Apple's iPhone: Home Court Advantage 30 comments
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There's no place like home. Just ask Kevin Garnett of the Boston
Celtics, or Deron Williams of the Utah Jazz. In the second round of
the NBA playoffs the home team has won 20 out of 21 games played. As
influential as the home court advantage is in the NBA, it might even
be more so for Apple (AAPL).
Over the last few weeks Apple has been signing international iPhone distribution deals at an astounding pace. Why so much urgency? Sure, they want the 3G iPhone to become a major global player, but the urgency has everything to do with their home court advantage; aka, the low dollar.
Even Apple has taken notice that the low dollar might be on its way
out and they realize that it's time to seize the moment. Let's take a
look at the grandaddy of them all, India. Vodafone and Bharti Airtel
will reportedly market the new handset through a staggering 250,000
retail outlets, including franchisee-owned shops. Compare this
rollout with the meager 7,000 Apple and AT&T stores in the US.
On top of this staggering 250,000 number, consider the profit effect of the low dollar; iPhones will be priced at 23,000 Rs or about $545 each. The US retail price is $399. The raucous fans in Boston, Utah, New Orleans or San Antonio can't touch that kind of home court advantage.
Apple stock is taking a well-deserved breather this week after a big
run from the $120's, however I attribute this stock price recovery to
improved broad market conditions and a huge Mac quarter. The
international iPhone story has yet to be priced into the stock. The
market is still thinking that Apple will sell only 10-12 million
phones this year. I don't think so. All they need to do is sell 40
iPhones per store in India to reach 10 million.
The iPhone home court advantage story could end with India's 1.1
billion population and still be a great investment play. But it
happens to be just the beginning, Apple has been busy, real busy.
Check out the list of recent deals: Telecom Italia (TI) Mobile will be
selling the iPhone in Italy, Rogers (RCI) will market the device in Canada,
Swisscom (SCM) earned the rights to sell the device later this year in
Switzerland, while SingTel through its subsidiaries said it would
market the phone in Singapore, India, the Philippines and Australia.
America Movil (AMX) said it would offer the Apple handset throughout Latin
America, while Vodafone (VOD) announced deals for Australia, the Czech
Republic, Egypt, Greece, Italy, India, Portugal, New Zealand, South
Africa and Turkey. Orange gets France, Austria, Belgium, the Dominican
Republic, Egypt, Jordan, Poland, Portugal, Romania, Slovakia and
Switzerland. Market share madness is ready to roll.
Apple's newest board member, Avon CEO Andrea Jung, was responsible for Avon's (AVP) direct sales program launch in China. Her role on the Apple board was clearly defined in the press release announcement from Steve Jobs, "Andrea will be our eighth board member, and I think she will add a new dimension to our already lively board discussions." Jung added, "I feel privileged to join this exciting and dynamic team and look forward to working closely with Steve and the board during the next phase of Apple's growth." What could that next phase of growth be? Operation Get Apple Into China.
China Mobile (CHL) maintains a subscriber base of 375 million -- more than the population of the United States and by far the largest in the world. They already provide service to 400,000 iPhones that have been unlocked and smuggled into China. It should be no surprise that Andrea Jung was the only board member not in attendance at Apple's annual shareholder meeting in March. I'll bet I can guess where she was.
iPhone China could be right around the corner. Prepare yourselves to see Apple blow away even the highest iPhone sales estimates. I'll see you around $300 a share by the earnings report in January.
Disclosure: Long AAPL
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This article has 30 comments:
seeksomething.com
There's a difference between the amount of noise generated by loyal fans/media and how many devices will actually be sold. Apple's market will continue to erode as competitors such as the Blackberry Thunder/Bold, Samsung Instinct, HTC Diamond and eventually WinMo 7 and Android come on-line. Time for a reality check - they will likely never hold a dominant position in the smartphone market, and especially not this year.
This swarm of deals assumes new kit. Why is it hard for some
to imagine that Apple can sell tens of millions when this has already
occurred not just for Apple's own iPod, but for another cellphone,
the Motorola RAZR, which shipped >50M for innovations in
casing, not even in software. Look at the hockey-stick adoption
curves at:
money.cnn.com/2006/05/...
to see what portends for the iPhone. Of course, exponential growth
tapers off, but for Apple it is just starting. From the perspective of
a software developer, SDKs for the "competitor" cellphones mentioned
by 'infestation' are quite primitive. Now Apple is ready to sell apps while Android is just getting off the ground. Apple's differentiators
include software rollout for what is basically a miniature computer,
in addition to the sleek hardware fit & finish coupled with
a marketing juggernaut.
As he has mentioned in his earlier postings, there are several other catalysts that will dwarf the income/profit contribution iPhone will make to the Apple earnings story through CY '08.
Keep you eye on the real ball ... Mac computer sales. Expect to see consistent YoY growth of 40% and healthy margins maintained.
Apple's +18 billion in cash will also begin to develop a life its own.
You did notice that Apple Store sales were up +70% YoY, too, right? And they are adding a lot more stores this year.
And lets see how well they can keep their music business steady.
Let's not forget deferred income, either. Its contribution to quarterly EPS after another 2 or 3 quarters will become very significant, and iPhone sales swell the 24-month/8-quarter straight-line revenue recognition pipeline.
And Apple may have new tricks up its sleeve. Of course they have probably 4 iPhones in their pipeline to start to cover multiple price points like their iPod offerings. Expect the first lower end model no later than MacWorld in January.
Don't expect AppleTV to stay in hobby mode either. It will grow up as a full-featured (i.e. high definition displays), integrated home entertainment system that is internet connect, wireless in cool ways and stunning in design. B&O and Sony are the next victims of AppleTV, guaranteed.
Oh .... and watch the gaming story unfold. I don't know how to count the revenue possibilities any more for that than I do Apple's probable inroads they will make in the enterprise market.
Jason predicting $300 by January is in the cards.
Blackberry, Palm, and Nokia ARE the market. Over 1.1 BILLION phones were sold during the last 12 months and Apple already has 2nd place in the smartphone segment, after Apple JUST entered the market.
As with MSFT and computer manufacturers, Apple will increase its market share in mobile phones and it will because of its iphone OS and UI.
for Palm)time saving etc. it's just not worth cost. We have a good deal with Vodafone and even though Palm syning sucks on the Mac we will stay where we are until Apple truly sets the iPhone free
Considering how insanely competitive the smartphone/mobile segement is, I'm surprised so many people have been blinded by the iPhone into thinking it will dominate. Crazy.
As for iPhone totally owning all other smart phones: Consider this is the first phone Apple has made. And it's better than anything else. And competitors are _struggling_ to create a competitor that's half as good in terms of usability.
Of course, in the old AAPL days the same thing held true for Macs yet no-one was buying them and no-one cared. But I think Apple has found that the consumer market rewards ease of use and great design infinitely more than the PC market. iPod, iPhone, and dark horse AppleTV are all trying to capitalize on that.
The AppleTV is an irrelevant product at the moment but it, too, has the potential to become a game-changer.
Apple's biggest challenge is how to deal with success. How to design more products at the same quality.
Now do the same with an iPhone. If you can say that the blackberry is your choice then we are from different planets.
- the deals being made by apple are in countries where 2G is dominant, Apple has to milk its cow and make greater profits by selling older phones to countries where 2G prevails for now. 3G may be deployed in a coule years in India/China but today its all 2G.
- sell the 2G phones in counties where there are big grey markets (India, China, Philipines). It could help reduce the "grey market for a 3g" handset and thereby keep the profits for Apple and AT&T in the US
- Plant the seeds to get people to buy Mac's and iTunes, the Vista problems are global, I wonder when Apple start's selling Mac's in emerging markets, this is a huge opportunity for Apple.
I hope you're not shorting Apple. It's a shame you won't be going long (A very expensive shame).
Got IRA? Got Apple? Got Money?
Thanks, Sir Steve Jobs!
Consider this:
- Apple is launching its highest visibility product in countries where it had no presence to date what so ever or it was so small that most people would never buy a Mac. In my home country (Europe) nobody calls an MP3 player an iPod, they simply call it a MP3!
- For every iPhone sale, soon there comes a Mac sale, maybe in the form of a MacBook followed by an iMac, then an Apple TV, Airport Extremme, Airport Expresses, etc. That is called the Apple Ecosystem.
It is adictive! And Viral! It actually uses the principles of something called Viral Marketing. Because the person who buys an iPhone and enters Apple's ecosystem soon gets their friends and family all contagious too!
So Apple will increase its Mac sales dramatically on account of all the iPhone sales. Apple will cease to be a niche market company AND a US centric company as it has always been and will instantly become a global contender.
This is a global assault! Some say it is Apple's try at global domination. That is so funny. But if you realise that it is the CEOs of Orange, Telefonica, Telecom Italia etc. that are flying to Apple's Cupertino headquarters to convince Jobs to give them the iPhone and that the device has been 'smuggled' out of the country to almost every corner of the world, then you'll realise that it's almost a Gold Rush all over again.
One can already see that in terms of cellphone subscriber base, right now it's almost quadrupled. And the China deal is announced around the Olympic Games - time when Apple opens its Apple Store in high-life retail block in Beijing - then you'll understand how big Apple will get in terms of iPhones and Macs.
I really don't see any difficulty of Apple becoming Apple x2 or x3 in the very short term.
And I just bet Jobs has got something up his sleeve for WWDC that will revolutionize things even more - and it's not the 3G iPhone!
PS: go get some AAPL!
PPS: infestation, well chosen nick.
Apple will sell for $90 in January. Mark my words. Not a single soul is going to buy iphone for $545 in India. You get better phones almost free in India. And, there will be cheap iphone clones popping up everywhere in India and China soon. In Europe itself iphones are not selling and carriers are slashing prices. Asia will be a colossal failure.
You ain't seen nothin' yet!
Those familiar with the US experience don't realize the implications that the iPhone is an entirely new platform.
The majority of people in the world who use email, web access and other computer functions, including those in third world countries and emerging industrial countries use mobile devices...not laptops or desktops for their web access. The device that does it best has an enormous global advantage.
that is the best way to put it
Apple is a start up !!!
some people love to hate Apple but the problem is they show a lack of grey matter and that is the only reason they make comments like "Apple will sell for $90 in january" .. you have to be 14 to make a dumb comment like that or live in a trailer in the woods with no tv or contact with the outside world.. or both
On a less rhetorical note: aside from iPhones in India (which I honestly can't comment as I don't have the credentials to do so) we are going to be seeing a shift towards macs in the workplace...all without apple even looking up from their consumer-focused spreadsheets. Read all about it here: www.businessweek.com/m...
I love Steve Jobs. We would be living in a horrible PC-dominated world without Macs. The man is truly an entrepreneurial genius.
Make Macs, not War!
I understand his ego wants to leave the impression that it is solely he who is responsible for the success of Apple. However I wish there were some acknowledgment of others who could step in and keep the company on its innovative track. At least that would ameliorate a stock collapse if the worst were to happen.
Regarding 250,000 retail outlets in India, I would not make a big deal about this. Many are small mom and pop stores and mostly carry inexpensive phones. Although Indian mobile phone market is fastest growing in the world (8.5 million new connections a month or 100 million a year), most of the growth comes of places where they never had land lines (country side). Most of the poeple want a mobile phone to make a call. A price of Rs. 23000 is too steep for an average Indian.
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Shares of China Mobile (HK:941: news, chart, profile) fell 2.5% after the cellular service-provider, the world's largest by subscribers, said it signed 7.4 million new customers in April, down from 7.78 million in March.
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Shares of China Mobile (HK:941: news, chart, profile) fell 2.5% after the cellular service-provider, the world's largest by subscribers, said it signed 7.4 million new customers in April, down from 7.78 million in March.
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20smoney.com/2008/05/2.../