Apple's iPhone Still the Gold Standard - RBC

The smartphone market has gotten very crowded very quickly this summer as both Google (GOOG) and Palm (PALM) have entered the market with credible offerings, yet Apple's (AAPL) iPhone will likely remain the gold standard moving forward, a new report from RBC Capital Markets says.

Calling smartphones "the next wave of computing" and installing Apple in a leadership position, Mike Abramsky, analyst, has forecasted smartphone penetration to reach 504 million units or 35.1% of all handsets by 2012.

"We view the iPhone as a 10-year platform, with significant growth and share gains ahead," Mr. Abramsky wrote in a note to clients.

Our outlook reflects continued iPhone share gains in domestic and international markets, driven by distribution expansion, more innovations in devices and user experience, and additional iPhone [models].

The infrastructure and selling environment created by iTunes and the iTunes music store is also a "competitive advantage" and quite impressive, he said.

However, there are challenges for the company, including the health of founder Steve Jobs. But in the near-term, Mr. Abramsky expects Mr. Jobs to accelerate Apple's product innovation. Apple may also have to deal with margin downshifts on mix as it targets the smartphone market.

Mr. Abramsky has revised his forecasts for Apple, to $42.8-billion revenue in 2010 ($7.23 a share) on 31.4 million iPhones. For 2011, he expects $50.3-billion revenue ($8.25) on 49.3 million iPhones.

In the near term, he expects $36-billion revenue ($5.90) in 2009.

RBC maintains an Outperform rating for Apple and has increased the price target to $250 frrom $190.

Comments

[Techtrader10:]

I'm not seeing the iPhone penetrating the business market. Friends of mine that have tried the iPhone for their business have switched back to the various RIMM products. Their two main complaints are dropped phone calls (and while people point to ATT as the reason for dropped call, you buy iPhone you buy ATT) and battery problems. I still just use a cell phone, so all I can do is listen to the comments/complaints of people that need and use the smart phones. Those that need them seem to lean toward the Blackberries. The friends of mine that use them for personal use go more toward the iPhone and tolerate the phone problem. That was true two years ago and seems to have not changed. So I would not call the iPhone a "gold standard", just the choice of the game players and people looking for a gadget to play with while on the go.

Aug 18 12:52 PM

[Frank Castle:]

For anyone in Enterprise, Blackberry and BES are the Platinum standard.

iPhone is what it is and being a hardened enterprise tool is pushing that expectation.

Stick to little apps and web / media and your golden. I've seen a number of articles that AppStore is now a disadvantage to the platform due to the controls over what apps you can load as well the mountain of utter junk to browse through to locate the few good apps. The average iPhone user has downloaded 5 apps, 4 of them free so the gold rush is over.

All that said - it's a fun device for casual users.

Aug 18 02:24 PM

[Constable Odo:]

RIM has been a force in the enterprise for many, many years. Like Windows, the BB has the business world locked up and other companies locked out. Until the executives and employees actually running the company take control from the IT departments, Apple will not get in with any of their products. It's easier for RIM to grab consumers because sales are only based on a matter of choice of individuals. In a business, even if 90% of a company wanted to use iPhones, the 1% comprising IT can and will block it. No choice for individuals or productivity since a business isn't run as a democracy.

Right now it isn't important because Apple can barely keep up with iPhone demand for consumers, so extra business sales would probably be a burden at this time. Maybe in another year or so, Apple will have stabilized the iPhone platform enough to compete with the BlackBerry and BES. Until then, Apple needs to keep building up massive revenue and profits and grow its cash reserve much higher.

Apple needs to come out with a product that fits in space that doesn't exist yet or is mostly untapped and hopefully the tablet will do it.

Aug 18 03:14 PM

[reagan:]

Poor Techtrader10! Just can't comprehend that Apple is the future & RIMM is so yesterday......


On Aug 18 12:52 PM Techtrader10 wrote:

> I'm not seeing the iPhone penetrating the business market. Friends
> of mine that have tried the iPhone for their business have switched
> back to the various RIMM products. Their two main complaints are
> dropped phone calls (and while people point to ATT as the reason
> for dropped call, you buy iPhone you buy ATT) and battery problems.
> I still just use a cell phone, so all I can do is listen to the comments/complaints
> of people that need and use the smart phones. Those that need them
> seem to lean toward the Blackberries. The friends of mine that use
> them for personal use go more toward the iPhone and tolerate the
> phone problem. That was true two years ago and seems to have not
> changed. So I would not call the iPhone a "gold standard", just the
> choice of the game players and people looking for a gadget to play
> with while on the go.

Aug 18 06:43 PM

[jmmx:]

@ Techtrader10

I think you raise some good points here. But I also think that it is a little more complex than you have presented.

Before answering that - however - I find it interesting that the list of iPhone grievances by BB-ophiles has been reduced to the two you mention from the long laundry list of year and a half ago.

What I am saying is this: IF a company needs to write a complex custom application, especially if this uses graphics, then the iPhone becomes a more compelling solution than probably any other. The SDK for the developers is so phenomenal that it really eases the development process. Not only is this desirable in and of itself, but an important result of this is that it allows many more production turns in a given time frame. So software can quickly "evolve".

Finally, if ATT and battery life are truly what is keeping business users from adopting, Apple will change these.

I do have to agree that Jobs' obsession with small and light sometimes works to the detriment of the product. One more half-once of battery would probably give 20 or 30 percent more life.

Aug 18 10:51 PM

[mollytjm:]

however, for $9 you can solve the battery problem with a tiny instant plug in that uses regular AA batteries. It's faster than switching out a phone battery and works really well.
But i agree with jmxx... Apple appreciates its customers and they do listen to what we want. They will continue to innovate very fast and give us better and better products.

Aug 19 11:04 AM