How can Apple and Samsung make 109% of phone profits?

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‘There are three kinds of lies – lies, damn lies and statistics’ so the saying goes, and this headline from Yahoo goes some way to prove it.

Yahoo news published an item this morning suggesting that Apple and Samsung were making 109% profits, and a lot of comments were about these two phone giants making more than 100% of the industry profits. Just how is this possible? If I have one cake and I divide it between two, how can I give 53% to one and 56% to the other? It just doesn’t make sense.

In fact, it is just a trick with statistics, using two different measures to create an eyecatching headline. So, how do I create 109% profits? The answer is because the other players in the phone market are making big losses. As an example –

1) Industry profits = $1b. Made up with losses of $90m by Nokia et al., $530m of Samsung profits and $560m of Apple profits.

2) Samsung profits = $530m, or 530m / 1b = 53% of industry profits.

3) Apple profits = $560m, or 560m / 1b = 56% of industry profits.

Total profit made by Apple and Samsung = 109% of industry profits. Simple. But how do you show this in a pie chart or explain it to your 8 year old child?

It just goes to show that you can have your cake and eat more than 100% of it!

Read the original Yahoo news item here – http://uk.finance.yahoo.com/news/apple-samsung-earn-smartphone-profits-221159143.html

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