iPhone could add 22% to Apple's earnings for 2007

[AppleInsider]

Apple Computer's upcoming iPhone handset could potentially generate an incremental 70 cents in per share earnings and $6 billion in revenue for the company during the 2007 calendar year, one Wall Street analyst says.

"Extrapolating the news reported by Commercial Times in Taiwan (of Hon Hai shipping 12 million Apple iPhones in the first half of 2007), we ran some numbers to get a sense of the incremental impact," Bear Stearns analyst Andy Neff wrote in a research note to clients Wednesday morning.

The analyst, who had been modeling the Cupertino, Calif.-based iPod maker to earn $3.07 per share on $24.5 billion in revenue during 2007, said sales of the new device could add an additional $0.70 in earnings-per-share and $6 billion in revenue.

"Our estimates include 30 percent potential cannibalization of total (current) iPod unit sales by iPhone introduction," he wrote.

Given Hon Hai’s (Foxconn's) expectation of shipping 12 million iPhones during the first half of the year, Neff assumed total unit shipments could run as high as 29 million for the entire calendar year when the higher sell-through back-to-school and holiday quarters were factored into the mix.

In calculating the device's revenue potential, the analyst assumed Apple would price the phone around $300 without wireless carrier subsidies, which would fall below PALM's Treo with an average selling price (ASP) of $489 and RIMM's Blackberry with an ASP of $349.

"ASPs could end up higher/lower depending on features," he noted.

Neff also assumed an operating margin of 15 percent, slightly above the company's current operating margin of 14 percent. "Our margin assumption appears reasonable since PALM Treo’s gross margin is 35 percent - 40 percent while Apple's operating expenses as percentage of sales is about 15 percent," he wrote.

Sales of 29 million iPhones during the 2007 calendar year would represent an approximate 3 percent share of the overall mobile phone market, the analyst said.

[ View this article at AppleInsider.com ]

[Ireland]

I actually think 29 million is not overreaching, as the iPod has estimates of over 40 Million this year, and everyone uses phones. I hope they're great cause I'm in the market.

[Johnny Mozzarella]

I'm trying to hold out...just a little bit longer.
I think the prediction is very reasonable as long as there is an unlocked version that will work on GSM networks.

[hohlecow]

Blast! and me with a new 2 year Verizon contract!! This means either a) the phone will be GSM only (like it should be, anyway) or b) Verizon will i] try to sell it for $400 without contract , ii] cripple the thing beyond use and/or iii] rip out the apple gui and stick their standardized crap interface on it.

Anyway you look at it, no real iPhone for me until 2008

[macFanDave]

C'mon! If the analysts are talking about iPhone in public, the secret is out!

Apple ought to announce it BEFORE Xmas, so people who might otherwise get stuck with a phone they will soon hate for one or even two(gack! Me and my effing Blackberry!) years as a so-called gift, can get an IOU for an iPhone.

Sorry, Steve, I didn't blab it, so don't blame me.

[Johnny Mozzarella]

This is one of the best iPhone mockups I have seen.
Both in terms of what is feasible and what I want.

[melgross]

I don't think those numbers are impossible, if it comes out early enough in 2007. But, they would be quite an accomplishment, even if they do canabilize the lower end of Apples' iPod sales.

[lepton]

I think the iPhone and 'true' video iPod are the same item. I think it will be iPod, phone, PDA, Apple Remote Desktop in one. Here are the details:

What the iPhone Will Be

-Mike from News that Morphs

[Ireland]

Originally Posted by Johnny Mozzarella

This is one of the best iPhone mockups I have seen.
Both in terms of what is feasible and what I want.

Nice, apart from the fact it will cut the face off you when using it. Phones can't have sharp corners.
If you like cutting your face off, then you may prefer this one.

[audiopollution]

I realize that the analyst mentioned that the price depends on features but, if $300 ends up being the retail price of the iPhone, you're going to get a bare-bones handset.

$400-$450 seems more realistic to me. At that price, I'd expect a quad-band GSM with 4 Gig of flash memory. Tri-band UMTS/HSDPA would be useful, too - truly making it a world phone.

[MacTel]

Originally Posted by macFanDave

C'mon! If the analysts are talking about iPhone in public, the secret is out!

Apple ought to announce it BEFORE Xmas, so people who might otherwise get stuck with a phone they will soon hate for one or even two(gack! Me and my effing Blackberry!) years as a so-called gift, can get an IOU for an iPhone.

Sorry, Steve, I didn't blab it, so don't blame me.

The iPhone is nice but I'm going to hold out for an iTricorder. I often find myself in new and strange enviroments that I want instant analysis of while I play my tunes. An iTricorder would have helped me tremendously last night in the poker room at a casino I've never been to before. If I knew who the players and bluffers were from the get go I would have done much better. Come on Apple, what's the hold-up?

[machei]

This thing would have to be pretty impressive to tear me away from my Crackberry. The one thing they can't do and have it look sleek is include a full qwerty keyboard, especially on a small form factor the size of an iPod, and that is pretty much necessary for it to work as an e-mail device, which I assume will be part of the appeal if it links to all the services via .Mac. And sadly, if the real benefit is that if it's only a phone plus your iTunes, the blackberry Pearl still does it better. Part of what I love about iPods is that they do what they do really well, and part of THAT is because they are built to only do one thing. I get worried when devices serve more than one master. I don't ever use the calendar/games/contacts/etc. on my iPod, but it doesn't bug me that they're there because they don't detract from the music player. But when you get into NEEDING things like a keypad, to say nothing of a full keyboard, you're asking for it.

Don't get me wrong I desperately WANT to like the thing, I'm just a perpetual skeptic.

[Ireland]

I've looked at every iPhone mock-up on the web. My favorite is this one, you know, the one where the screen can change depending on what function you want to use on the phone. Making a call? Select phone from the menu, and you'll get a number and keypad to sent texts or dial numbers. Using the music feature? Select iPod from the menu, and instead of numbers and keys, a clickwheel and iPod interface appears on the screen. Playing games in the iTV, the screen could change to a game controller, you turn the device on its side like a joypad, on the right is x,y,a,b and on the left is a four way controller. With all those apple patents recently, this is more fact than fiction then you may think. Also I think these mock-ups not only look real, but look like they would be durable and useable in a real-life situation.





.......

[melgross]

Originally Posted by audiopollution

I realize that the analyst mentioned that the price depends on features but, if $300 ends up being the retail price of the iPhone, you're going to get a bare-bones handset.

$400-$450 seems more realistic to me. At that price, I'd expect a quad-band GSM with 4 Gig of flash memory. Tri-band UMTS/HSDPA would be useful, too - truly making it a world phone.

It all depends on what we mean when we say "price", doesn't it?

My Treo 700p, lists, or listed for $649, pretty fancy, no?

But, with a 2 year extention to my Sprint contract, and the fact that I hadn't gotten a new phone for 24 months, I paid $399.

Now, Verison has pretty much the same deal for $299.

So, depending on just what Apple plans to do, $300 isn't impossible.

[audiopollution]

Originally Posted by melgross

It all depends on what we mean when we say "price", doesn't it?

My Treo 700p, lists, or listed for $649, pretty fancy, no?

But, with a 2 year extention to my Sprint contract, and the fact that I hadn't gotten a new phone for 24 months, I paid $399.

Now, Verison has pretty much the same deal for $299.

So, depending on just what Apple plans to do, $300 isn't impossible.

I agree, that with carrier subsidies, $300 is entirely possible, but ...

Originally Posted by AppleInsider

In calculating the device's revenue potential, the analyst assumed Apple would price the phone around $300 without wireless carrier subsidies, which would fall below PALM's Treo with an average selling price (ASP) of $489 and RIMM's Blackberry with an ASP of $349.

... the $300 quoted by the analyst is without subsidy.

[melgross]

Originally Posted by audiopollution

I agree, that with carrier subsidies, $300 is entirely possible, but ...



... the $300 quoted by the analyst is without subsidy.

I agree. But it is still meaningless. Apple doesn't have to license the OS, or any of the other software, which takes a chunk out of the sales price. They might also sell direct for a large part of the sales. If they can do that, they get more profit, whch could allow them to reduce the price all over.

Palm has been sucessful with the Treos', but their sales are measured in much smaller numbers than we are seeing the estimates for Apple's phones, about 10% of it. That also brings the price down.

The $649 list on my phone is just that. most items are reduced 10 to 25% from list as a normal part of the pricing structure. With that, the price of the Treo could really be as low as $499. Then discounts from there.

Apple doesn't usually allow much discounting because of their low list, compared to the wholesale price. While that gets around the illegal price fixing, it effectively gives dealers little wiggle room.

If Apple priced their phone without the extra "discount" margin, the phone, again, might see a lower effective price.

All of these things together could allow $300 as a price, or possibly $349, to match the hi end iPod.

It also depends on what Apple is trying to do here. Are they going for a wide market, or for a smaller, but high end audience?

If the numbers being projected are correct, it will be the wide market.

[MacGregor]

Originally Posted by Johnny Mozzarella

This is one of the best iPhone mockups I have seen.
Both in terms of what is feasible and what I want.

I prefer a clamshell phone, but I'd go for that too!!!!!!!

[MacGregor]

Originally Posted by Ireland

All of the images look good except for this one. What kind of nano-fingers do you need to punch in a phone number, let alone an IM? I do like the flexibility behind two (possibly both touch screen) screens. However one large screen gives the possibility of video and virtual QWERTY keyboarding.

[Ireland]

Originally Posted by MacGregor

All of the images look good except for this one. What kind of nano-fingers do you need to punch in a phone number, let alone an IM? I do like the flexibility behind two (possibly both touch screen) screens. However one large screen gives the possibility of video and virtual QWERTY keyboarding.

I know, I noticed. Apple would do the keypad differently, but you get the concept right? I was hesitant about adding that image to the mix, but I had to show all aspects of what I was trying to convey.

[Robin Hood]

I just ordered the Sony Ericsson K610im: http://www.sonyericsson.com/spg.jsp?...pp1&pid=10485#

If the iPhone can match its features, and also does music well, I will get it. BTW, for the above phone I paid €59 (taking €90 rebate into account). I'd be prepared to pay more for the iPhone, especially if it works really well with Mac OS X.

[SpamSandwich]

I'll believe it when I can order it. Even then, I may not believe it.

[Neruda]

Originally Posted by Ireland

I've looked at every iPhone mock-up on the web. My favorite is this one...

I don't know what the iPhone will look like, but Apple shoud hire Christopher DeSantis to do the commercials

[ecking]

Originally Posted by Ireland

I've looked at every iPhone mock-up on the web. My favorite is this one, you know, the one where the screen can change depending on what function you want to use on the phone. Making a call? Select phone from the menu, and you'll get a number and keypad to sent texts or dial numbers. Using the music feature? Select iPod from the menu, and instead of numbers and keys, a clickwheel and iPod interface appears on the screen. Playing games in the iTV, the screen could change to a game controller, you turn the device on its side like a joypad, on the right is x,y,a,b and on the left is a four way controller. With all those apple patents recently, this is more fact than fiction then you may think. Also I think these mock-ups not only look real, but look like they would be durable and useable in a real-life situation.





.......

These are pretty damn cool and nice. I don't know about the game controler function though the lack of tactile feedback might be werid for games.

I just hope whatever they offer isn't using themselves as the provider because then I won't get one and even if I want'ed to the service would probably be f*ed up in Canada anyways.

Apple just make and sell the phone for a price of a 80gb ipod and sell it online and at your stores unlocked and on top of that offer a subsidized version to providers.

No one outside the US wil be able to use your phone if you make yourself the provider!

[SpamSandwich]

Come to think of it, I'd rather have a Nintendo DS phone...

[Marcusapple]

I think apple is done with the phone. It will be out sooner than we think.

[Dr. X]

Here is another image that someone did of an iPhone:

[SpamSandwich]

That's a nicely done rendering, but the edges near the keys look so sharp they could slice your fingers clean off.

[Ireland]

Originally Posted by Marcusapple

I think apple is done with the phone. It will be out sooner than we think.

For someone who just registered you have some insight. This MWSF better be good, because I'm looking forward to it. Too much waiting frankly.

[JeffDM]

I think it's a bit much: 22% of Apple's revenue from a product that's starting out from zero in its market? I think that's a bit much. For a product with no direct predecessor in the market, to something that's basically predicted to take in half as much revenue as the entire Mac line or half the revenue as half the iPod line? I'm not saying it won't happen, but I think that number is a little high. I realize that the mobile phone market is huge but that's still a major leap.

[MacDuff]

Originally Posted by Neruda

I don't know what the iPhone will look like, but Apple shoud hire Christopher DeSantis to do the commercials

As excellent as that commercial is -- and as seductive it makes that phone design -- there are definitely some ergonomic issues with that phone design. It's just tough to see it with all the cool smoke and mirrors being thrown at us in that "commercial". So yeah... your point still remains. It works! They SHOULD hire the guy!

[Ireland]

Originally Posted by JeffDM

I think it's a bit much: 22% of Apple's revenue from a product that's starting out from zero in its market? I think that's a bit much. For a product with no direct predecessor in the market, to something that's basically predicted to take in half as much revenue as the entire Mac line or half the revenue as half the iPod line? I'm not saying it won't happen, but I think that number is a little high. I realize that the mobile phone market is huge but that's still a major leap.

You don't believe Apple could take 3% of the market in its first year?? The phone market is very competitive for sure, but when it comes to software, hardware and UI, Apple is the best in the world. If the iPhone is as good as it could be, judging from Apple's past product history, then 29 million phones in year one is definitely feasible. After all 40 million iPod's this year, and the iPhone will have an iPod built-in.

[melgross]

Originally Posted by JeffDM

I think it's a bit much: 22% of Apple's revenue from a product that's starting out from zero in its market? I think that's a bit much. For a product with no direct predecessor in the market, to something that's basically predicted to take in half as much revenue as the entire Mac line or half the revenue as half the iPod line? I'm not saying it won't happen, but I think that number is a little high. I realize that the mobile phone market is huge but that's still a major leap.

I'm not so sure. They already have ready users in their iPod contingent. They also have many Mac users who will move to it.

That's a pretty big number in total. And then there is the other 95% of the population.