Apple iPhone Users to Reach 30 Million by 2010 - Goldman

One of the key factors behind the huge success of Apple Inc.’s (AAPL) iPhone is software. In March, the company unveiled the App Store, the only home for a wide range of third-party applications for the iPhone and iPod touch, which will be accessible through iTunes or wirelessly. It is expected to launch in late June along with iPhone software update 2.0.

These third-party applications will differentiate the iPhone from a growing number of its smartphone competitors, according to Goldman Sachs analyst David Bailey.

He told clients:

We think that Apple’s use of Mac OS X on the iPhone, which is the same operating system used with Macs, combined with Apple’s software development toolkit (SDK) specifically designed for the iPhone, provides a more robust application development environment for developers.

While other mobile platforms offer scaled-down applications, Apple’s plans are expected to make the development process more efficient and promote richer functionality. One current example of this is the Safari Web browser for the iPhone, which offers a full Internet browsing experience as opposed to the limits with some other smartphones. Meanwhile, the App Store’s layout and distribution system should result in a better user experience and drive higher adoption rates than existing platforms, Mr. Bailey said.

He expects to see small “widget-like” applications offered for free or at costs ranging from C$0.99 to C$2.99, along with large and more sophisticated applications likely between C$19.99 and C$29.99. Apple retains 30% of this revenue, while developers get the other 70%.

While a quick ramp-up is expected in the second half of 2008 that will coincide with the launch of the 3G iPhone and more than 40 new international carriers and countries, the analyst expects the App Store will make a more meaningful contribution to Apple’s earnings in 2009, with roughly $120-million in incremental net revenue and $0.10 in earnings per share. He expects these numbers will climb to around $280-million and $0.20 in 2010.

Mr. Bailey said:

Apple’s expanding addressable market for iPhone applications, in turn, should attract software developers’ interest and development resources, leading to a broader selection of third-party applications available at the App Store.

Goldman sees the active installed base for the iPhone climbing from around 2 million at the end of 2007 to roughly 9 million by the end of 2008, jumping to approximately 20 million and 30 million by the ends of 2009 and 2010, respectively.

Comments

[guliamo]

We were talking about AAPL getting back to $200 and sure enough - here it is. But there is no real wonder. Apple is quadruple and there are no competitors with as much as a double play. I'll explain:
I predict that in 5 years your life will look like this:
You'll come home from work, stick your iPhone into it's slot on the 50" Apple TV screen, you'll turn the TV on and you'll see a screen looking much like iTunes. You'll then decide if you want to here music from your collection, rent a movie from iTunes or even shop on Amazon and pay through your iPhone / Apple account.
It is clear that the more a buying process that the corporation ownes, the more succesfull it will be in fending off competition. Now check this out, Apple creates:
Hardware (iPhone, MAC and your future TV screen)
Software (iTunes, Leopard)
Communications (iPhone billing rev share)
and.. MEDIA! (selling songs, movies, ringtones)
No one else even comes close!
Microsoft sells only software.
Dell sells only hardware
Verizon sells only communications
Warner Bros Sell only content.
All these players can play on but it won't be long before they have to play ball with Stevie J, Cuz I bought my beautiful 50" TV at the Apple store, I buy my music on iTunes and if the HBO back episode isn't for rent on iTunes I guess I'll just rent something else..
I predict Apple will see $400 within the next 5 years. This company is run brilliantly.

2008 May 28 04:58 AM

[wallawallabingbang]

2-way video conferencing on the new iPhone?

Game over, RIMM.

2008 May 28 05:52 AM

[tom1234]

guliamo---i know exactly what you say is sooooo on point --ARE WE THERE YET ---($300.00 PER SHARE) I THINK SOONER THAN LATER ---the WIZZZARD is so in control that apple's only competition is AAPLE

2008 May 28 07:46 AM

[imacademic]

guliamo, Only wonder is Stevie
(ijust called to say ilove you). You're right on the money, if not somewhat conservative. I project 2 -3 years. What's up with the imaster beta? Sounds like a case of ipremature withdrawal.

2008 May 28 07:49 AM

[imacademic]

Now you see it now you don't?
ivibe user must have been behind in his obligations. This is no place for ischtick!

2008 May 28 08:01 AM

[jcsegenmd]

Back two months ago when all the chicken littles were running around wringing their hands about apple's dip to 117/share, the predicted (some analyst in late '07) $325/share by the end of 2008 seemed like a pipe dream; now it's back on track of course and those same doom & gloomers (present company excluded) are now chirping as if they knew all along.....

Here's an exercise that some might find amusing to see where apple's market cap might well go within 5 years:

Add up the caps of all (ALL) the businesses which swim in the same waters as apple: MSFT, DELL, GRMN, PALM, RIMM, and competing segments of mixed players like Sony and HP, then multiple that number by 0.7 (which is the percentage of MP3 player market that apple currently owns)

Scary isn't it?

Apple has an upside potential 3-5X that of microsoft.

Why?

They're easier to use, they don't crash as much and in the long run are cheaper as they don't need to be replaced as often--I expect to squeeze another year out of my '05 powerbook; the screen's starting to go, but I've only shut it off perhaps 200 hours in those three years (vacations); it's frozen maybe five times, but in fairness to the machine, a couple of times I had multiple huge Quark files open AND seven programs going at the same time

Apple will be at $400 within 18 months

2008 May 28 08:06 AM

[digivision]

well guiliamo's picture sounds good but ... it isn't that simple ,first it's view is flawed.
Microsoft doesn't just sell software they do ,hardware (xbox,Zune), phone os and services .. they just suck at doing it .
Apple does it better than anyone but this doesn't mean that the others
are going to sit back and watch.
I see one big competitor for Apple in the next few years and that is LG
they could pair with a OS company like MS and do something interesting like they did with Netflix

2008 May 28 08:11 AM

[jmmx]

@gulliamo
Few mistakes
- no need to turn on the TV, slip in iPhone & TV starts automatically.
- You do not see Leopard OS - you see Osprey OS
- There will be other features we cannot even imagine now :)

@walla...
SKYPE on iPhone?
Game over, RIMM.

@Newton Rules
LG? Pretty good guess. You may have something there. But if they do an OS, they will have to do Linux or Android, not WinMobile.

IMHO

2008 May 28 10:50 AM

[jmmx]

More @gulliamo

EVERY ROOM will have a mini TV running Mac OS-Lite that will be hooked into the local network. You watch/listen to content and make phone calls or video chat anywhere. Touch screen access to the internet. Recipes in the kitchen anyone? .....

Star Trek in the home is around the corner.

2008 May 28 10:58 AM

[samij]

30m by end of 2010 means that apple is falling far behind their target of 1% market share, since about 5b cell phones is sold between mid 2007-end 2010, apple would be able to capture about half a procent market share, or half of their target.

2008 May 28 12:48 PM

[imacademic]

Are we there yet?

2008 May 28 07:26 PM

[guliamo]

Without getting into details or analysis my basic idea is that the Brand is king.. Apple will continue to out perform because their story is more than in numbers.. it's the holistic experience that is "Apple".. example:
When you call the Apple store.. there is no IVR asking you to click "dos" for spanish and no waiting around - you get a human answer that directs you straight to where you need to go - that's brand.
When I went to the Apple store to by phones for my girlfriend.. it was a packed store.. so this guy checks me out with a portable credit card machine and sends the receipt to my e-mail.. that's brand.
When I ordered a nano from the Apple on-line store.. the Nano came fully charged and ready to go! How annoying is it when you get a new device, to have to charge it for 24 hours before starting use? Apple get it, so they pre charge it.. that's brand!!
Microsoft has no brand.. it's a nuisance monopoly that one must live with. Some one mentioned the Zune.. are you serious? what a floporama! how many did they sell excluding the gates family, three?
You mentioned LG teaming up with Microsoft, but you can't team up with microsoft.. to team up, you have to know how to share, MS doesn't.
It's been said that the only product Microsoft could launch that wouldn't suck... is a vacuum cleaner.. hehe..

2008 Jun 04 02:32 PM