Julian Ivan-Alexander

Apple iPhone: Not The Game-Changer Many Expect

The opportunities offered by this market totally dwarf that of the existing music player market by 1000%.
If phone convergence is where its at, Apple will be there. Any loss of momentum in iPod sales growth will be picked up by iPhone music-enabled handset sales, should that be what customers really want. Either way, Apple will offer more choices, not less, to consumers wanting to stay within the iPod ecosystem in the future, thus assuring their future loyalty to the platform. This opens up more opportunities, not less, and opens the door to higher sales growth of mobile devices, not fewer.
So in future Apple will be playing for market share within a market of 1.2 billion devices sold annually (mobile phones + stand-alone music player annual sales for 2007/2008) instead of trying to dominate and eking out sales growth from a market of just 100+ million devices (the anticipated market for MP3 players in 2007).
Wow! a 10x fold increase in opportunity. And this fool from Bernstein is worried about declining sales growth for Apple devices? When has price been a barrier to sales when it comes to the popularity of Apple devices? Lastly, when has Apple disappointed on the hardware front recently? Have any of its iPods been anything other than a wild success? Can he really imagine Apple would launch a phone for which it did not feel it would have a strong, ready, and willing market?
Licensing technology for their devices - and coping with the cost of that - is nothing new for Apple. It licenses the OS on which the iPod runs. It licences other technology within the iPod too. It still manages great margins on these.
As for the comment that competitors have significant resources to invest in music phones - sure they do. And what's the result? Bad products. They may have the resources, but they don't have the talent. There is every reason to expect Apple to get this right, given their obsession with design, as they have done for years, just as there is every reason to expect these others to continue to get it wrong, as they have done for years. Buyers want Apple products. If Apple offers them a good solution, they'll buy it.
Finally, I can hardly credit the last comment: "Distribution challenges: Apple has no relationships with global wireless carrriers, unlike companies like Nokia and Motorola. If this were so easy to do, he wonders, where are the phones from Dell (DELL) and HP (HPQ)?" You might as well ask "where are the music players from HP and DELL?" Oh, that's right, DELL had to withdraw theirs because nobody bought them. And HP? They initially licenced the iPod and branded it HP, but dropped it when nobody wanted to buy them. They wanted the Apple iPod, not the HP Apple iPod. Now there's brand equity for you!

The Bernstein analyst doesn't have a clue what he's talking about. I could pick holes with his analysis for days.