BofA sees 3G iPhone build in May, predictions "too conservative"

[AppleInsider]

Further fueling talk of a 3G-capable iPhone this spring, a research note from Bank of America claims knowledge of next-generation Apple handset production beginning in May, and warns that past sales predictions have been timid.

In his message to investors, financial analyst Scott Craig points to channel investigations which show an iPhone capable of faster, third-generation cellular Internet access produced in small numbers in May, with a larger number surfacing in June as Apple prepares a formal rollout for the new device.

"This likely implies a launch announcement in [the second calendar quarter]," Craig says.

Apple is also likely to significantly increase its iPhone production compared to its most recent full quarter. While iPhone production during the holidays totaled 2.3 million, the Bank of America researcher estimates about three million 2G and 3G iPhones made during the spring quarter and a much larger eight or more million during the summer. Each additional million units sold could add about $400 million to Apple's bottom line, Craig notes.

Simultaneous reports on Friday supported the analyst's statements., with the Taiwanese Commercial Times paper alleging that bidding is underway for 3G iPhone manufacturing while Dow Jones ventured so far as to claim that Hon Hai had already won a contract for production of an advanced model.

The investigations of the supply chain have been enough to warrant a significant rethink of longer-term predictions for 2008. As Apple may now produce the same eight million iPhones in one quarter that analysts have been predicting for the entire year, previous estimates are now "starting to look too conservative," according to Craig.

The expert maintained existing forecasts for the rest of Apple's lineup. iPod shipments are estimated to drop by several percentage points year over year for the first quarter, dipping below 10 million units, while a combination of the MacBook Air and refreshes to existing portables is tagged as a likely upside for computer sales.

[Eduardo]

Wow, so many rumours on the new iPhone--seems like I'll be able to use my stimulus payment just in time for my future iPhone.

[Bageljoey]

Originally Posted by Eduardo

Wow, so many rumours on the new iPhone--seems like I'll be able to use my stimulus payment just in time for my future iPhone.

Yeah, they could peg the price of the 3G phone at $600 even to match the giveaway. The first gen phone could be reduced to $300 and marketed to minors (to match their giveaway number). I can see the advertising angle now...

They better hurry up and get it out, though. I don't know how long people will have that $$. Easy come, easy go!

[8CoreWhore]

I've been waiting a year for this!

[satchmo]

Originally Posted by Bageljoey

Yeah, they could peg the price of the 3G phone at $600 even to match the giveaway. The first gen phone could be reduced to $300 and marketed to minors (to match their giveaway number).

Still too high. Keep it at $499 and lower the current one to $249.

[Bageljoey]

Originally Posted by satchmo

Still too high. Keep it at $499 and lower the current one to $249.

Well, $600 (ok, $599 if you must) for the first month. Then they can drop if $200. Think of all the free publicity!

[aplnub]

I can't imagine 3G being such a leap in speed people hold out for it. Especially when you consider people in the States have limited 3G coverage through AT&T.

While I was in Paris, my iPhone was dog slow. In the US, it is much faster. I think that my iPhone browsing the web is not really that much different than my blackberry pearl. I get a better experience on the iPhone too. Maybe it is my location but I couldn't wait for a 3G when I can have it now and be happy.

[hypermark]

Originally Posted by AppleInsider

As Apple may now produce the same eight million iPhones in one quarter that analysts have been predicting for the entire year, previous estimates are now "starting to look too conservative," according to Craig.

So if the estimates for ONE QUARTER equal what analysts projected for an ENTIRE YEAR, previous estimates are starting to look too conservative? DUH, ya think?

Seriously, in fairness to the analysts, predicting big numbers in absence of historical data is fuzzy guesswork at best.

Mark
--
Read 'iPhone: Mobile Reasons for Optimism'
http://thenetworkgarden.com/weblog/2...e-reasons.html

[Rot'nApple]

Originally Posted by aplnub

I can't imagine 3G being such a leap in speed people hold out for it. Especially when you consider people in the States have limited 3G coverage through AT&T.

While I was in Paris, my iPhone was dog slow. In the US, it is much faster. I think that my iPhone browsing the web is not really that much different than my blackberry pearl. I get a better experience on the iPhone too. Maybe it is my location but I couldn't wait for a 3G when I can have it now and be happy.

"While I was in Paris, my iPhone was dog slow" - it a Parisian thing!

"I couldn't wait for a 3G when I can have it now and be happy", while envious of you and your satisfaction with your iPhone purchase, I compose a great deal of stoic patience awaiting the revised iPhone that hopefully will have the hardware that people who are smarter than me say the original iPhone lacks to make it a truly complete phone filled with the 'latest and greatest' from a technical standpoint.

While AT&T may not have universal 3G service, they do have a list showing 3G coverage, where you click on your city and it shows a PDF map of the area of your city in Blue that is 3G capable and Orange where EDGE takes over. That is, if I am understanding it correctly. If I am, my local area has nice 3G coverage and if a side by side comparison regarding speed of the web, where 3G is as fast as people familiar with it say it is, then Dial-up is to EDGE what 3G is to DSL/Cable?

Of course, when I got cable internet and ditched the dial up I was amazed at the speed, now that I became familiar with cable speeds, it now seems slow at times. What does the future hold for both Internet speeds for the home computer and the iPhones et. al.

[TBaggins]

Originally Posted by aplnub

While I was in Paris, my iPhone was dog slow. In the US, it is much faster.

Well, as the current iPhone is 2.5G, you were either on EDGE or GPRS while in Paris, not HSDPA(3G).

If your iPhone was really, really slow there, chances are you were on GPRS (~ 40 kbps), which is somewhat common in Europe. And all the more reason to go 3G.


.

[SpamSandwich]

The only two factors that will continue to hamper wide and deep adoption of the iPhone are:
a) the price
b) at&t

[Buck]

I think one of the reasons of slow 3G adoption is the fact that the operators don't have any bandwidth to spare and even their current slow-speed offerings are overloaded with traffic. That way simply making the channel faster won't help.

[anantksundaram]

Originally Posted by AppleInsider

Each additional million units sold could add about $400 million to Apple's bottom line, Craig notes.
.

He surely means "top line", not bottom line?

[winterspan]

Originally Posted by Buck

I think one of the reasons of slow 3G adoption is the fact that the operators don't have any bandwidth to spare and even their current slow-speed offerings are overloaded with traffic. That way simply making the channel faster won't help.

I'm not directly addressing this just to you, but everyone else as well. I think it's really important to distinguish a few different things that I see lumped together so often.

1) USA rollout of 3G cellular service differs TREMENDOUSLY between carriers. It's not so simple to just say "USA cell service suckz".
AT&T, the leading GSM carrier still has nowhere near the 3G/UMTS coverage that Verizon has with it's 3G/EVDO service, which obviously blows since the iPhone is tied to AT&T.

2) Related to #1, the actual rollout of 3G service and sales of 3G-capable phones are both much better/higher than actual USAGE of 3G data services on phones.
3G broadband laptop cards are somewhat popular, however.

Now don't get the wrong idea, I am definitely not defending the wireless telecom companies in the USA (ESPECIALLY NOT THE WIRED CABLE/DSL PROVIDERS), but I just want to provide a more accurate picture of the actual state of 3G in the USA.

[otayranchdweeb]

I cannot believe an investment analyst would think that 3G would be such a huge deal that millions more phones would be sold on that feature alone. EDGE isn't THAT slow (try using 1xRTT on an old Sprint phone -- THAT is slow!) 3G isn't exactly fiber optic speed. It's not even WiFi speed. Not even CABLE MODEM speed! Sheesh. This smells way more of stock hype than anything.

So, pfft. Screw it. I'm waiting for 4G. Yeah, that's my excuse.

(Kidding. I already bought one on July 3.)

Oh, and to those of you that are waiting for your "economic stimulus" rebate checks to pay for your new iPhones -- I paid over $30K in taxes for 2007 and made too much money to qualify for a rebate myself. So, you're welcome.

[anantksundaram]

Originally Posted by otayranchdweeb

I cannot believe an investment analyst would think that 3G would be such a huge deal that millions more phones would be sold on that feature alone. EDGE isn't THAT slow ..... This smells way more of stock hype than anything.

I couldn't agree more. I think EDGE has been unfairly dumped on. I have tried it in a few cities in Europe as well, and it works fine for the typical sites to which I navigate (e.g., nytimes, wsj, google news, redsox, celtics, engadget, etc; AI though is interminably slow). Heck, with 5 bars, even Youtube is actually pretty decent!

Is 3G faster? Yes, but only slightly more so. But because everyone -- esp. outside the US -- has bought into the hype and because that's how many non-US phones are being sold these days, it's here to stay, unfortunately.

[markb]

I cannot believe an investment analyst would think that 3G would be such a huge deal that millions more phones would be sold on that feature alone

I agree that no one who can currently get an iPhone now should wait for the 3G feature alone but...

I think the unwritten assumption is that along selling more because its now 3G the phone will be deploy(able)ed to MAJOR new markets. I think it will be severely disappointed if 3G iPhone isnt launched in Japan simultaneously with the current markets. This additional market alone would be enough to boost sales by quite a bit, justifying some of the talk of additional millions of iPhones.

I do think the 3G feature will double sales in Europe from their fairly anemic current levels.

[quinney]

Originally Posted by anantksundaram

He surely means "top line", not bottom line?

Maybe he is factoring in the estimated recurring revenue also.

[anantksundaram]

Originally Posted by quinney

Maybe he is factoring in the estimated recurring revenue also.

Quite unlikely. A generous estimate on the sale-related net profit margin on each iPhone sold is 25% - 30%. Say 30%. That would imply that each million phones sold contribute to $120 million in profits. It is not possible that estimated recurring revenue is contributing to an additional profit $280 million.

Indeed, I have seen guesstimates (can't find the cites now) that Apple makes $3/month on its ATT contracts (perhaps a little higher in Europe). Assuming all of that is net profit -- again unlikely -- that is just $36 million per year (with an additional $36 million kicking in to the following year's net income).

This analyst mis-spoke, that's all.

[wizard69]

Originally Posted by aplnub

I can't imagine 3G being such a leap in speed people hold out for it. Especially when you consider people in the States have limited 3G coverage through AT&T.

Well it is an improvement but People don't seem to understand the technology. The often given numbers are the optimal transfers that can happen.

On the other hand many of us are waiting not so much for 3G as some of the other hoped for technologies coming in the next phone. In any event my current cell is on its las leg I may be force to update no matter what Apple does. The other thing is that once an improved iPhone comes out some of us are also hoping for lower rates on the currnet phone.

Lets face it AT&T contract is a bit stiff, more so than many of us feel comfortable with. I'd be very pleased if AT&T cut the contract rate for the current iPhone in half. It would move a lot of hardware and allow Apple a little breathing room for the expanded capability model.

While I was in Paris, my iPhone was dog slow. In the US, it is much faster. I think that my iPhone browsing the web is not really that much different than my blackberry pearl. I get a better experience on the iPhone too. Maybe it is my location but I couldn't wait for a 3G when I can have it now and be happy.

There are many factors that come into play with respect to transfer rates. Just because people in Europe like to tout their 3G networks doesn't also imply that the infrastructure is in place to support all that 3G hardware. Europe in many ways is still a technology backwater.

In any event yes waiting for just 3G is stupid.

Dave

[Bageljoey]

Originally Posted by otayranchdweeb

I cannot believe an investment analyst would think that 3G would be such a huge deal that millions more phones would be sold on that feature alone. EDGE isn't THAT slow...

Just because it might be mostly hype doesn't mean that it won't affect people. If people hear that "something better is coming!" enough they might be waiting. If you were on the fence about buying one, wouldn't you consider waiting?

Also, there have been plenty of rumors about other things that might be arriving with the update. Better camera? OLED screen? Real GPS? More storage? Voice recognition? Therefore, waiting for 3G also means waiting to see what else is coming.

I like to think that I'm not a lemming or a tool of the analysts, but if I buy, it will be after 3G arrives.

[Bageljoey]

Originally Posted by anantksundaram

This analyst mis-spoke, that's all.

Or was miss-quoted...

[anantksundaram]

Originally Posted by Bageljoey

Or was miss-quoted...

And all this time, I thought Kasper was a guy......

[Bageljoey]

Originally Posted by anantksundaram

And all this time, I thought Kasper was a guy......

I tried it with one "s" and got the dreaded red line.
It didn't look right with "ss" but at least I didn't have that line rebuking me.

(Sorry K)

[TBaggins]

Originally Posted by anantksundaram

Is 3G faster? Yes, but only slightly more so.

Gosh, no.

Even ATT, who still has a fairly modest (though improving) 3G network by world standards, claims 600 to 1.4 Mbps real-world for their 3G network, versus 75 to 135 kbps for their own EDGE network. This is from their own website. If you're in a very good area, you might get up to 180-200 kbps from ATT's EDGE, still nowhere near their 3G speeds.

People who think 3G is only "slightly" faster than EDGE are probably looking at comparos of certain non-Apple 3G smartphones using slow minibrowsers and slow cpus. Versus some of those, yes, the EDGE iPhone, running the much better Safari mobile browser, and having a faster cpu, can almost keep up. But... what happens when the iPhone has Safari and a fast cpu AND 3G?

A 3G iPhone should positively FLY on the 'net, compared to both the EDGE iPhone and many competing 3G smartphones. That's why ppl are so excited.


.

[macsmudger]

Have I missed something ?

Could it be that the national agreements to tie the current iPhone to a specific carrier, do not apply to a new model ? Have we seen the legal agreements ? Given AT&T supposedly made a big investment in rolling out better EDGE service (sic!) for the iPhone, the existing deal may be specific to a GSM-only device. Apple may have a loophole for a 3G iPhone, and I would be very surprised if both Apple and AT&T did not have some kind of exit clause if the original iPhone deal suited neither party had it been a flop.

Call me suspicious, but with O2 Ireland now providing the iPhone without the much hyped Visual Voicemail, and the >20% unlocked iPhones out there, Apple must be thinking something different (pun intended) this time around with a 3G model. With the SDK now released and faster data links, could a 3rd party could offer features like visual voicemail or even better unified communications offerings.

Just a thought.

Smudgeer

[George8600]

I don't understand as to why Apple would keep both the 2g iPhone and the 3g when it comes out instead of replacing them, 3g is much better quality. 3G technologies enable network operators to offer users a wider range of more advanced services while achieving greater network capacity through improved spectral efficiency. Services include wide-area wireless voice telephony and broadband wireless data, all in a mobile environment. Typically, they provide service at 5-10 Mb per second. It would also open up features on the iPhone such as video chatting, and what not--possibly more networkign features. The 2g is up to get replaced with a 3g, prices should stay the same, even though I have a feeling for a newer model coming in at a $100 more being a 32Gb iPhone rather than an 16GB one, and having both, like the iPod touch.

[samab]

Originally Posted by macsmudger

Have I missed something ?

Could it be that the national agreements to tie the current iPhone to a specific carrier, do not apply to a new model ? Have we seen the legal agreements ? Given AT&T supposedly made a big investment in rolling out better EDGE service (sic!) for the iPhone, the existing deal may be specific to a GSM-only device. Apple may have a loophole for a 3G iPhone, and I would be very surprised if both Apple and AT&T did not have some kind of exit clause if the original iPhone deal suited neither party had it been a flop.

Call me suspicious, but with O2 Ireland now providing the iPhone without the much hyped Visual Voicemail, and the >20% unlocked iPhones out there, Apple must be thinking something different (pun intended) this time around with a 3G model. With the SDK now released and faster data links, could a 3rd party could offer features like visual voicemail or even better unified communications offerings.

Just a thought.

Smudgeer

Well, it wouldn't make any sense to lock yourself to a multi-year exclusive agreement to a specific phone model when mobile phones goes out of style in 1 year. Also --- it was the European carriers that specifically enlarged their EDGE networks for the European iphone, not AT&T. European carriers HAD to deploy 3G networks by a certain date by their 3G licenses --- therefore they didn't deploy EDGE in the first place. AT&T never had such restrictions so they upgraded from GPRS to EDGE and then from EDGE to 3G.

It wouldn't make sense if Apple makes a pink version of iphone --- calls it a different model and be able to sell it to a second carrier that is not AT&T.

Considering that the SDK doesn't allow you to do anything on core systems (i.e. no running in the background) --- how could 3rd party even offer something like visual voicemail or unified communications offerings.

[Hutcho]

Originally Posted by otayranchdweeb

I cannot believe an investment analyst would think that 3G would be such a huge deal that millions more phones would be sold on that feature alone. EDGE isn't THAT slow (try using 1xRTT on an old Sprint phone -- THAT is slow!) 3G isn't exactly fiber optic speed. It's not even WiFi speed. Not even CABLE MODEM speed! Sheesh. This smells way more of stock hype than anything.

I don't know what kind of cable modem you're using, but here in Munich Germany, I get 7.2mbit/s with a 3G card in my laptop.

I'm sorry, 3G is miles and miles ahead of EDGE in regards to its capability. Whether they have a crappy implementation in America is beside the point.

I can tell you, people in Europe have been waiting for this. Buying a phone in Europe with no 3G is like buying a phone with a black and white screen. If you know what you're talking about at all, you just don't do it.

Maybe you need to look further than your own back yard before you start telling everyone that it's not a big deal.

[mrochester]

Is 3G faster? Yes, but only slightly more so. But because everyone -- esp. outside the US -- has bought into the hype and because that's how many non-US phones are being sold these days, it's here to stay, unfortunately.

I'd like to make it clear that when we're talking about a 3G iPhone, what we really mean is an HSDPA enabled iPhone. So yes, 3G is FAR faster than EDGE. We're talking about speeds of 1.8mbps, 3.6mpbs and 7.2mbps etc etc. This is *exactly* what the iPhone needs for a device that is touted as an internet gateway.

[d.mantic]

I think 3G will be faster, but I agree with many here that it's not necessarily such a blow out as some of the theoretical bandwidth numbers imply. Basically, 3G does have much faster bandwidth numbers, but you also have to take into account latency, error rates, and CPU load. Edge may well have an advantage in all of these categories, and that helps to narrow the big bandwidth lead that 3G has. See here.

[mrochester]

Look at it this way. Edge might consume less power, but you are also actively using the device for longer while you wait for the data to trickle through. With 3G and HSDPA you're done and dusted much quicker and have to device asleep and back in your pocket much sooner, and the whole experience has been more pleasing because it's quick and efficient.

[chadisawesome]

boygeniusreport did a test with edge, vs 3g, vs wifi.

basically the phones all outputted about the same. it's not the speed that bottlenecks the data, it's the phones processor speed. the only real time you will notice is when tethering your phone to your computer, which we know is a no-no with the iphone data plan.

[valanchan]

Originally Posted by otayranchdweeb

I cannot believe an investment analyst would think that 3G would be such a huge deal that millions more phones would be sold on that feature alone.

3G alone will allow Apple to be considered a serious phone maker in Japan, China and India. There are probably close to 1 million iPhones there now but when the markets are open, and with a 3G phone, I think Apple could sell as many iPhones in one quarter as it did for the whole of 2007.

[aplnub]

Originally Posted by valanchan

3G alone will allow Apple to be considered a serious phone maker in Japan, China and India. There are probably close to 1 million iPhones there now but when the markets are open, and with a 3G phone, I think Apple could sell as many iPhones in one quarter as it did for the whole of 2007.

I think 3G is just a nice buzz word and warm feeling people experience. On a phone, 3G is just not faster than what we have now on the iPhone to warrant flood gates opening.

Now, saying that Apple was going to let Verizon in on the fun, now that would unleash chaos. I would beat Apple couldn't keep up with demand for 6 months.

[TenoBell]

The only two factors that will continue to hamper wide and deep adoption of the iPhone are:
a) the price
b) at&t

10 million phones shows that Apple does not intend of have wide and deep adoption.

AT&T, the leading GSM carrier still has nowhere near the 3G/UMTS coverage that Verizon has with it's 3G/EVDO service, which obviously blows since the iPhone is tied to AT&T.

The other part of know is that the iPhone on EDGE gets twice the use of both Verizon and Sprint EVDO combined.

I can tell you, people in Europe have been waiting for this. Buying a phone in Europe with no 3G is like buying a phone with a black and white screen. If you know what you're talking about at all, you just don't do it.

This is not reflected in mobile data marketshare and real world usage.

Mobile Safari holds number two behind Nokia in mobile browser marketshare. Even though Nokia sells about 6 times as many phones as the iPhone has sold.

O2 UK reports the iPhone is generating "unheard of mobile data use". Data traffic so high that it strains O2's network.

Now, saying that Apple was going to let Verizon in on the fun, now that would unleash chaos. I would beat Apple couldn't keep up with demand for 6 months.

I agree for the people who like Verizon it would be better. But AT&T is actually growing faster.

A 3G iPhone should positively FLY on the 'net, compared to both the EDGE iPhone and many competing 3G smartphones. That's why ppl are so excited.

I agree this will be the case with the next iPhone. But would not have necessarily provided a better experience last year.

[markoh]

Originally Posted by TenoBell

Mobile Safari holds number two behind Nokia in mobile browser marketshare. Even though Nokia sells about 6 times as many phones as the iPhone has sold.

I guess you're talking about specific Nokia phones. Overall Nokia phones outsell iPhone 1 to 100.

[NOFEER]

3G+SDK+EXCHANGE =12million at least, it will be critical mass

[Bageljoey]

Originally Posted by markoh

I guess you're talking about specific Nokia phones. Overall Nokia phones outsell iPhone 1 to 100.

The discussion was about mobile browser usage, not phone ownership. Most of those Nokia phones have nothing to do with browser usage--and the ones that do have browsers are often clunky and underutilized. People may use the browser on some Nokia models but it is often a difficult and annoying experience. On the other hand, the iPhone, by most accounts, stimulates and invites internet usage.

[markoh]

Originally Posted by Bageljoey

The discussion was about mobile browser usage, not phone ownership. Most of those Nokia phones have nothing to do with browser usage--and the ones that do have browsers are often clunky and underutilized. People may use the browser on some Nokia models but it is often a difficult and annoying experience. On the other hand, the iPhone, by most accounts, stimulates and invites internet usage.

I own both the iPhone and N95, both of which are in the same price range. I'd give away my iPhone any day over the N95. There really isn't anything in the iPhone that my Nokia can't do,
but tons of things in the N95 that the iPhone doesn't have. For starters, slow 2.5G connection doesn't really "stimulate and invite internet usage".