Apple's "Anywhere" iPhone Has Far From Peaked 26 comments
February 29, 2008
| about: AAPL
- Carl Howe's articles on Seeking Alpha
- Carl's blog: Notes from Anywhere
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Apple's invitations to an event on March 6 to discuss the Apple Software Development Kit for the iPhone generated several Apple inquiries around here, and Apple COO Tim Cook's talk yesterday at the Goldman Sachs event
added more fuel to the story. I thought I'd take a break from my usual
"Anywhere all the time" writing, and just pass on some of the data and
answers I've been providing to reporters:
- Has the iPhone wave peaked? No; in fact, I would argue that the iPhone phenomenon has just gotten started. The Apple iPhone is truly an Anywhere phone, putting communication, media, and Internet content in the palm of nearly anyone's hand anywhere in the world and on (mostly) any GSM network. Despite the iPhone only being available for sale in four countries, it's being used today in more than 100. This adoption is amazing because no official native third-party apps have been released and the device is a version 1.0 device, Apple's first effort in a market most pundits said it could never succeed in. Imagine what sales will look like when there are official distribution channels in more than four countries, when third party developers can create new iPhone applications, and when Apple has version 2.0 and 3.0 devices in the market.
- Are iPhone unlockers hurting Apple? I think this idea is way overblown. Apple receives full retail price and full retail profits for every phone it sells, locked or unlocked. The device is profitable by itself, regardless of whether it gets carrier revenue sharing or not. Further, the fact that Apple is doing carrier exclusive deals now doesn't mean it is wedded to that model, a point Tim Cook made in his presentation. So everyone who is claiming Apple is "losing" $1 billion due to unlocked phones is simply noting problems with their own models of Apple's business, not Apple's. Apple of course doesn't acknowledge or report any revenues from carriers associated with the iPhones, so any numbers or losses you hear about those are inferred speculation, not facts.
- Does Apple need to cut prices on its iPhone?
Not in the least. Apple has no intent of chasing Motorola to see who
can lose more money on phones in a futile attempt to gain market share.
Market share isn't the name of Apple's game; consistent and growing
profits are. Apple's brand says to nearly everyone in the world that
its products are fashionable, easy-to-use, and a bit exclusive. Apple
competing only on price would be like BMW cutting
prices on its cars so they can be distributed through Wal-Mart; it
would be marketing suicide.
In my opinion, Apple's game plan on its Anywhere phone will likely mirror that of iPods. iPods started with one model and then gradually branched out to three or four of them (depending on whether you consider the iPod touch to be an iPod or a low-end iPhone). Even today, the 16 GByte iPod touch sells for the same price as the original iPod introduced in 2001. People should expect there to be both cheaper and more expensive iPhones over time, but that the target price points for the iPhone with touch screens and Internet capabilities will remain what they are today. - Is Apple going to make its iPhone goal of 10 million phones by the end of 2008? Yes. Apple doesn't provide goals if it doesn't think it can both make and exceed them. While the economy and consumer spending are throwing up some roadblocks, I see Apple easily exceeding that goal by about 25% by the end of calendar 2008. And in case anyone was confused, that's the benchmark that Steve Jobs set: 10 million phones by the end of 2008, not 10 million phones in the first year of sales or the first fiscal year.
The bottom line: as the buzz at the Mobile World Congress proved, Apple changed the mobile phone market worldwide with its first and uncertain effort in a new market. Just as it did with computers, Apple isn't playing a market share game; it's building mind share. And while there only officially successful in a few countries today, imagine what will happen when they are Anywhere.
Disclosure: Long AAPL
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This article has 26 comments:
Is it safe to say that those unlocked phones are considered out of warranty? So, what Apple give up in revenue sharing, it gains in not having to provide service and support for the unlocked phones?
an interesting sampling here...
on a flight (140 passengers) this week from paris to copenhagen, there were 3 people sitting close by with iphones. at least 2 of them were danish and denmark doesn't even sell the iphone yet. i saw a number of them in spain as well.
this is interesting especially when you consider that in denmark sophisticated mobile phones are nearly given away free when you sign/renew with a teleco.
the iphone sales from what i am seeing are phenomenal.
Today, only one single model of the iPhone shocking the entire mobile world. What happen if another new model of iPhone coming this year.
MacBook Air also represent the completely new design philosophy of the portable computer in future.
Carl, are you sure your facts are really facts, because they are sure as hell ignored by the likes of Savitz and Sacconaghi?
;)
As for asia again, here is another scenario...I was in Indonesia two weeks ago and had a meeting with a business partner. The assistant came in, who was a guy not much older than 23 had an iphone. Now i know that he does not get paid more than $400 a month and that the iphone goes unlock over there between $500-$800. Can you imagain that people over here are willing to spend their one month salary for a phone? Another scenario, was in Vietnam two months ago and there were at least 4 people who I met that had an iphone.
very well said... some companies will do anything to dominate market share and the most common way to do it is through price cutting
of course price cutting comes at the expense of quality and customer support..
Who wants to be in a race for the bottom?
Hello DELL!
other confusion is the 10m target. apple has repeatedly confirmed that the target is for year 2008. not by end of 2008. if you want to be taken seriously, please at least follow the statements the company officials make.
as for the target itself, apple will not reach it without new models and/or price cuts into both the device itself and the subscription plans offered by its operator partners. and for new models, adding 3g won't be sufficient.
further i don't think anyone has been claiming unlockers hurting apple, the issue is what level of the revenues of the iphone sales are priced into the stock price. 10m subscription iphones / year vs 6m subscription + 4m unlocked iphones / year makes significant difference, especially when for company trades at the pe-level of apple.
in summary, you're one confused dude :)
Apple said what they said repeatedly. No matter how many times journalists misreport what they said it doesn't change reality. Please get your facts right.
Now, given this corrected reality, do you really believe Apple will not make its goal? Or do you want to adjust that?
Sources for the real Apple prediction are all from Apple directly (or indirectly by transcript).
1. Try listening to Steve's MWSF keynote again. A link to the Quicktime video is here <www.apple.com/quicktim...;. You'll find the relevant statements at 1:16:40-1:17:15 into it.
2. Look at the transcript of Apple's FQ307 earnings conference call at <seekingalpha.com/artic...;. Search for the text "Finally, we reiterate our goal of selling 10 million iPhones in calendar 2008."
3. Look at the transcript of Apple's FQ108 earnings conference call at <seekingalpha.com/artic...;. Search for the text "we remain confident in our goal for 10 million for calendar 2008."
4. You can also try listening to Tim Cook's talk from yesterday again. Yes, he says it again.
Who cares if J.C. says that apple shares should be on hold, a buy or a sell?!; only suckers follow that lead. Apple is not Jim´s; THANKS GOD!
>>>Are iPhone unlockers hurting Apple? I think this idea is way overblown. Apple receives full retail price and full retail profits for every phone it sells, locked or unlocked. The device is profitable by itself, regardless of whether it gets carrier revenue sharing or not.<<<
Of course the unlocked iphones are hurting apple. Apple may still make a tiny profit by selling the hardware, but the revenue sharings with the carriers is where the gravy is. Instead of making $200-300 per iphone over the life of its two-year contract, apple is now making less than $50 per iphone. According to my math, $200-$300 is a lot more than $50. If that's not hurting, I don't know what hurting is.
Bottom is this - iphone has not been as great a sucess as many apple fans and investors had hoped for....10 million iphones by the end of 2008 or not.
don't let me stop you.....keep up the good work of leading the apple fan squad.
Hey, why don't you whine and cry over the many, many dollars that, say, Nokia, isn't getting because they haven't been getting recurrent revenue from carriers? I'll throw you a towel and join in with some crocodile tears if that will help you feel better...
You're thick as a brick, man.
Lastly, anyone who could seriously accuse Howe of cloudy thinking, should NOT stop taking their medication.
scott w
growhtportfolio
What I object to is that Apples MacBook doesn't synch with any other Microsoft Mobile PDA or smartphone product, so as a MacBook user, I don't have the ease of use of a portable calendar, notes, contact PDA.. I have to use my HTC Touch, synch with my MacBook's Windows Outlook data!
I can hold off on the phone features, but want a single portable PDA that works with the MacBook!
Further of interest, neither in Taiwan, Hong Kong or China is there an official Apple Store. Several distributors , and they try to service customers, but essentially they still just sell hardware. None has accessories for the iPhone , despite the fact that their customers are growing by leaps and bounds.
I know of one HK mobile phone distributor that is selling 200 iPhones a day unlocked, and sales are growing 25% per week.
Its a great product, and version 2 will I'm sure be even better. Apple - start meeting demand of the customer, instead of pissing them off!