

Apple 2.0 blogger Philip Elmer-DeWitt also slapped around journalists (e.g., his competitors): "Reports that Apple's iPad lost a big chunk of its market turn out to be premature." I quote the friendliest part of his post. Ah, sorry Elmer-DeWitt, there's nothing premature about these reports at all. The Apple fan club is making the wrong distinction, by focusing on Samsung's Galaxy Tab "sell-through" and insinuating it doesn't compare with Apple. I've got to laugh, because Apple also reports "sell-in," even though it refers to shipments as sales.

Most analyst firms also record shipments as "sell-in," when counting PCs and other products. "Sell-in" refers to the number of products shipped into the sales channel. "Sell-through" refers to actual sales to customers. During Apple's fiscal 2011 Q1 earnings call earlier this month, executives revealed that the quarter ended with 4-6 weeks of iPad inventory, up about 525,000 units. Let's do some quickie math. Apple shipped 7.331 million iPads over 12 weeks, which works out to about 610,917 units per week. Assuming that sales rate -- and presumably with iPad selling so well Apple might calculate for even more -- four weeks works out to more than 2.4 million and six weeks to, well, why bother? Let's be super generous to Apple here and just call actual sales somewhere around 5 million units, when subtracting four estimated weeks of inventory.

Samsung hasn't reported "sell-through" data, but neither has Apple. The one data point Strategy Analytics has to work with is "sell-in." From that perspective, Strategy Analytics has responsibly made market share calculations on what it knows, and it's the same measure used by most analyst firms.

That said, I personally oppose "sell-in" as a measure for the very problem presented here. It's inexact. Manufacturers like Apple and Samsung like reporting "sell-in" because it makes sales look higher than they really are. But shipments aren't sales.

I don't doubt that Apple sold many more iPads than Samsung did Galaxy Tabs during fourth quarter. I'd even guess that "quite small" means just that. But the Apple Fan Club used "quite small" to compare two different measures -- shipments into the channel versus sales out. Based on the limited data available, Strategy Analytics' market share comparison is fair. Is it real world accurate? No less accurate than any other analysis measuring shipments versus sales, and there are plenty of them reported everyday, and by the same folks quashing the Strategy Analytics analysis.

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