Goldman: iPhone to drive 'next big growth phase' for Apple
Following a recent buying intention survey, investment bank Goldman Sach said it is increasingly confident in its estimates that Apple will sell more than 14 million iPhones through the 2008 holiday shopping season.
The survey, conducted in the US, UK, China, and India, found that the number of potential iPhone buyers is equivalent to 75 percent of the installed base of current iPod owners, with just under half of the potential buyers coming from respondents who have never owned an iPod.
In the US, 71 percent of respondents indicated interest in a potential Apple mobile phone, analyst David Bailey told clients, noting that the survey took place before the iPhone was unveiled in January.
Overall, Apple ranked as the No. 4 most desired handset brand in the US -- again, the results coming before the formal demonstration of iPhone, which broadly exceeded expectations.
"Some of the concerns about the unwillingness of consumers to switch carriers to get the handset they want seem misplaced, with 30 percent of UK respondents and 15 percent in the US suggesting that they would switch," Bailey wrote.
He said the results offer increased confidence that Apple will meet his previous sales estimates of at least 4 million units in 2007 and 10.5 million in 2008.
In his analysis, Bailey assumed 25 percent video iPod cannibalization in 2007 and 50 percent in 2008, concluding that iPhone alone could add an incremental 4 to 5 percent to Apple?s revenue growth in those two years.
"We think that iPhone starts the next big growth phase for Apple," he wrote, "making it a core holding, and believe that the stock should be bought on dips prior to the product?s launch in June."
The survey, conducted in the US, UK, China, and India, found that the number of potential iPhone buyers is equivalent to 75 percent of the installed base of current iPod owners, with just under half of the potential buyers coming from respondents who have never owned an iPod.
In the US, 71 percent of respondents indicated interest in a potential Apple mobile phone, analyst David Bailey told clients, noting that the survey took place before the iPhone was unveiled in January.
Overall, Apple ranked as the No. 4 most desired handset brand in the US -- again, the results coming before the formal demonstration of iPhone, which broadly exceeded expectations.
"Some of the concerns about the unwillingness of consumers to switch carriers to get the handset they want seem misplaced, with 30 percent of UK respondents and 15 percent in the US suggesting that they would switch," Bailey wrote.
He said the results offer increased confidence that Apple will meet his previous sales estimates of at least 4 million units in 2007 and 10.5 million in 2008.
In his analysis, Bailey assumed 25 percent video iPod cannibalization in 2007 and 50 percent in 2008, concluding that iPhone alone could add an incremental 4 to 5 percent to Apple?s revenue growth in those two years.
"We think that iPhone starts the next big growth phase for Apple," he wrote, "making it a core holding, and believe that the stock should be bought on dips prior to the product?s launch in June."
Comments
I wonder what the query basis of the survey was?
I disagree that the iPhone will cut into iPod sales that much... I still plan on getting a big honkin' iPod for my music and an iPhone for my phone when glitches are ironed out and they open it to developers a little bit... At least the widgets.
I don't think cannibalization is a valid concern anyway. A business has to obsolete their own products before someone else does. A business that rests on its laurels is a danger to itself.
I think there's always going to be some market for a dedicated product, but the question is how soon the integrated device is broadly preferred over a dedicated one simply on convenience, weight and so on.
But seriously, if it weren't for at&t's service requirement, I'd certainly want an iPhone for myself. I'll wait it out with my new Samsung... for now. If a new, very cool iPod with multi-touch were introduced, however, I'd buy one tomorrow.
I am very confused as to why analysts feel there will be so much cannibalism...
How does 8gigs qualify as a "video iPod?"
Is it the geographical coverage of certain suppliers that just wins out in some areas? Or is there more to it?
There does seem to be a greater willingness here in the UK to swap mobile supplier than in the US and this survey seems to confirm that. Is there any obvious reason why there is less willingness in the US? Why wouldn't people swap to get the right phone?
Is it the geographical coverage of certain suppliers that just wins out in some areas? Or is there more to it?
The carriers themeselves suck. people get very vendictive when a carrier screws them over. It happens allot. carriers get nasty reputations and people try to avoid them.
The fact is is that all the carriers suck and have screwd lots and lots of users. There will always be a portion of users that will refuse to go to a certain carrier because that was the last carrier to screw them over. So it really doesnt matter which carrier the phone went to because there will always be a group of people who dont like that company.
I am currently hating Sprint. I assume sometime next year I will be hating AT&T.
I disagree that the iPhone will cut into iPod sales that much... I still plan on getting a big honkin' iPod for my music and an iPhone for my phone when glitches are ironed out and they open it to developers a little bit... At least the widgets.
I wonder what the query basis of the survey was?
Don't forget that most iPods sold are either Nano's, or the much smaller Shuffles.
Most cannibalization will come from one of those camps, with the majority likely coming from the Nano buyers.
They will simply think of the iPhone as a Nano with a phone.
5G owners will look at the memory drop as a downgrade, and many will either not buy, or will buy both. Shuffle owners might find it to be too expensive, and more than they need.
I don't think cannibalization is a valid concern anyway. A business has to obsolete their own products before someone else does.
That's an excellent point!
When my companies had to look at our products, we always had to find a way to not just improve them, but to make a newer product that was more compelling than the current one, and more compelling than the competition's as well—before they did.
The carriers themeselves suck. people get very vendictive when a carrier screws them over. It happens allot. carriers get nasty reputations and people try to avoid them.
The fact is is that all the carriers suck and have screwd lots and lots of users. There will always be a portion of users that will refuse to go to a certain carrier because that was the last carrier to screw them over. So it really doesnt matter which carrier the phone went to because there will always be a group of people who dont like that company.
I am currently hating Sprint. I assume sometime next year I will be hating AT&T.
People don't hate their carriers as much as some think. The turnover rate is much less than for cable broadband, DSL, or most other subscription services.
The rates are, from what I remember, generally under 6%. As broadband also offers yearly, and multiyear contracts with fees for leaving, that's telling. Before, when you lost your current number, there could be an excuse, but no longer.
With all of the hatred of Cingular, and AT&T, on the boards, it must still be noted that it is the largest service, and gained over a million and a half new subscribers last reporting period. It now has over 61.5 million customers as of about a month ago.
I use Sprint, and I don't hate it, it's true, sometimes it's annoying.
There does seem to be a greater willingness here in the UK to swap mobile supplier than in the US and this survey seems to confirm that. Is there any obvious reason why there is less willingness in the US? Why wouldn't people swap to get the right phone?
Is it the geographical coverage of certain suppliers that just wins out in some areas? Or is there more to it?
I don't know if it's the same in the UK, but in the US you generally have to pay around $100-200 (50-100 pounds) to break out of your contract and switch.
There does seem to be a greater willingness here in the UK to swap mobile supplier than in the US and this survey seems to confirm that. Is there any obvious reason why there is less willingness in the US? Why wouldn't people swap to get the right phone?
Is it the geographical coverage of certain suppliers that just wins out in some areas? Or is there more to it?
The short answer is contracts. In the US the carriers almost always have a 1-2 year contract that you must sign with a heafty early termination fee to break the contract.
I am very confused as to why analysts feel there will be so much cannibalism...
How does 8gigs qualify as a "video iPod?"
Because the analysts know there will soon be 60gb flash iPhones that will cost $299. Look at the big picture.
I'm not aware of the same level of angst in the UK over mobile phone company antics as is seeming to be the case in the US.
People don't hate their carriers as much as some think. The turnover rate is much less than for cable broadband, DSL, or most other subscription services.
The rates are, from what I remember, generally under 6%.
Mmm... no, Mel. The turnover rate for US wireless carriers is far higher than that. Monthly churn rates vary from around 1.2% (for the better carriers like Verizon or US Cellular) to over twice that, for companies that either suck (horrible customer service), or have spotty coverage (like say T-mobile not too long ago).
That translates to yearly turnover rates ranging from 15 to 30%. People bail on the their carriers all the time, and things aren't getting that much better.
With all of the hatred of Cingular, and AT&T, on the boards, it must still be noted that it is the largest service, and gained over a million and a half new subscribers last reporting period. It now has over 61.5 million customers as of about a month ago.
It's not hard to gain customers in a growing market. Cingular/ATT actually has over a million customers a month bail on them (their monthly churn rate averages around 1.8%, times that by 61 million and you'll get it), but, like most of the other carriers, they gain more than they lose because the market's still growing.
That will start to change in a couple of years though, as the US market finally nears cellphone saturation. The carriers have succeeded in pushing phones to everyone who could possibly need one, including bad credit risk customers (prepay) and kids (family plans), pretty soon only population growth will grow the base from here on out. And more carriers will either stagnate in customer count overall, or actually lose customers overall.
.
I don't think cannibalization is a valid concern anyway. A business has to obsolete their own products before someone else does. A business that rests on its laurels is a danger to itself.
Great (and valid) point, but whenever I use it regarding Apple's Mac line-up, someone always whines.
.
They will simply think of the iPhone as a Nano with a phone.
I don't think so. All the people who buy a nano do so because of the convenient size. There's no way they'd switch to a relatively clunky iPhone. (relative to the nano)
A business has to obsolete their own products before someone else does. A business that rests on its laurels is a danger to itself.
That's a great point Jeff.
Great (and valid) point, but whenever I use it regarding Apple's Mac line-up, someone always whines.
You also want to cannibalize your current product with something that will sell far better not something that is only marginal.
They will simply think of the iPhone as a Nano with a phone.
Yes Jobs did specify the cost of the iPhone. By thinking of the number of people who would buy an iPod and a smartphone. With the iPhone you are buying both in the same device.
In the UK the contract periods have tended to be 12 months but have recently been extending out to 18. However, I think the tendency is not to feel any need to stick with the same supplier at the end of that period. With the early announcement of the iPhone, none of us will have a very long time to wait until our contract end dates by the time of the UK launch. I know I'll avoid the termination fee but will happily move after that.
I'm not aware of the same level of angst in the UK over mobile phone company antics as is seeming to be the case in the US.
There isn't much angst here either.
It's mostly the people online, in forums like this one, who feel the angst.
It's like DRM. People online hate it, while the vast majority don't care in the least.