iPhone interest said to be larger than market anticipates

Posted:
in iPod + iTunes + AppleTV edited January 2014
A survey conducted last month by investment bank Morgan Stanley found that interest in Apple's upcoming iPhone is much larger than the market currently anticipates, driving the firm to raise its estimates for the Cupertino-based iPod maker through 2007.



The survey of 2,500 US consumers revealed that more people are interested in buying an iPhone than the combined number of people who already own or are planning to buy a similar high-end device in the next twelve months.



"In keeping with our iPod 'halo effect' thesis, Apple?s brand reputation is the largest driver of this interest, and the survey results suggest iPhone demand could increase even more if Apple successfully expands awareness of the product, broadens the iPhone product portfolio, extends to other carriers, or offers service contract or product discounts," analyst Kathryn Huberty wrote in a note to clients.



Huberty said that with the high-end device market clearly growing, iPhone is well positioned to disrupt potential market shares, placing service providers with limited lock-in and a younger customer base at the most risk of share losses to Cingular.



According to the survey results, demand for the new Apple communications device will stem from two primary sources: consumers who own or plan to buy a high-end device (HED) and those that are already amongst Apple?s existing customer base.



"Our survey shows that those who already own/plan to buy a HED are 12 times as likely to purchase an iPhone as people who neither own/plan to buy a HED nor own any Apple product," Huberty wrote. "Respondents that don?t own a HED but do own an Apple product are 13 times as likely to purchase the iPhone as people who neither own/plan to buy a HED nor own any Apple product."



Supplementing the survey findings with some assumptions, the analyst said she now expects Apple to sell roughly 8 million iPhones over the next twelve months, up from her previous forecast of 6 million. At the same time, however, she lowered her 2007 calendar year iPod unit estimates to account for a 48 percent iPod cannibalization rate implied by the iPhone survey, which is slightly higher than the 33 percent she had forecast.



Examining potential for additional iPhone upside, Huberty noted a direct correlation between consumers? iPhone awareness and the level of 'extreme interest' in purchasing an iPhone evidenced by her firm's survey results.



"Only 18 percent of the 2,500 total respondents had 'heard a lot about the iPhone and its features' at the time of our survey, followed by 36 percent who had 'heard of iPhone but did not know much about it', and 45 percent who had 'never heard of an iPhone,' she explained. "The level of extreme interest in iPhone was 20 percent, 5 percent, and 3 percent, respectively, for these subgroups."



Huberty added that Apple's recent settlement with Cisco affords it the opportunity to aggressively market iPhone and increase awareness, which she expects will help drive interest levels higher.



Meanwhile, the analyst believes there is a 'high likelihood' Apple will expand its iPhone portfolio over the next twelve months to help address some of the existing barriers to adoption, such as the high cost of the device and inflexible wireless carrier contract pricing.



"We believe Apple will introduce new, lower-priced iPhones in late 2007 or 2008, making the product more attractive to a wider range of users," she wrote, noting her view that the $200-$300 range would represent the "sweet spot" for mass adoption. "We also believe Cingular and Apple have discussed creative contract pricing which would also put an upward bias on our current model."



A meaningful discount to service contract pricing on the part of Cingular could increase her firm's iPhone forecast by 70 percent," she added.



Following its iPhone survey, Morgan Stanley is forecasting Apple to earn $3.62 per share during the 2007 calendar year, up $0.43 from its previous estimates of $3.18. The firm also bumped revenue and gross margin estimates by $561,000 and 1.9 percent, respectively, to $25.71 million and 30.8 percent. iPod unit forecasts were reduced by the aforementioned 1.5 million figure to roughly 45 million units, while the firm made no change to its 2007 Mac unit estimates of 6.297 million.



"We?d be buyers of Apple on incremental revenue and operating leverage," Huberty told clients. "We believe the market is underestimating the likely success of iPhone."
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Comments

  • Reply 1 of 34
    Good, something new, numbers of interest in groups that had no prior knowledge.



    If Apple releases a flagship iPhone, then quickly launches a revision that fixes all the glitches and short-comings of the prior version then launch a lower tag version shortly afterwards they should be doing quite well. There really is a demand for a phone that just 'works' and does all the neat multimedia. Most people have access to WiFi, so that is fine for internet most of the time... Cingular needs to push and upgrade their networks nevertheless, if there is a new release 6 months after the initial release (provided that the intial release is on time) then Cingular still has 8+ months.



    BB is great and reliable, some people never find out how to take the battery out for a hard reset... Why? Because they don't need to. But it doesn't have all the neat multimedia features and phone functionalities. It's simply a productive tool.



    The Treo is like Vista, full of candy, but not quite there in stability. We actually use these in our office because of functionalities.
  • Reply 2 of 34
    yamayama Posts: 427member
    Didn't we have another survey a couple of days ago that suggested there was absolutely no interest from anyone to buy an iPhone?



    Mind you, I seem to recall that it was a survey by Microsoft asking 100 people: "Would you buy a new phone for $600?"
  • Reply 3 of 34
    melgrossmelgross Posts: 31,381member
    If this is true, along with the previous article, Apple could have a $30 billion + year.
  • Reply 4 of 34
    jbelkinjbelkin Posts: 74member
    It all depends on how and whom you ask - this seems closer in line to reality - bam out of the gate, it is clearly the MUST HAVE status symbol of 2007 and it will sell like crazy in June through the holidays - presumbaly Apple will also introduce a widescreen ipod so it will be a merry holidays for Apple (not to mention the refreshed computer line).



    You have to keep in mind that you will get different survey results if you call HH's at 11 in the morning than if you stop people at an airport at 4:00 PM - that original survey of 139 seems to have been asked at a pizza joint. This one seems much more targeted corrected in people who have used Apple products and/or using smartphones.



    Yes, $599 is not "cheap," but I've been to dinners where that was spent by 2 people so what is cheap or expensive?
  • Reply 5 of 34
    bdkennedy1bdkennedy1 Posts: 1,459member
    And as usual, Apple won't be able to produce enough and people will have back orders so they'll have to wait even longer.
  • Reply 6 of 34
    MacProMacPro Posts: 18,012member
    Quote:
    Originally Posted by bdkennedy1 View Post


    And as usual, Apple won't be able to produce enough and people will have back orders so they'll have to wait even longer.



    Perhaps that is a better situation to be in than MS must be in with warehouses full of unsold brown Zunes
  • Reply 7 of 34
    solsunsolsun Posts: 763member
    "There is truth, there are lies, and there are survey results." - Mark Twain
  • Reply 8 of 34
    ragexragex Posts: 126member
    When I worked for VZW Wireless, we had a ton of people every day after the announcement coming in asking about the iPhone. There is a definite customer base, and you'd be surprised how much people are willing to pay for a phone if it can do everything the person wants.
  • Reply 9 of 34
    SpamSandwichSpamSandwich Posts: 30,736member
    Quote:
    Originally Posted by jbelkin View Post


    It all depends on how and whom you ask - this seems closer in line to reality - bam out of the gate, it is clearly the MUST HAVE status symbol of 2007...



    -snip-



    Yes, $599 is not "cheap," but I've been to dinners where that was spent by 2 people so what is cheap or expensive?



    The iPhone is an "aspirational" product, as they like to call it in advertising and marketing. It represents the best in class of a product that everyone must have. This is the "halo" effect that Apple's marketing imparts to it's products, whereas Microsoft's marketing emphasizes product aspects that are not personal or emotional. Big differences.
  • Reply 10 of 34
    I'm interested in buying a Helicopter, but that don't mean I am getting one. Just let the phone be released and we'll see.
  • Reply 11 of 34
    quinneyquinney Posts: 2,523member
    Quote:
    Originally Posted by digitalclips View Post


    Perhaps that is a better situation to be in than MS must be in with warehouses full of unsold brown Zunes



    There it is, a big fat sitting duck up on a tee.

    Can we hear a ...............



    [wilco, take it from here]
  • Reply 12 of 34
    Quote:
    Originally Posted by BlackSummerNight View Post


    I'm interested in buying a Helicopter, but that don't mean I am getting one. Just let the phone be released and we'll see.



    My thoughts exactly. I have tremendous interest in the iPhone... though I probably won't get one... at least not until it can be more easily afforded, either via price reduction or pay raise... Guess which will happen first?



    -Clive
  • Reply 13 of 34
    SpamSandwichSpamSandwich Posts: 30,736member
    Quote:
    Originally Posted by quinney View Post


    There it is, a big fat sitting duck up on a tee.

    Can we hear a ...............



    [wilco, take it from here]



    Is this a reference to the new sport of fowl golfing?
  • Reply 14 of 34
    MacProMacPro Posts: 18,012member
    Quote:
    Originally Posted by SpamSandwich View Post


    Is this a reference to the new sport of fowl golfing?



    I think he meant I had baited a few Trolls ... I could be wrong.
  • Reply 15 of 34
    pt123pt123 Posts: 696member
    I would be interested in getting one if they get the price down below $100 and make it work for Verizon.
  • Reply 16 of 34
    cnocbuicnocbui Posts: 3,613member
    Does anyone else get the impression that there must be a a wide screen iPod with a big HD all fully developed and ready for release but that it is being shelved until after the iPhone hits the shops?



    The iPhone has the bits - the OS, The big touch screen. Just take away the phone bits and plop in a HD and voila!



    I have a 3rd gen 15gb iPod and I would really like one with a much bigger drive but the current HD iPods don't tempt me in the least because the iPhone clearly hints at the next one being really sweet.



    It is a bit grating knowing that what I want is probably already a reality but it isn't going to be released yet so that it doesn't steal any of the iPones thunder.



    I think the initial predictions for iPhone sales are off by a huge margin. Shortly after they go on sale I think you will be less likely to find one to buy than a Sony PS3 in Europe at the moment.



    I think they will sell 5 - 10 times the number Apple have said they would like to initially. I just hope they really have enough on hand and have learned from past mistakes.
  • Reply 17 of 34
    desarcdesarc Posts: 642member
    this is what i think of surveys that don't list ANY demographics:



    a recent survey showed that the people walking out of shops on 5th ave with $1200 shoes are more than willing to pay $600 for a status-symbol phone, and people who asked me for change on the subway are far less willing to spend the same amount. in fact, housing-challenged respondents are 13 times LESS likely to view the pie chart i was paid $400 to make.



  • Reply 18 of 34
    ebrunnebrunn Posts: 75member
    Quote:
    Originally Posted by pt123 View Post


    I would be interested in getting one if they get the price down below $100 and make it work for Verizon.



    yeah, thats gonna happen
  • Reply 19 of 34
    Quote:
    Originally Posted by desarc View Post


    this is what i think of surveys that don't list ANY demographics:



    a recent survey showed that the people walking out of shops on 5th ave with $1200 shoes are more than willing to pay $600 for a status-symbol phone, and people who asked me for change on the subway are far less willing to spend the same amount. in fact, housing-challenged respondents are 13 times LESS likely to view the pie chart i was paid $400 to make.







    ROTFL! You hit the nail on the head.
  • Reply 20 of 34
    cnocbuicnocbui Posts: 3,613member
    Quote:
    Originally Posted by pt123 View Post


    I would be interested in getting one if they get the price down below $100 and make it work for Verizon.



    Perhaps you would also like Apple to arrange for water to flow uphill.



    If that is what it would take to just get you 'interested', what on earth would it take to get you excited.
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