By How Much Will Apple 'Blow Away' Its 10M iPhone Target? 36 comments
Larry Dignan
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The iPhone ante is being raised by the minute for Apple (AAPL). The question now shifts from whether Apple will ship 10 million iPhones by the end of 2008 to by how much it’ll blow away its own target.
To wit:
- Piper Jaffray analyst Gene Munster, one of the more bullish iPhone fans out there, is predicting 12.9 million iPhones by the end of 2008.
- Oppenheimer analyst Yair Reiner is predicting 14.5 million iPhone units in 2008.
- Apple’s official estimate 10 million and the company has stuck by that projection each quarter.
Add it up and it’s safe to say analysts think that Apple is bluffing.
Can Apple deliver? You bet, but it won’t be because of a shiny new iPhone. Apple is expected to deliver a 3G version of its iPhone (all resources), but the real impact of that rollout won’t be seen until the September quarter. While speculation about the next iPhone abounds with folks circulating tips, rumors and even customs data on imports, a 3G phone isn’t the reason why Apple will blow past its 10 million iPhone target.
The real reason: International distribution. Apple in just a few weeks has acquired a global footprint for the iPhone. It lacks a deal with China Mobile, but the available subscriber base globally has swelled. And with Apple shipping 5.4 million iPhones so far all the company has to do is skim a few global customers via these carriers in the December quarter to hit its target.
On Tuesday, TeliSonera, a wireless carrier, said it will offer the iPhone in Sweden, Norway, Denmark, Finland, Lithuania, Latvia and Estonia later this year.
That latest deal only adds to the following list of global heavyweights (chart courtesy of Merrill Lynch).
Within a few short weeks Apple has 32.6 percent of the total addressable global market. Simply put, Apple doesn’t have to do a whole lot to surpass its 10 million unit target. Reiner notes:
We believe current consensus estimates for the iPhone are far too timid in assessing the significance of the iPhone’s expanding international channel. Early evidence suggests that the iPhone is approximately a third as popular in the international markets where it is already available as it is at AT&T-enjoying roughly the same relative popularity as Apple’s computer do outside of the U.S. Our above consensus target of 14.5 million iPhones in 2008 assumes that this relatively popularity will merely be sustained as the iPhone becomes available to 480 million new international subscribers in 2H08.
And if Apple does hook up with China Mobile perhaps even Munster’s wild projection of 45 million iPhone in 2009 is in reach.
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This article has 36 comments:
I intend to be a millionaire before Santa brings me another sack of money this Christmas.
See link to article below
news.moneycentral.msn....
Hmmm, with this many iPhones in one year (presumably, that will grow in succeeding years) and iPhones' popularity for web usage among cell users, who needs WiFi?
20smoney.com/2008/05/2.../
{ long AAPL 2k shrs }
One, AAPL has used a deferred version of accounting, that may or may not be applicable to these new deals around the world. They took the sale of the iPhone with ATT and spread out recognizing the income over the life of the contract, two years if I remember correctly. That means that NONE of the impact will show up other than the amortized portion in any quarter. It does mean that even units sold last summer will be adding to the bottom line in the remaining quarters of this year.
Two, AAPL said that NONE of the income from ANY iPhone sold from the SDK announcement would be recognized until the release of the application store presumably after the WWDC expected rollout of the 3G phone.
These two factors are good for the leveling out of, and support of, the AAPL profits over the next year, but will NOT materially goose the bottom line no matter how many are sold...IF, and I stress IF they continue to book the profits on a incremental basis over the life of any contracts. There is no way of knowing now if that will be the case.
What IS going to massively hit the bottom line, immediately, is the overlooked workhorse that is really adding to the cash horde, the old standbys the desktop lineS { plural } and the notebook lineS { plural }. The next quarter, leading up to September is when the back to school market hits. And studies seem to show that going to school WITH an Apple is cool, and with a PC is just so...DROIDISH and uncool. Some schools are reporting that in excess of 80% of students either have a Mac or want a Mac, and the profits on these are good, and the money goes right to the bottom, as sold. The desktop lines, while overlooked, are poised now to RAPE the PC sluts, Vista is a known dog, OS X is a high priced but very attractive lady of the night...with all the charms of the best courtesans!
Not to mention the LOCK IN MARKET the applications store, added onto the iTunes store will have, every single user of an iPod Touch, or iPhone will be furiously downloading this or that new application as they flood out there, with AAPL taking a cool 30% off the top for each download. That alone, could and most likely WILL account for more bottom line profit than the hardware profit on the actual handheld unit will.
And NEVER forget the retail end, the juggernaught, grossing in excess of $4.6k/SF retail, numbers TWICE as high as Tiffanies, or the very best retaillers out there. And they are now opening as many as five stores a month, directly, and some partners, such as the Indian franchise, promise over 600 outlets within a year selling partial lines.
Add 'em all up, and you have a KA-CHING thing going.
Don't think the iPhone is the horse driving the buggy, it is the jockey leading folks TO the horse and buggy, which is the ongoing relationship, that equates to the online sales, online programs, to the desktops and laptops, and even and eventually to EVERYTHING digital.
This is going to shape up as the APPLE DIGITAL LIFESTYLE company!
Tan2Day: Do you really think apple software is "high priced"? I find it to be much lower than ms and an exceptional value.
cheers
Just a thought but why not play the option market on the news of the release date of the new iphone and ahead of the conference and sell the calls before the news or on the day of the news and reap the rewards while keeping the shares long then turn the profits from the options into additional shares by buying on the dips- I did this in the summer of 2005 and made a killing and am doing it once again. A stock, or rather, a company like this only presents itsself once in a great while and you can't afford to miss the leveraged opportunities that it presents especially to the small timers out there like myself.
I agree that the stock has stablized and it will only go up on quarterly results being exceeded and more "substantial" news.
I also agree you dont sell as long as Steve is there unless you need to make a little withdrawal for maybe a hmmmmm lets see.... a 3G iPhone =P
In the long run, it all hits the bottom line. But in the over three years I have watched the ANAL-ists at work with AAPL, I have observed they have this uncanny and GROWING inability to SEE the bigger picture. They are lemmings, they are myopic, they are basically TRADERS mentally, and the window a trader see's through is never much longer than the time it takes to read an article in People Magazine while visiting the .... yeah, that place.
So, whereas the money WILL all hit, expect to see sales skyrocket, and THEN expect the slew of articles like this "Apple SALES SOAR, PROFIT languishes.." or the like.
I saw them go bazonkers over the iPod sales slowing down in UNITS, never mind that three years ago, they were little MP3 players, and now they are baby multimedia wireless machines with average price tags DOUBLE before.
Sadly, for a trader, or those with trader mentalities { that isn't a bad thing, but it isn't normally associated with fully understanding the why's and wherefore's of the strategic growth, and long term viability of a paradigm changing firm } they will ACT on the nits, and ignore the chestnuts that were planted but not yet ready for harvest.
As most studies show, a patient, SMART investor, who will trade out the LOSERS but let the winners ride { that is why they invented trailing stops } generally will outperform the in and out boys almost every time. Apple is such a firm, so watching the MACHINE of the SYSTEM being assembled, and pretty much ignoring the minor ripples, seems to me to be a less risky endeavor than any other course of action.
As compared to what? Seriously?
Are you buying a computer company? Then yes. They ARE really a dime a dozen frankly.
Are you buying a REVOLUTION with a few million zealots that will sweat blood to pay for just about ANYTHING that is cool, nifty, neato, sleek, and hot to trot? Then no, those are rather rare.
I like to watch the discussion boards, and there are many, for all things Apple. It never ceases to amaze me, the passion, the involvement, the subsuming of one's own self into identification with Apple products and lifestyle. THAT isn't something that Wall Street can factually measure, but what OTHER firm could bring out a new can opener, have 1/3 the media give it free publicitiy, and have swarms of fanboys and gals standing in LINE for hours on end to purchase it, even sigh unseen?
NOW THAT is what I call a FRANCHISE, and that is MONEY SECURITY, even better than a depreciating money horde that they have too.
2008 - iPhone scores 9/10 versus other smartphones scoring a maximum of 3/10
iPhone impact will be hugely more than the iPod.
Just look at all the desperate efforts by every other phonemaker to copy it.
iPhone = halo for DEVELOPERS. The iPhone SDK has much in common with the OS X SDK (XCode). When developers see how much more efficient Apple's tools are compared to the cr*p they've been using all these years for Windows, a little little bulb will light up over their heads; to "go Biblical" "The scales will fall off of their eyes.".
I often see articles on how WS doesn't quite understand Apple or it will take WS some time to figure out Apple's accounting model. Aren't these people analysts? Don't they understand math or something?
Does Steve Jobs have to stand on a stage and explain in detail how the company does it's accounting? I'm just puzzled. Does RIM have some easily understandable accounting model that makes better sense to WS? Apple with all of its products and stores just seems to me a stronger company than RIM could possibly be, yet over the past months, RIM's stock price shows more strength than Apple's.
I'll wait until the 3G iPhone is introduced and see if Apple's stock price takes off and stays up. No point in my speculating on the future.
On the delayed revenue side, I'm not sure I understand the issue here. Wasn't the AT&T revenue sharing deal the reason for not wanting to record all the income up front? The revenue sharing doesn't apply to about 30% of the sales, so I'd imagine those sales are counted up front. And if they're not, they mean guaranteed income for four quarters, pushing up the base for all calculations and making the bottom line even more secure.
My question is, when does Apple decide to go after the low end market. I do not rule this out, I just thing they are waiting for the right time, perhaps after Microsoft so foolishly goes in debt!!! to by a 2nd rate search company like Yahoo!
In america, profits are king. Companies who have actually never done anything innovative or good are admired hugely just because they keep the money coming in (not talking about in the eyes of investors here but in the eyes of the man on the street, business owners, etc...) We give this credence and respect to individuals as well, to a point. i.e. One needed be a good person to be respected if they are very successful they will be respected. This respect as a stellar company continues to grow for Apple as Microsoft continues to lose money from their huge hoard. And there is no comparison how the 2 companies have treated investors in the past 10 years...
When Apple surpasses Microsoft in market capital, all hell will break loose, Apple marketshare will skyrocket more than we have seen now--and we have only really recognized Mac marketshare gains for LESS THAN ONE YEAR SO FAR!
This whole machine is ramping up. I love the way the iPhone profits are deferred and forward looking. What will happen pretty soon is that the volatility will come out of the stock. I don't want to sell now for a quick profit and potentially miss out on what is to come over the next few years. Even if it dipped to $120 again, I have still doubled my initial investment of 2 years ago. And as we have seen, it can come right back, even in this weak economy. If only our dollars were worth what they were even last year, but I digress...
Finally, I think it's extremely important that Apple continues to drive their acceptance globally, and iPhone is their ticket to do that.
Now long SNCR.
On May 30 01:04 AM bryanyc wrote:
> Personally I don't think there is going to be a jump and then dump
> in the stock. AAPL the stock is performing a little on the weak side
> the last week- which means that it has bumped up against what was
> considered to be its top value recently at around 190. So, I wouldn't
> play the sell just before the sell the news. That wasn't the way
> it happened with the last earnings report either. A good report:
> in the first minute the stock was up 10 points, then it dropped down
> some 18 points then wound up at about the same price in the after
> hours trading. The next few days it persistently rose higher. I think
> the big drop offs are done for awhile. What we are going to see IMHO
> is a slow, almost agonizingly slow, and gradual climb into the mid
> 190's- up a few, down a few, etc. with perhaps a few points of gain
> a week. By the end of the year we should make and hold 200 - 210.
> However, 2009 will be one of the most incredible years ever for Apple
> and AAPL though: 300 is in the cards.
As AAPL goes, there go I.