RIM sees no slowdown as analyst questions 10M iPhone target

[AppleInsider]

Apple's goal of selling 10 million iPhones in 2008 is being tossed under the microscope just as Blackberry maker Research in Motion (RIM) announced that its smart phone business has remained uncharacteristically strong through the start of the new year.

Speaking to clients in a research report on Friday, Bernstein Research analyst Toni Sacconaghi called Apple's self-imposed 10 million iPhone sales target "optimistic," especially if the company insists on maintaining carrier revenue share agreements without a significant price cut or new model introductions.

The analyst noted that iPhone sales averaged 180,000 units a week in the fourth calendar quarter of 2007, which stands as Apple's busiest period of the year. As such, he estimates to company will sell just 7.9 million units during the course of the year, given no change to its strategy.

"While we believe the iPhone has the potential to drive material earnings growth for Apple, recent data points suggest the business is facing two significant challenges: (1) overall demand for the handset appears to be falling short of expectations; and (2) the incidence of 'unlocking' has been much higher than expected," Sacconaghi wrote.

The Bernstein analyst was referring to recent reports that Apple has scaled back first calendar quarter iPhone production, and that unlocked versions of the handset may comprise 25 percent or more of the company's total shipments.

Should Apple hit its 10 million iPhone sales target, the number of unlocked devices would cause the company to forego between $1.1 billion and $1.3 billion in deferred subscriber revenues over two years, he added.

Meanwhile, RIM said Monday that it, unlike Apple, has not witnessed a decrease in subscriber growth since the start of the new year, as it had originally projected. Instead, the Blackberry maker now expects fourth-quarter subscriber additions to be approximately 15 - 20 percent higher than the 1.82 million it forecasted in December.

"BlackBerry smartphones proved to be a big hit throughout the holiday selling season and we’re pleased to see RIMM’s business momentum continuing in the new year," said co-chief executive Jim Balsillie. "The seasonal slowdown in net subscriber account additions that we expected in the new year did not occur and our focused execution with partners has continued to produce strong results within both enterprise and consumer segments."

RIM's ability to maintain its subscriber momentum has been attributed by some to its lower-cost offerings, such as $99 Blackberry Pearl, for which Apple offers no competitive option. Following the introduction of a $499 16GB iPhone earlier this month, BMO Capital Markets analyst Keith Bachman suggested that the Cupertino-based company may be going in the wrong direction when it comes to pricing.

"We believe Apple generates more than $200 in gross profit over the life of the phone, compared with approximately $100 for the actual sale of the phone," he wrote in a research report. "Consequently, we believe Apple would be much better off with lower-priced phones, with less profits at the time of sale, and significantly higher revenues/profits over the approximately two-year life of the phone."

Still, it's believed that Apple will aim to maintain its current course and the higher average selling price of its iPhone handsets later this spring with the introduction of a 3G model that should also help spur new demand. Reports have suggested that a target introduction is again planned for the June timeframe.

[ View this article at AppleInsider.com ]

[backtomac]

Originally Posted by AppleInsider

"We believe Apple generates more than $200 in gross profit over the life of the phone, compared with approximately $100 for the actual sale of the phone," he wrote in a research report. "Consequently, we believe Apple would be much better off with lower-priced phones, with less profits at the time of sale, and significantly higher revenues/profits over the approximately two-year life of the phone."

Well that would be great if people weren't unlocking the damn things at an astonishing rate. Does this guy not know how many are bought and unlocked or has he chosen to ignore this fact?

How would Apple make any money on unlocked phones on carriers that don't share revenue with them if they lowered the price much more?

[the cool gut]

Originally Posted by AppleInsider

RIM's ability to maintain its subscriber momentum has been attributed by some to its lower-cost offerings, such as $99 Blackberry Pearl, for which Apple offers no competitive option.

Well golly, the iPhone has not even been out a year yet - if you think Apple is not going to borrow from its iPod playbook then you're

[nagromme]

" if the company insists on maintaining carrier revenue share agreements without a significant price cut or new model introductions."

So... this analyst thinks there is ANY chance at ALL of there being NO new iPhone models or price changes all year?

"the number of unlocked devices would cause the company to forego between $1.1 billion and $1.3 billion in deferred subscriber revenues"

As the Macalope points out, that's not true: Apple's not "foregoing" that revenue-sharing, because there would BE no (or at least less) revenue-sharing agreements without the exclusivity. It's like saying "AT&T pays Apple to be the exclusive carrier. Apple is stupid not to make ALL the carriers be exclusive (?) so they can get ALL of them to pay Apple the same amount AT&T does." Obviously, they can't all be exclusive, and would not be willing to share as much without exclusivity. Apple's not "foregoing" that revenue-sharing... but they ARE making money on all those unlocked phones. Making--not losing.

[gigi]

Why they care about unlocking device ???? the majority of the unlocking iPhone is for other country were no carrier offer the iphone. So, apple do not loss any money from carrier, the iPhone is not available in those country (Canada, China etc..), they just sell more iPhone.

[CREB]

Quite honestly, I prefer the BlackBerry to the iPhone for business, and so does my son, who works for AT&T, and sells to enterprise. I like buttons versus touch when it comes to business. Apple will eventually get to where it is going with the iPhone, but Apple is not there yet. BlackBerry's have great speakerphones, and other basic features that work well such as GPS.

[Malligator]

I always thought the 10mil iPhone goal was the 18 months from introduction until the end of CY08? Everytime I read an article about a competitor saying Apple isn't going to make their goal they make it sound like the 10mil goal was just for '08? Am I wrong?

[dreyfus2]

Originally Posted by backtomac

Well that would be great if people weren't unlocking the damn things at an astonishing rate. Does this guy not know how many are bought and unlocked or has he chosen to ignore this fact?

How would Apple make any money on unlocked phones on carriers that don't share revenue with them if they lowered the price much more?

This gent is obviously not too bright...

- People do not buy unlocked phones (or buy to unlock) because the phone is too expensive - just the opposite: they often pay a lot more (unlocked 16GB models sell for 900 USD average on eBay Germany and there are hundreds of them being sold daily). They buy unlocked phones because they do not want the exclusive contracts, have no official iPhone in the country or do not want to deal with roaming charges when travelling. Apple should drop the "exlusive carrier" crap, and make the money itself iso dubious people on eBay making 100% ROI for spending 10 minutes unlocking the device and reselling it. Enormous amounts of people would buy the unlocked phone for a fair price - and, just like Touch users, willingly pay for substantial software upgrades (as a compensation for the revenue sharing with carriers).
- Apple has been far too slow in introducing the phone in more countries. Even if the competition is still far behind. The iPhone is no longer a new device - it is over 12 months old technology. The longer they wait, the less people will be willing to sign up for 24 months contracts.
- Apple reduced production in the new year? Big news and big surprise! It is a consumer device - the RIM is not. Private people buy for christmas, businesses buy out of the fresh annual budget. Analysts do not understand complex issues like this.

[sworthy]

Originally Posted by Malligator

I always thought the 10mil iPhone goal was the 18 months from introduction until the end of CY08? Everytime I read an article about a competitor saying Apple isn't going to make their goal they make it sound like the 10mil goal was just for '08? Am I wrong?

This is absolutely correct. People just have poor listening/reading skills.

[mac_daddy]

Originally Posted by the cool gut

Well golly, the iPhone has not even been out a year yet - if you think Apple is not going to borrow from it's iPod playbook then your an idiot.

All I can add to this is if anyone doubts the iPhone success, they need to re-consider who's running this show. The ship may or may not be on course, but I don't think too many people feel uneasy with Steve's hand on the tiller ;-)

[Adjei]

Isn't this the same analyst who said Apple had "lost" over a million iphones..

[petermac]

I still believe Apple will exceed the 10 million they forecast. New markets, new phone and the slightly delayed SDK will all spurn further sales. I do believe some potential buyers are now waiting for the 3G version, I am one of them. But going forward, I also believe it will be increasingly harder for Apple to stamp new carrier deals in other countries, particularly if they ignore the unlocking phenomena. The SDK will deliver more compelling applications and just sweeten the iPhone experience even more. Apple said at the launch they had a 2 year technological advance on their competitors, they better start now to capitalize on that, the competitors are going to to their all to lessen that lead time. It will be Apple's ability to ink new "carrier partnerships" in other countries and model revisions, faster than they have achieved to date, that will determine by how much they surpass that 10 million prediction. Instrumental to these goals ,is how soon a $199 iPhone "mini" comes to market. Of course I could be wrong and I reserve my right to change my mind. Until Apple shows the market they are on top of this and a more transparent roadmap is revealed, AAPL could drift to below $100 in the short term. I am going to buy more AAPL, my first lot only cost me $22. Thats my disclosure

[McHuman]

8m units + 4m units = 12m.

IDIOTS.

[VinitaBoy]

Morons, one and all, if they ever say AGAIN that Apple has to sell 10 million units in 2008 to arrive at Steve's forecast. Spread the word, friends: ALL APPLE HAS TO SELL THIS YEAR IS 6 MILLION UNITS! The TOAL from 2007 and 2008 must reach 10 million, for Christ's sake . . . and it most certainly WILL!

Well said, McHuman.

[minderbinder]

Originally Posted by nagromme

" if the company insists on maintaining carrier revenue share agreements without a significant price cut or new model introductions."

So... this analyst thinks there is ANY chance at ALL of there being NO new iPhone models or price changes all year?

Exactly. It seems bizarre that they seem to assume that apple won't do anything all year to spur sales. Even if they maintain the rate of Q4 2007, that's 9.3 million phones (the 7.9 million mentioned in the article assumes a decrease).

Originally Posted by Malligator

I always thought the 10mil iPhone goal was the 18 months from introduction until the end of CY08? Everytime I read an article about a competitor saying Apple isn't going to make their goal they make it sound like the 10mil goal was just for '08? Am I wrong?

Nope. If you go back and actually listen to the keynotes, Jobs himself says 10 million in 2008, which is one percent of the 1 billion phones anticipated to be sold in 2008. A number of publications (including AI on earlier articles) have screwed this up, but all the direct quotes from apple people say 10 million in 2008.

Originally Posted by sworthy

This is absolutely correct. People just have poor listening/reading skills.

Um...no. That's wrong. You hear it straight from Jobs's mouth, just listen to the iPhone keynotes.

[sapporobaby]

Originally Posted by CREB

Quite honestly, I prefer the BlackBerry to the iPhone for business, and so does my son, who works for AT&T, and sells to enterprise. I like buttons versus touch when it comes to business. Apple will eventually get to where it is going with the iPhone, but Apple is not there yet. BlackBerry's have great speakerphones, and other basic features that work well such as GPS.

Great point, while the iPhone "may" be considered a smart phone, it is far from being a business phone. The iPhone is more iPod than phone when you compare its features with those of Blackberry, or Nokia, or SE. Apple has to decide if it really wants to enter the enterprise market and then make a device tailored for that market. Simply calling and iPhone an enterprise device does not make it one.

[minderbinder]

Originally Posted by VinitaBoy

Morons, one and all, if they ever say AGAIN that Apple has to sell 10 million units in 2008 to arrive at Steve's forecast. Spread the word, friends: ALL APPLE HAS TO SELL THIS YEAR IS 6 MILLION UNITS! The TOAL from 2007 and 2008 must reach 10 million, for Christ's sake . . . and it most certainly WILL!

Nope, that's wrong, and you continue to spread this misinformation.

Jobs's forcast was "10 million IN 2008". Not by the end of 2008. IN.

If you're so sure he said 10 million by the end of 2008, find a direct quote from Jobs. You won't find it.

[JeffDM]

Apple going up doesn't have to mean that RIM has to go down, and RIM doesn't have to go down for Apple to go up, I think it's a ludicrous thing to think otherwise. The typical person interested in an iPhone isn't necessarily and probably isn't like the typical Blackberry user.

[nagromme]

Originally Posted by sworthy

This is absolutely correct. People just have poor listening/reading skills.

Actually if you watch the keynote around 1:15+ it's clearly stated that the goal is 10 mil IN 2008--one full year--not for 2007+2008 both, and not BY the end of 2008 (a year and a half). And Apple has stood by that number and timeframe since then--such as Peter Oppenheimer in the conference call around 6:00+.

[minderbinder]

There it is.

[ncee]

Apple isn't dumb, and I don't think folks are suggesting that. I do think Apple will be coming out with an ALL NEW iPhone, that will be less money, and it may become available from other sources.

Apple isn't about to invest this much money and sit back. they do listen, they just don't act as fast as WE'D like them to.

I believe they are concerned about the stock price and they realize they HAVE to do something, and do it soon.

I think you'll see a bunch of new products, as well as up-dates very soon. Apple may be it's own worst enemy.

They have a handful of products that are the rage, and everyone expects everything they do, to be gold. Hey even Apple can have a "Bad Apple" every once and a while.

I'd be lying if I said, I like the way the stock is going … but.

With the current state of the economy - even Apple has to be concerned. They know that folks will be getting a check real soon, and they know for how much. They will have a ad campaign soon, and they will be offering product / products that are in the range of what folks will be getting for "Extra Money".

Hey the government wants to give away our money, who better then Apple to take away from us.

$600.00 - $100.00 buys a lot of iPods, iPhones, AppleTV and the new item(s) they will be announcing soon.

Skip

[sapporobaby]

Originally Posted by petermac

Apple said at the launch they had a 2 year technological advance on their competitors, they better start now to capitalize on that, the competitors are going to to their all to lessen that lead time.

I agree with much of your other premise but totally disagree with this annotated statement above. which technical advantage are we talking about? Touch screens? Nokia, and SE have been there years before. EDGE? Been there done, that about 3 years ago. 2 Megapixel cameras? The list continues. What Apple did was to innovate and implement on and older technology, i.e the touch screen and they did this quite well. The iPhone is far from ground breaking but the implementation is quite evolutionary as opposed to revolutionary.

[nagromme]

Originally Posted by sapporobaby

I agree with much of your other premise but totally disagree with this annotated statement above. which technical advantage are we talking about? Touch screens? Nokia, and SE have been there years before. EDGE? Been there done, that about 3 years ago. 2 Megapixel cameras? The list continues.

Actually... the technology Apple leads in continues to be software. The operating system. No current mobile OS remotely approaches--either in usability (a revolution, NOT an evolution) or underlying platform (the best modern desktop OS made portable)--what Apple has got with mobile OS X. Which is itself young and only the beginning (with the upcoming SDK being a big next step). The iPhone/Touch platform isn't perfect (someone will claim I'm suggesting that ) but it's far ahead of the competition and about to get even better in a matter of weeks.

Technology does not equal mere hardware bullet points.

Which is why, 2 years after revealing the iPhone, 1.5 after shipping, no competitor is shipping an OS with the power and usability that Leopard on iPhone offered from the start. This year better some attempts may be made (possible Android-derived)... but the iPhone's OS X is a moving target. Maybe a 2-year lead was too SHORT an estimate

[TenoBell]

which technical advantage are we talking about?

Mobile OS X - phone OS that uses desktop APIs.

Mobile Safari - phone browser that fully renders html

Mobile Mail - email that fully enders html

Touch screens? Nokia, and SE have been there years before.

Multi-touch is a specific technology that no one else has.

[mdotdubz]

Originally Posted by McHuman

8m units + 4m units = 12m.

IDIOTS.

Hey watch it! I got banned for that.

Originally Posted by TenoBell

Mobile OS X - phone OS that uses desktop APIs.

Mobile Safari - phone browser that fully renders html

Mobile Mail - email that fully enders html



Multi-touch is a specific technology that no one else has.

YES!!! And I hate whenever some analyst is like "so & so is coming out with a touchscreen"... SO WHAT!!! Touchscreens have been around for years, MT is exclusive to the iPhone. Touch screens were pretty useless and cheap 'til Apple came along, now everyone is all "me too!" with their touchscreen phones that conspiciously have black backgrounds and colorful home screen apps.

[samab]

1) 1% market share --- but the cell phone market keeps growing. The world market for cell phone will grow into 1.25 billion phones in 2008, which means that Apple will need to sell 12.5 million iphones this year to get the 1% market share.

2) What Munster and Sacconaghi said is about the same.

Munster's estimate includes a lot of fine print --- Munster already accounted for a future iphone price drop, a future Asian launch and a future 3G iphone launch into his 10 million iphone estimate.

Sacconaghi is just putting all the fine print into the big font --- Apple is not going to reach its goal of 10 million iphones without a future iphone price drop, a future Asian launch and a future 3G iphone launch.

It's like people arguing whether the iphone is $400 pre-tax or $450 after-tax --- it's the same thing.

[willrob]

The Bernstein analyst has always been very bearish on Apple. FUD is the ussualy type of story he produces. In this piece he is willing to accept Rimm's positive outlook based on little hard data, and crucifies Apple again on no hard data. These are his opinions, and that of his firm which makes money by shorting. Go to their web site and check out their market strategy.

[teckstud]

Originally Posted by backtomac

Well that would be great if people weren't unlocking the damn things at an astonishing rate. Does this guy not know how many are bought and unlocked or has he chosen to ignore this fact?

How would Apple make any money on unlocked phones on carriers that don't share revenue with them if they lowered the price much more?

Doesn't matter- the pricing was formulated before unlocking became an issue and are overpriced regardless. Evre
yone keeps asking why the stock keeps dropping and this pinpoints a main factor- too many overpriced products and dwindling demand for them. Finally we have just received a cheaper shuffle and .99cent movie rentals - so it looks like Apple is trying to offest the lopsided pricing in the product line with these more democratic price offerings.

[samab]

Originally Posted by willrob

The Bernstein analyst has always been very bearish on Apple. FUD is the ussualy type of story he produces. In this piece he is willing to accept Rimm's positive outlook based on little hard data, and crucifies Apple again on no hard data. These are his opinions, and that of his firm which makes money by shorting. Go to their web site and check out their market strategy.

If a company doesn't give you any hard data --- then you should really be careful of accepting their PR statements.

And more importantly --- basically all the Wall Street analysts have said the same thing. Munster just put all the fine print in the back pages while Sacconaghi put the fine print in the front pages.

[minderbinder]

Originally Posted by samab

1) 1% market share --- but the cell phone market keeps growing. The world market for cell phone will grow into 1.25 billion phones in 2008, which means that Apple will need to sell 12.5 million iphones this year to get the 1% market share.

Apple's numbers were based on projections at the time, which was months ago. It's only february, we won't know total worldwide sales for sure until the year is over. While I'd like to see apple make 1% regardless of what the total is, I think people will be satisfied if apple gets their 10 million this year.

[sapporobaby]

Originally Posted by nagromme

Actually... the technology Apple leads in continues to be software. The operating system. No current mobile OS remotely approaches--either in usability (a revolution, NOT an evolution) or underlying platform (the best modern desktop OS made portable)--what Apple has got with mobile OS X. Which is itself young and only the beginning (with the upcoming SDK being a big next step). The iPhone/Touch platform isn't perfect (someone will claim I'm suggesting that ) but it's far ahead of the competition and about to get even better in a matter of weeks.

Technology does not equal mere hardware bullet points.

Which is why, 2 years after revealing the iPhone, 1.5 after shipping, no competitor is shipping an OS with the power and usability that Leopard on iPhone offered from the start. This year better some attempts may be made (possible Android-derived)... but the iPhone's OS X is a moving target. Maybe a 2-year lead was too SHORT an estimate

I agree with you there.

[JeffDM]

Originally Posted by sapporobaby

I agree with much of your other premise but totally disagree with this annotated statement above. which technical advantage are we talking about? Touch screens? Nokia, and SE have been there years before. EDGE? Been there done, that about 3 years ago. 2 Megapixel cameras? The list continues. What Apple did was to innovate and implement on and older technology, i.e the touch screen and they did this quite well. The iPhone is far from ground breaking but the implementation is quite evolutionary as opposed to revolutionary.

They made those compromises to make the unit thin and run longer on batteries. The other devices with better specs were generally twice as thick. Some people don't mind the size, others, don't want a brick in their pocket. The part that's revolutionary was the UI: looks, controls & behavior.

[teckstud]

Originally Posted by the cool gut

Well golly, the iPhone has not even been out a year yet - if you think Apple is not going to borrow from it's iPod playbook then your an idiot.

Doesn't matter - if you're going into the cellphone market you hshould have more than one great product to offer. Apple should have had more than one version of cellphone when they intially entered the market. Cellphones go stale very fast- look what happened with the Razr and Motorola. The razr lost the cool factor and Motorola had nothing to offer in addition to it. LG, Blackberry, SoneEricksonetc all have many good models to choose from. Apple needs to saturate the market with different phones and fast to keep up the competitive pace and pricing of the cellphone market.

[sapporobaby]

Originally Posted by TenoBell

Mobile OS X - phone OS that uses desktop APIs.

Mobile Safari - phone browser that fully renders html

Mobile Mail - email that fully enders html



Multi-touch is a specific technology that no one else has.

Not quite sure about that. Do you mean the patent? If Apple has the patent, then you have a point, but if not, I will only concede that currently Apple has a better implementation of an old technology. Now, if the MT UI was the only thing on the iPhone but it isn't. The rest of the phone, is simply old, old, old technology and here you can't prove me incorrect on this.

[e1618978]

[never mind]

[dreyfus2]

Originally Posted by teckstud

Doesn't matter- the pricing was formulated before unlocking became an issue and are overpriced regardless. Evre
yone keeps asking why the stock keeps dropping and this pinpoints a main factor- too many overpriced products and dwindling demand for them. Finally we have just received a cheaper shuffle and .99cent movie rentals - so it looks like Apple is trying to offest the lopsided pricing in the product line with these more democratic price offerings.

Dwindling demand? Have you seen the last quarterly report? Macs sell better than ever before and the iPod Touch (the most expensive product) did save the iPod bottom line - the loss was in the cheap models.

Of course they offer cheap movie rentals - they have lowered the price for the Apple TV and want to make money by renting movies. Makes perfect sense. Compared to the loss others make with each xBox or PS3 sold, Apple is doing extremely well. The stock development reflects a weak economy and a lot of fairly odd reporting. A company that can sell people 400 USD phones and iPods and 3k laptops despite a weak economy while earning the highest consumer ratings in every discipline is not having problems.

[samab]

Originally Posted by minderbinder

Apple's numbers were based on projections at the time, which was months ago. It's only february, we won't know total worldwide sales for sure until the year is over. While I'd like to see apple make 1% regardless of what the total is, I think people will be satisfied if apple gets their 10 million this year.

The problem with you argument is that the world market for cell phones is already 1.1 billion LAST YEAR.

http://uk.reuters.com/article/intern...79783620080214

[teckstud]

Originally Posted by sapporobaby

I agree with you there.

The general public probably does not think they are paying $400-$500 for a cellphone's OS. They think only of the physical make of the phone. And if that OS is not compatible with corporate OS requirements it doesn't matter how fantastic the OS is, if your place of business does not subsidize it.

[teckstud]

Originally Posted by dreyfus2

Dwindling demand? Have you seen the last quarterly report? Macs sell better than ever before and the iPod Touch (the most expensive product) did save the iPod bottom line - the loss was in the cheap models.

Of course they offer cheap movie rentals - they have lowered the price for the Apple TV and want to make money by renting movies. Makes perfect sense. Compared to the loss others make with each xBox or PS3 sold, Apple is doing extremely well. The stock development reflects a weak economy and a lot of fairly odd reporting. A company that can sell people 400 USD phones and iPods and 3k laptops despite a weak economy while earning the highest consumer ratings in every discipline is not having problems.

Dwindling demand of the iPhone was my point- not Macs. The lead article of the thread even states that it cost too much.

[SpamSandwich]

Originally Posted by minderbinder

Nope, that's wrong, and you continue to spread this misinformation.

Jobs's forcast was "10 million IN 2008". Not by the end of 2008. IN.

If you're so sure he said 10 million by the end of 2008, find a direct quote from Jobs. You won't find it.

"In" is the same as "by the end of". They both occur within the 2008 timeframe.