Can Apple Double Its iPhone Sales Goal?

On April 23rd, at Apple's (AAPL) Q2 Earnings Conference, the company beat the street and provided their usual conservative guidance. They reported selling 1.7 million iPhones since the beginning of the year, putting them somewhat short of the rate they needed to meet their 10 million iPhones goal by the end of 2008. No one gave it a second thought, even though the year was 25 percent over, they had only achieved 18 percent of their goal. Again, no one was worried because we all “know” that Apple will be introducing the 3G iPhone, new OS 2.0, the SDK, and the App Store. But, I’ll guarantee you that everyone was doing the math and scratching their heads. It just didn’t add up.

Then the barrage of carrier deals started rolling in just weeks before the WWDC. Apple went from 4 carriers to nearly 70, at least at the time of this writing. They have carriers lined up on every continent, covering pretty much the industrialized world, with a few exceptions. Some of these deals apparently break the one carrier-one country model that Apple had seemed to standardize on. But even this should not have been a surprise, when back in February Tim Cook declared that Apple was not tied to a single business model.

Now things start getting a little clearer. With the new carrier deals, Apple now has a potential market of nearly 700 million cell phone customers. And with the iPhone currently enjoying a 3 percent general cellphone market penetration rate, that equates to nearly 21 million iPhones! So, there you have it, more than double Apple’s initial projection.

My take on this is that a market penetration of 3 percent seems way too conservative to me. Why would we assume that Apple will not increase their market? Sure I understand that not everyone wants a smart phone, especially at a premium price and the extra cost of digital service. Fine, so we leave the smart phone market out of this equation. But what if Apple decides to introduce an iPhone with fewer features, an iPhone Light? And allows carriers to subsidize it, so that it’s basically free with a service contract? Then I can see that market penetration dramatically increasing. My guess would be 7 to 10 percent. Let’s split the difference. That would figure out to be about 60 million iPhones! Whoa!

Disclosure: Author holds a long position in AAPL

Comments

[wallawallab...:]

I think that neither Wallstreet nor the average investor has any conception of the real magnitude of Apple's opportunity with the iPhone, Mac's and and iPod at home and abroad.

2008 Jun 04 04:54 AM

[mrtaxx:]

The iPhone is more of a computer or communication device then an phone. It's a computer, iPod, gaming device, phone, GPS, video conference device, IM device, camera, text messaging device, music device, TV, address book, photo album & whatever else you can think of due to the SDK. The iPhone is all of these thing or will be all of these things and more.

Contact anyone, anytime, anywhere with your iPhone. There are people out there that do not understand what this device is capable of. The iPhone IMO will sell more then the Moto Razr did (the most popular phone in history).

The iPhone will cause a halo effect to Mac's and vise versa IMO.

2008 Jun 04 08:09 AM

[wallawallab...:]

If the iPhone features 2-way video conferencing, there are absolutely no worldwide limitations for the device and all peripherals (Mac, etc.).

2008 Jun 04 08:49 AM

[tom1234:]

see the results in september

2008 Jun 04 08:51 AM

[Rob L:]

Apple's not going to offer an Iphone Light. That would be called the 2G model @ 4GB, the "lightest" version. You can't even get the 2G 16GB right now, so I think that speaks pretty much for itself in terms of offering a Light.

2008 Jun 04 08:51 AM

[brewer:]

There is no technical reason not to include video conferencing, the only reason it was left out of the 2G version was bandwidth limitations, and the fact that Apple likes to leave some features for the next generation product.

2008 Jun 04 09:10 AM

[PK de C'ville:]

The iPhone fireworks are just beginning. By Xmas, iPhones will be everyone's special gift, just as the iPods before it.

Apple's 'discovered' people will beat a path to your door if you can guarantee 'delight'.

Seems I can't think of another high tech company that reliably delivers the big D. You?

2008 Jun 04 10:04 AM

[jmmx:]

All the analysts always state something like:

“the carriers that have announced deals with Apple have total subscribers of 669 million people…”
-

What about the total market of the countries in which they do business. If ATT has shown anything, it is that many people will switch carriers to get iPhone. So the market is probably double or more the 669 M.

IMHO

2008 Jun 04 10:07 AM

[jmmx:]

iPhone Lite - It already seems pretty light to me. :)

iPhone has 3 features:
1- Phone
2- Large screen
3- Mac OS

Apple is NOT in the cell phone market - it is in the market of selling computing and media devices. Therefore #2 and #3 are integrated. There is no such thing possible as 1/2 of Mac OS.

And so there is only one possibility for an iPhone Lite, and it already exists: iPod Touch.

2008 Jun 04 10:13 AM

[Cho Cha:]

"Apple went from 4 carriers to nearly 70, at least at the time of this writing."
Shouldn't that be countries?

2008 Jun 04 10:45 AM

[Sleeper Ser...:]

So... what's the iPhone's penetration rate in the European markets where it's been on sale? Because I'm going to bet that it's not 3%.

2008 Jun 04 11:32 AM

[drierp:]

it's 10 million phones IN 2008, not BY 2008.. check your facts!

2008 Jun 04 12:01 PM

[samij:]

what kind of figure you get if you use the "general cellphone market penetration rate" of iphone in uk, france and germany instead of that in the us? not quite 21m...

2008 Jun 05 04:45 AM

[Neil Anderson:]

Wow! The iPhone is an enterprise class computing platform running Unix. Did I mention it makes phone calls? :)

2008 Jun 15 10:13 PM