Apple Sold $2 Billion Worth Of iPhones Into Samsung's User Base

Apple Inc. AAPL happily reported that it sold 74.5 million iPhones during the fourth quarter, but there's one stat the company never talks about: how many iPhones were sold to former Android customers.

Apple may not have that number, but market research firm Phoenix Marketing International has an estimate.

"Samsung was selling a lot of large-screen phones into the Apple user base," Leon Majors, senior vice president at Phoenix, told Benzinga. "Apple has reversed that and sold, in my estimation, $2 billion worth of large screen phones into Samsung's user base."

Majors, whose firm released a new study about Apple Pay, said that the battle with SAMSUNG ELECT LTD(F) SSNLF isn't about mobile payments.

"It's about smartphone market share for large screen cell phones," he said. "To me, that's the reason why Samsung bought LoopPay. They needed to react to the payment side, but it was really because there's a war going on in the smartphone footprint between Apple and Samsung in that screen format. That's what it was about. The rest of it is marketing."

Related Link: Expert: 50% Of New iPhone Buyers Will Adopt Apple Pay Within 2 Years

High Adoption Rates

Phoenix surveyed 3,002 credit cardholders and found that 11 percent had linked at least one payment card to Apple Pay. Greg Weed, director of card research at Phoenix, broke it down even further. He said that two out of three iPhone 6 and 6 Plus users had linked a payment card to Apple Pay, and most of those consumers ended up using the feature.

"The Apple Pay users are really quite positive about Apple Pay despite any problems they may have run into," Weed told Benzinga. "They [think of] Apple Pay [as] a reflection of the image they want to project in terms of being cool. It's got a style component that can't be overlooked."

Of those who use Apple Pay, more than half said that they had asked retailers if they accepted the solution. Weed believes this is an important element in encouraging retailers to adopt Apple Pay.

Big Results, Bigger Reactions

Majors said that Apple Pay, which launched last fall, was "sucking all the air out of the room," which forced others to react.

"Samsung reacted [and] purchased LoopPay," he said. "They're not bringing out LoopPay as LoopPay. They're modifying it, building it into the phone and making it a different experience. It's not the standard LoopPay. They couldn't allow the Apple Pay challenge to go unanswered much longer because it literally was sucking all the air out of the room."

Majors said that PayPal (which acquired Paydiant) might have preferred to stay quiet until after its split from eBay Inc EBAY had been completed.

"But again, all the air was leaving the room," said Majors. "Google has to react because 50 percent of the market is Android. Are they not gonna have a reaction? Samsung is trying to protect its part of the turf. Google is trying to protect its Android turf in total, so they had to react."

Phoenix plans to complete six tracking studies this year to keep an eye on the mobile payment space and its impact on smartphone sales.

"Apple Pay is wonderful, but none of it Apple invented," said Majors. "It's marketing and packaging of all the technologies and features that they've put together. It's all these battles and positioning between these behemoth cell phone providers that is driving this battle. If Apple can take a cut of the payment system while they're doing it, that's gravy. But the battle is about the smartphone world."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.