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Mid-market consumers, women will "trade up" to luxury of iPhone - report

post #1 of 29
Thread Starter 
Apple Inc. and its iPhone are set to ride a growing wave of middle-market Americans who are defining a new market segment through their willingness to pay a premium for "new luxury" goods, says a new report from Credit Suisse.

According to the 21-page briefing, a "new luxury" product is one that demonstrates technical superiority, improved functionality, and compels an emotional attachment by its owner. It possess higher levels of quality, taste, and aspiration than other goods in its category, but is not so expensive as to be out of reach.

"We believe the iPhone addresses all three of these characteristics as it enters the market harnessing the worlds best operating system (Mac OS) which will drive a step function increase in both functionality and simplicity relative to other products in the market," analyst Robert Semple wrote in the report. "And while these features can stand on their own, we believe there will be a certain 'cachet' associated with owning the iPhone, much like the Motorola RAZR phone when it was launched in 2005."

Semple said middle market consumers most likely to adopt the iPhone include empty nesters, single twenty-something professionals, and dual income couples with reduced financial commitments and more disposable income. Divorced women also rank high on the list, according to the analyst, given the increase of women generating income combined with higher divorce rates.

"In fact, we believe the greatest surprise around iPhone is that women may surpass gadget geeks as the largest customer segment to adopt the iPhone," he wrote.

In defending his thesis, Semple cited a "precedent" or trend in the market where consumers continue to show a willingness to "trade up" to premium products, such as the Apple iPod, Under Armour, Coach handbags and Tiffany jewelry. "At Coach, the mix of $400+ handbags has increased 100 basis points as a percentage of total sales," he explained. "And at jeweler Tiffany, 'statement' jewelry has seen average selling prices increase from $81,000 to $91,000 over the past year while less-than $500 silver products have decreased as a percent of total."

Fueling the trend, according to the analyst, is the rise in discretionary wealth, the introduction of an influential female consumer, changing family structures, and evolving consumer behavior, along with encouragement from media influences to acknowledge and respond to personal needs.

"Why will consumers Trade Up to the iPhone?," asked Semple. "The real value and differentiation in the iPhone lies not its sleek design (this is certainly helpful though), but rather, the innovative qualities and resulting capabilities delivered by the Mac OS X, which remains the best operating system in the PC world today in our opinion, and an OS that easily exceeds the capabilities of the scaled down OSs that dominate the mobile phone market today."

While the Apple device was conceived to act as a phone, web browser and iPod, its potential to excel in other areas of digital media may also exist. The Credit Suisse analyst said it's products of the iPhone's nature that typically develop popular utilities unforeseen by the product designers. "With the host of capabilities that the iPhone enables, users will inevitably find their own uses for the product," he wrote. "For example, with a 2 mega-pixel camera and an OS designed to handle photo management (iPhoto), we believe the Apple will be able to deliver in one product what camera phones have been trying to accomplish for several years, immediate and quality photo sharing."

Semple also predicts that iPhone will become a go-to weather tracker along with a pseudo GPS device -- two utilities which he claims consumers have needed since the inception of the mobile phone. At the same time, however, he acknowledged that concerns around the device are many and the stakes high. While Apple has a great track record with its products, it has from time to time, had issues with new releases, primarily due its decision to surprise the market and avoid real beta testing. In the case of iPhone, the analyst believes this particular concern is exacerbated by the fact that Apple is entering an entirely new product category, one which is very complicated.

"From our perspective, this is where Apple can do the most harm to the iPhone brand if it is early to market with a product that is not ready for prime time," he wrote. "Battery life and screen quality are other concerns that warrant discussion."

With the global handset market expected to grow 14.7 percent to 1.1 billion units in 2007 followed by growth of 9.7 percent to 1.2 billion units in 2008, Semple estimates that Apple will capture "a very small segment" with sales of 5 million units in 2007 (share of 0.4 percent) and 15 million in 2008 (share of 1.2 percent).

"Our expectations are being viewed as overly optimistic, especially in light of the fact that only 3 percent of handsets sold in US retail locations actually sell for over $300," the analyst continued. "The majority of which are categorized as smart phones. If we are correct, Apple would take over 100 percent share of the smart phone market, but importantly, we do not believe the iPhone is aimed at smart phones, rather, it is designed to expand the high end of the traditional mobile phone market."

While iPhone's features certainly qualify it as a smart phone, the device will resonate most predominantly with mainstream users owing to its innovative design, superior functionality and 'hype' associated with new product releases from Apple, he added.

In light of his analysis, Semple is convinced the iPhone will generate a gross margin of 40-46 percent before payments from Cingular (which could potentially amount to $100-150 per unit), making the device significantly more profitable than he originally anticipated.

As a result, the analyst raised his fiscal year 2007 and 2008 earnings-per-share estimates on Apple from $3.56 and $4.30 to $3.59 and $4.43, respectively. He also increased his price target on shares of the Cupertino-based company by $20 to $140.

Shares of Apple reacted favorably to the report and were trading at an all-time high on the Nasdaq stock market, up $1.17 (or nearly 1 percent) to $122.50.
post #2 of 29
Where is the data for the myriad hipster SF geeks who listen to Wilco and The Shins and who shop at Urban Outfitters and drive mid-80's Volvo's who are gonna buy these things in numbers way greater than suburban soccer moms ever will?
post #3 of 29
Really? Only one?
post #4 of 29
This report doesn't say who this woman is that will buy an iPhone.
post #5 of 29
Do we know where she lives? Where she works? Who she's seeing?

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

Reply
post #6 of 29
Quote:
Originally Posted by JeffDM View Post

This report doesn't say who this woman is that will buy an iPhone.

I'm not sure who she is either, but I admire her style. Must be one special lady.
post #7 of 29
Quote:
Originally Posted by JeffDM View Post

This report doesn't say who this woman is that will buy an iPhone.

Here she is!
Things Ain't What They Seem!
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Things Ain't What They Seem!
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post #8 of 29
Well that's hardly SFW. She does seem to be a special lady, though!
post #9 of 29
I like how Credit Suisse officially clears up all the confusion as to what is the best operating system. I can now point the [Windows] unbelievers (aka stubborn CFOs) to this and say - SEE?? CREDIT SUISSE RECOMMENDS! Instant switching guaranteed.
post #10 of 29
Quote:
Originally Posted by AppleInsider View Post

"Why will consumers Trade Up to the iPhone?," asked Semple. "The real value and differentiation in the iPhone lies not its sleek design (this is certainly helpful though), but rather, the innovative qualities and resulting capabilities delivered by the Mac OS X, which remains the best operating system in the PC world today in our opinion, and an OS that easily exceeds the capabilities of the scaled down OSs that dominate the mobile phone market today."


I don't agree with Robert Semple's cost and earning assessments at the end of the article, but it is obvoius he 'gets' Apple.
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #11 of 29
Quote:
Originally Posted by solipsism View Post

I don't agree with Robert Semple's cost and earning assessments at the end of the article, but it is obvoius he 'gets' Apple.

Are you going to masturbate now?
post #12 of 29
I think her volume needs adjusting!
post #13 of 29
Quote:
Originally Posted by wilco View Post

Are you going to masturbate now?

I would but your mother already wore me out. \
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #14 of 29
"we believe the greatest surprise around iPhone is that women may surpass gadget geeks as the largest customer"

Are you kidding me, I think woman must make up the largest segment of all cellphones. Just take a look on the streets, those things never get turned off.
post #15 of 29
Quote:
Originally Posted by AppleInsider View Post

"We believe the iPhone addresses all three of these characteristics as it enters the market harnessing the worlds best operating system (Mac OS) which will drive a step function increase in both functionality and simplicity relative to other products in the market," analyst Robert Semple wrote in the report. "And while these features can stand on their own, we believe there will be a certain 'cachet' associated with owning the iPhone, much like the Motorola RAZR phone when it was launched in 2005."

Just one quick example: I can easily imagine the potential for an iPhone app that would allow it to be used as a Bluetooth MultiTouch control pad for your Mac. OS X on the phone to OS X on the computer. The main question is whether the SDKs Apple releases would allow that kind of functionality to be exploited.
post #16 of 29
I'm cooking you a super-sized crow pie...I'm sure you're going to love eating it, Monkey Boy!!!



/
post #17 of 29
Snore, zzz, huh, what was that?

Oh just another iphone thread stating the obvious that women will trade in their phones for the latest trend. Not mentioning they will probably trade their iphones some time afterwards for the next trend that comes along while Apple stick with the same design for a few years.

zzzz. *waits for some real news, like some freakin' WWDC rumors - it's only 5 days away and you people have NOTHING!*
post #18 of 29
Quote:
Originally Posted by Marvin View Post

zzzz. *waits for some real news, like some freakin' WWDC rumors - it's only 5 days away and you people have NOTHING!*

• New iMac designs
• 10—11" MacBook Pro

Happy?
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #19 of 29
This thread is sad.



post #20 of 29
Quote:
Originally Posted by MacsRGood4U View Post

Here she is!

God bless America.

.
Cut-copy-paste, MMS, landscape keyboard, video-recording, voice-calling, and more... FINALLY
To the 'We Didn't Need It' Crowd/Apple Apologista Squad : Wrong again, lol
Thanks for listening to your...
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Cut-copy-paste, MMS, landscape keyboard, video-recording, voice-calling, and more... FINALLY
To the 'We Didn't Need It' Crowd/Apple Apologista Squad : Wrong again, lol
Thanks for listening to your...
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post #21 of 29
Quote:
Originally Posted by MacsRGood4U View Post

Here she is!

Hey, did anyone notice her iPod isn't on, yet plugged into her ears? What's she listening too?

And, take the same picture, but replace the iPod with an iPhone, and most of the geeks here would be zooming in and checking out the picture, and later say "There's a woman in the picture?"
post #22 of 29
Quote:
Originally Posted by kerryb View Post

"we believe the greatest surprise around iPhone is that women may surpass gadget geeks as the largest customer"

Are you kidding me, I think woman must make up the largest segment of all cellphones. Just take a look on the streets, those things never get turned off.

Women may use the cell phone alot, but I don't see many women with blackberrys, treos, or other smartphones. It may be trendy, but if all you're going to do is call, its really a waste of money.
post #23 of 29
Quote:
Originally Posted by solipsism View Post

New iMac designs
1011" MacBook Pro

Happy?

Show me pictures.

Is it just me or is that girl not all that attractive? Sure she's quite attractive but she's been out in the sun too long.
post #24 of 29
Can we please stay on topic.
post #25 of 29
Quote:
Originally Posted by bavlondon2 View Post

Can we please stay on topic.

Doesn't the term mid-market consumer mean they're in the middle of the market? Doesn't that, by definition, preclude them from buying a top-market device? Because, technically, they won't be mid-market anymore.

OK, kind of on-topic. Did you see the poll on this article's main page? I think, to be fair, there should be an option to say "not planning on buying one". (Or maybe three options, "Not planning to buy one at apple store" and "not planning on buying one at AT&T store" and "not planning on buying one on-line").

Oh, and I realized yesterday that you apparently can forget about using AT&T's pay-as-you-go plan, since the ads say you need a two year contract. Probably already mentioned, but I just thought I'd try to stay on-topic.

BTW, did you get a look at that woman. I wouldn't mind 'staying on-topic' with her, if you know what I mean......
post #26 of 29
Quote:
Originally Posted by Louzer View Post

Women may use the cell phone alot, but I don't see many women with blackberrys, treos, or other smartphones. It may be trendy, but if all you're going to do is call, its really a waste of money.

Have you ever noticed that watches only tell time, and yet they cost a ton of money?

Of course you can buy watches with extra fancy features. Stopwatch features... Altimiter....Calculator. And yet, the more features watches have, the less valuable they are. Insane! It breaks the first law of geek econo-dynamics.

People are saying the iPhone is expensive. But $600 is like a cheap watch. A Seiko or something. And watches spend half their time stuck up your sleeve. Who can see them up there? You spend $3000 on a freaking Omega and no-one even knows you have it.

What we need is something that shows we are cool and loaded and we get to wave it around a lot.


C,
post #27 of 29
Quote:
Originally Posted by MacsRGood4U View Post

Here she is!

Thanks a hell of a lot.

First time in five years that my wife walks into my studio and sees my wall mounted screen flash this picture. (Have set this Mac to Reload (open) Pages (Safari) every minute)

Her comments are unrepeatable, with the exception of , "You idiot."
post #28 of 29
Quote:
Originally Posted by Marvin View Post

Snore, zzz, huh, what was that?

Oh just another iphone thread stating the obvious that women will trade in their phones for the latest trend. Not mentioning they will probably trade their iphones some time afterwards for the next trend that comes along while Apple stick with the same design for a few years.

I assume your referring to the fiasco that has been iPod where Apple sat on the same design and everyone moved to other solutions.?????
post #29 of 29
Quote:
Originally Posted by solipsism View Post

I would but your mother already wore me out. \

I highly doubt it. My mother looks nothing like an iPhone.
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