iPhone seen as still too expensive, losing steam in fall
A new report warns that halving the iPhone's price this summer still wasn't enough to truly grow sales -- and that recent metrics may show an actual shrink in sales during the early fall.
Morgan Stanley analyst Katy Huberty points to a study of prospective iPhone buyers that shows about 46 percent of them believing the handset to be too expensive, even at its $199 entry point.
Few actually object to the phone itself; only 11 percent disliked either the design or the feature set, the researcher says. About 31 percent objected to the iPhone's continued exclusivity with AT&T, which prevents subscribers to Verizon or other carriers from switching without added costs.
Huberty also takes care to dismantle notions that the resistance necessarily has its roots in preconceptions of Apple, noting that only 15 percent of the same overall group thinks Macs are overpriced.
The percentage of those showing very strong interest in buying an iPhone has also dropped significantly over time. Where as many as 7 percent of would-be buyers were very interested in the phone in February 2007 -- four months before the original phone and many of its final details were released -- 5 percent now show that same level of interest today.
Regardless of Apple's own beliefs as to the truth of those objections, it may have to use price as leverage to spur sales, the analyst warns. According to Huberty, sales were half as strong during September and October versus the height of the iPhone's launch in July and September. The exact methodology used to collect this information isn't known, but the data is used to lower estimates for Apple's 2009 iPhone shipments from 19 million down to 14 million.
To spike sales, Huberty suggests that Apple should take a cue from recent rumors and halve the price to $100, which she believes could at least double iPhone sales numbers. Apple's prized profit margins likely wouldn't be an issue, she claims, as the company only needs to reduce the cost of manufacturing and selling an iPhone by 17 percent to achieve the intended effect.
While other reports have also been cautious on Apple's iPhone sales performance for the fall, recent analysis has also suggested that the numbers may be deceptive as the company passes through the holiday season. Kaufman Bros.' Shaw Wu has just noted that gift cards may be factors in any seemingly disappointing sales during the fall quarter, as Apple may record the immediate revenue from an iPhone 3G gift card but can't register the buyer as an iPhone customer until the recipient picks up and activates the handset.
As many as one million actual iPhone buyers may go "missing" as a result, Wu says.
Morgan Stanley analyst Katy Huberty points to a study of prospective iPhone buyers that shows about 46 percent of them believing the handset to be too expensive, even at its $199 entry point.
Few actually object to the phone itself; only 11 percent disliked either the design or the feature set, the researcher says. About 31 percent objected to the iPhone's continued exclusivity with AT&T, which prevents subscribers to Verizon or other carriers from switching without added costs.
Huberty also takes care to dismantle notions that the resistance necessarily has its roots in preconceptions of Apple, noting that only 15 percent of the same overall group thinks Macs are overpriced.
The percentage of those showing very strong interest in buying an iPhone has also dropped significantly over time. Where as many as 7 percent of would-be buyers were very interested in the phone in February 2007 -- four months before the original phone and many of its final details were released -- 5 percent now show that same level of interest today.
Regardless of Apple's own beliefs as to the truth of those objections, it may have to use price as leverage to spur sales, the analyst warns. According to Huberty, sales were half as strong during September and October versus the height of the iPhone's launch in July and September. The exact methodology used to collect this information isn't known, but the data is used to lower estimates for Apple's 2009 iPhone shipments from 19 million down to 14 million.
To spike sales, Huberty suggests that Apple should take a cue from recent rumors and halve the price to $100, which she believes could at least double iPhone sales numbers. Apple's prized profit margins likely wouldn't be an issue, she claims, as the company only needs to reduce the cost of manufacturing and selling an iPhone by 17 percent to achieve the intended effect.
While other reports have also been cautious on Apple's iPhone sales performance for the fall, recent analysis has also suggested that the numbers may be deceptive as the company passes through the holiday season. Kaufman Bros.' Shaw Wu has just noted that gift cards may be factors in any seemingly disappointing sales during the fall quarter, as Apple may record the immediate revenue from an iPhone 3G gift card but can't register the buyer as an iPhone customer until the recipient picks up and activates the handset.
As many as one million actual iPhone buyers may go "missing" as a result, Wu says.
Comments
It might be right on the money, I don't know, but it just seems like fluff or worse at this point...
With zero methodology given, it is hard to take this report all that seriously.
It might be right on the money, I don't know, but it just seems like fluff or worse at this point...
Huberty is the kind of analyst that if you had more information on her methods you might have even less faith in her abilities. She wears the kick-me sign among analysts who follow Apple.
She's missed Apple's revenue estimates by almost $1 billion and EPS by 6 cents.
She was 700,000 units below iPhone's performance, 2 million units light on her iPod estimate and 200,000 units under Apple's Mac numbers.
http://www.cnbc.com/id/28159562/site/14081545
I can understand posting her comments, but this article actually makes her look like she knows what she's doing.
Until there is an iPhone that doesn't require a data connection, I will stick with my iPod touch + normal phone.
Ms Huberty has a pretty awful record at forecasting Apple unit sales and profits. Why doesn't AppleInsider mention her record? Why is AppleInsider giving space to an analyst who has proven time and time again her incompetence?
Slow news day?... I agree, analysts should not be given a free pass on their opinions. Their opinion, plus crediting them on AI can equal damage to AAPL stock and reputation.
These analysts have a track record, and they should be called on it, but every bloody time I take AI to task for assuming a journalistic stance but still not quite getting it, I get a note from Kaspar taking umbrage at my comments.
Kaspar, why did you not bother to take an editorial role here and include this analyst's track record as a point of reference to their unfounded comments? I'm honestly interested in what the thinking is here...
Who is the person making the decisions to post stories on AI? That person should be taking a responsible editorial role. I don't think anyone expects "Wall Street Journal" level reporting, but clearly there needs to be an editor assigned... I'd vote for Mel Gross.
the problem is that the service from at&t almost doubles my monthly bill.
Until there is an iphone that doesn't require a data connection, i will stick with my ipod touch + normal phone.
amen.
Who's paying her anyway?
And, by the way if you don't want a data plan, you're not a target customer anyway???
In case you haven't noticed that's what the iphone is about?
it's certainly not about talk only?
Try a couple of tin cans and a roll of string
It's the best selling "phone" in America - end of story.
More over the price of an IPhone is very reasonable. Certainly it could be better but that is true of all hardware. What makes IPhone expensive is the AT&T contract which makes one feel like the have been forceably bent over and abused. The way I see it is that AT&T could do better by $15 a month and still make good money.
In any event I still have a lot of people taking interest in my IPhone. Many looking towards future purchases.
Dave
Shouldn't Appleinsider at least reference Katie's lousy track record?
She's missed Apple's revenue estimates by almost $1 billion and EPS by 6 cents.
She was 700,000 units below iPhone's performance, 2 million units light on her iPod estimate and 200,000 units under Apple's Mac numbers.
http://www.cnbc.com/id/28159562/site/14081545
I can understand posting her comments, but this article actually makes her look like she knows what she's doing.
Good link, by the way. This CNBC reporter has the goods on this analyst.
She should be fired. Her price target was still beaten at the close on the day she issued the downgrade. She always gets it wrong unless her aim is to drive it down.
Does anyone have a guess when the exclusivity with ATT could possibly end, for example with say a new phone?
Or, when one could get an Apple phone without a data plan?
Slow news day?... I agree, analysts should not be given a free pass on their opinions. Their opinion, plus crediting them on AI can equal damage to AAPL stock and reputation.
These analysts have a track record, and they should be called on it, but every bloody time I take AI to task for assuming a journalistic stance but still not quite getting it, I get a note from Kaspar taking umbrage at my comments.
Kaspar, why did you not bother to take an editorial role here and include this analyst's track record as a point of reference to their unfounded comments? I'm honestly interested in what the thinking is here...
Who is the person making the decisions to post stories on AI? That person should be taking a responsible editorial role. I don't think anyone expects "Wall Street Journal" level reporting, but clearly there needs to be an editor assigned... I'd vote for Mel Gross.
I agree, but then again AI is not what one would call a news agency nor would I consider Kaspar a journalist.
It's a rumor site. A popular one at that. Guaranteed to be even more popular and lucrative with click through on stories just like this. Sensationalist headlines certain to provoke the Mac community.
Ethics don't mean a thing when dollar signs are in your eyes.
A new report warns that halving the iPhone's price this summer still wasn't enough to truly grow sales
The overall 2 year cost went up by around $160.
People who believe this kind of "half" crap are part of the reason we're in this economic mess.
Those old Wizard pocket organizers - the ones with tip calcualtors, remember? They were at least $200 unless you had a deal from a guy like Bob Sacamano. No wifi. No phone. No music, photos, or video.
Seriously - the purchase price should be of nominal importance to the consumer. The question is can you come up with the extra $30 a month for a data plan. And to me, $30 a month is about the most I'd want to pay. With a crappy device that made surfing hard I wouldn't want to pay it. With the iPhones ease of use it's far more easy to pay. $30 strikes me as a laptop data plan price. $20 for the iPhone would cut down on the protest.
My wife has a BB 88xx and I was shocked at the web browser. It looked like Pong. I haven't looked at many smart phones to see what the browsers look like. But this Blackberry is miles behind the iPhone.
The real thing to complain about with iPhone pricing is SMS plans. That business is criminal.
EDIT : The Wizard went for over $600 in 1993
I feel that the iPhone is not overpriced at all. What people are wary about is the phone service, data, text message, add a line, night and weekend minutes extra! Oh, by the way, were gonna stick it to you for 2 years. Even if the damn phone is free people will still not be interested in paying for the services and for that length of time.
Exactly, 199 or even 299, i bet most people could afford it. It is relatively cheap compare to other phones.
The problem is the contract itself.
Now this causes a problem.
How Apple could maintain the iPhone value? They dont want it to be priced too low while being competitive. With that price they can not lower it. And they cant change the contract Talk Time and Usage Allowance. Which means it is pretty much locked phone into this price range.
The only thing i could think of it to get rid of the 8GB Model and introduce 32GB iPhone.
What do you think the phone is worth? I actually think the value of the entry level phone is reasonably $500 - so let's go with that.
Let's say AT&T is picking up the tab for $300 with the subsidy, and you're paying $200 for the phone.
Take that $300 they gave you and apply it to your data plan. Over the course of 24 months you'd be getting $12.50 per month. That leaves you with $17.50 per month to pay for data. Not so bad.
That only works for two years, then you're back to $30 per month. Or more if it goes up. But you'll probably want a new phone anyway.
Just something to think about.....