iPhone expectations: Lofty to loftier

iPhone expectations: Lofty to loftier

Summary: Can Apple's iPhone sell 45 million iPods in calendar year 2009 and take 7 percent of North America handset share?That's what Piper Jaffray analyst Gene Munster is arguing in a research note Thursday.

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TOPICS: Apple, iPhone, Mobility
61

Can Apple's iPhone sell 45 million iPods in calendar year 2009 and take 7 percent of North America handset share?

That's what Piper Jaffray analyst Gene Munster is arguing in a research note Thursday. Wall Street analysts have been floating big predictions on iPhone shipments for days. Apple has projected 10 million units in calendar 2008 and analysts expect more.

Instead of pooh-poohing the prediction, let's here Munster tell it:

"We believe Apple can sell 45 million iPhones in CY09. While this may seem like a bold prediction, we believe a number in this area is not as far of a reach as some may think. Specifically, to reach iPhone units of 45 million, we believe the product will have 7.0% handset market share in North America and 2.8% handset market share in the rest of the world (ROW). We assume Street pricing on iPhone will have dropped to $338 by CY09 from $542 in CY07. Additionally, it is critical to keep in mind that the iPhone will be a combo device (iPod and mobile handset), which will attract more than just a mobile phone customer. We believe we have factored cannibalization of iPod from iPhone into our model by lowering iPod growth rates from 35%+ year over year growth in FY07 (and prior years) to 10%-15% year over year in FY08 and FY09."

That's a mouthful, but the bottom line is that 45 million units is a stretch. Munster got input from Mike Walkley, Piper Jaffray's wireless analyst, before making the call. According to Walkley, Munster's prediction is a stretch, but feasible based on the Motorola RAZR. The RAZR sold 65 million units in 2006 after launching in mid-2004.

How did the RAZR do it? For starters, price points are key. Once the RAZR fell way below $300 units surged.

There are two problems with this comparison. For one, Motorola's RAZR launch was a global launch. Apple is starting out with one carrier in the U.S. To make Munster's numbers work anywhere from 12 percent to 15 percent of AT&T customers would have to be iPhone users. Meanwhile, the iPhone may not hit the sub-$300 mark. Apple doesn't cut prices with reckless abandon--unless rival carriers dent iPhone demand with other devices. Lower priced iPhones are likely to emerge, but sales depend on whether consumers see the iPhone as an iPod replacement or a smartphone. BusinessWeek reports that the debate won't be settled until 2009.

Munster is banking that the iPhone will benefit from the iPod replacement cycle, which runs about 2 to 3 years. He assumes that 15 percent of iPod users will look to the iPhone as a replacement. Since Apple is likely to ship 100 million iPods in 2006 and 2007, 15 million iPhone units may just be iPod replacements.

Munster adds:

"If we assume 7.5 million of these are North America customers and 7.5 million are international, Apple needs only add 5.8 million iPhone buyers, on top of iPod replacement buyers, in North America and 24.3 million internationally. We believe CY09 will be the year in which we see the biggest growth in adoption, given the iPod adoption rate spiked in years 3-4 following release (growing units > 400%). We think iPhone adoption will spike between years 2-3, given greater awareness for MP3 players and music-enabled handsets. We are modeling for year over year iPhone unit growth of 223% from CY08 to CY09."

Now Apple could hit Munster's projections, but the iPhone seems to be setting up for a perceived failure. Apple has a hit on its hands, but with expectations being ratcheted up daily it will be nearly impossible to make Wall Street--and probably the tech press--happy. Let's say Apple sells 30 million iPhones in 2009. That's a big deal--unless expectations are calling for 45 million iPhones.

Topics: Apple, iPhone, Mobility

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61 comments
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  • Apple doesn't cut prices

    But what they do is introduce newer models at the same price point, and move older models to a lower price point. And, with the iPod, they introduced all kinds of new models at all kinds of price points (shuffle, nano, etc).

    Given iPod sales, $338 doesn't seem that far-fetched if you get a phone thrown in as well. We'll know by 2009 how well the iPhone really works. If it works as promised and is as revolutionary as touted, this number will easily be achieved. If it flops or hits major technical problems, we'll have all moved on by then.
    tic swayback
    • Will iPhone work?

      Apple has put a lot into the iPhone basket, including postponing its greatest
      product, Mac OSX Leopard. Apple products have traditionally had the highest
      quality ratings in the industry. There were MP3 players before iPods. Most didn't
      work worth 2? even though some were pretty expensive. After iPods came out the
      whole industry improved its lines. My guess is that the iPhone will work great.

      Will it sell? My guess is yes. It's one of the most anticipated new product releases
      for quite a while. Its price will keep many away. If you need a phone, you want a
      device that can make phone calls, not necessarily one that plays music, has a
      digital camera and can play movies. Still, it's a compelling device, and many will
      buy it because it's the latest greatest gadget. People love their gadgets. If the
      iphone sells as well as the RAZR, it would mean more money in a short period of
      time for Apple than years of iPod sales. I think the iphone will revolutionize the
      industry, if not by its own success, by the success of all the copycats. Will it meet
      the expectations of Wall Street? Who knows? Then again, Apple is in it for the
      profits, and they WILL make money. Like the iPod, there's a lot of profit built into
      these devices.
      MacGeek2121
      • Except iPhone is the copycat

        [i]I think the iphone will revolutionize the
        industry, if not by its own success, by the success of all the copycats.[/i]

        HTC Touch is already out. Scores of touchscreen phones have been out for years. iPhone is the one copying HTC... badly. Why badly? Hmm, HTC has replaceable battery, can install programs on it, can add memory, etc. etc. etc. All the price of an Apple product with half the functionality of the devices already on the market!
        NonZealot
        • What about LG Prada

          The LG Prada was out before both the iPhone and this HTC Touch you keep promoting. Give LG Prada some love Zealot!

          You continue to sound desperate
          dave95.
          • Fair enough

            Thanks for helping me prove that the iDumbPhone is a second rate copycat of far superior phones that have been out for years. I appreciate the backup. I don't know if you've noticed but there are a lot of Apple zealots here and very few sane people like you and me.
            NonZealot
          • Hahahahaa

            Continue to fight the good fight, Zealot!

            Here is some more names you can use:

            iDumpPhone
            iHailJobsPhone
            iAmAZealotPhone
            dave95.
  • Author = idiot (45M WORLDWIDE)

    Munster was talking about 45M units WORLDWIDE - not North America. Pull your head out before publishing such tripe.
    drwit
    • *CRASH*

      That was the sound of your glass house crashing. The author never said it was 45 million U.S. sales - you read it wrong.
      Busay
  • I love Mac zealot logic!!

    [i]Additionally, it is critical to keep in mind that the iPhone will be a combo device (iPod and mobile handset), which will attract more than just a mobile phone customer.[/i]

    Yeah, because if I'm in the market for a $200 music player, I'm going to pay $600 + 3yr contract + full data plan. Bzzzzt. Wrong. If I'm in the market for a $200 music player, I'll find a $200 music player. The iDumbPhone most certainly isn't $200. By the end of the 3 year contract, that iDumbPhone will have cost you thousands of dollars.
    NonZealot
    • Bzzzzt! You are a Zealot.

      Everyday I try to read articles and follow-up with other's points of view only to run into your tirades. To boot, your name is an absolute falsity. And for one who constantly moans about facts, can I ask where you got you're "3-year contract" info? You are obviously employed to do just what you are doing. If not, your "Non_Zealot" life is pretty sad.
      I will give you credit on your being fairly knowledgeable on a lot of topics. Even if they are indeed boiling over with your own zealotry. But you come off like such a jack*** that i take non of what you say seriously. See you are making my life less productive because i feel i had to just post my opinion of your ridiculous comments. grow up.
      massiv_design
      • Facts? The Zealot don't need..

        no stinkin' facts. If the facts don't fit his preconceived notions, he makes up new
        ones that do.
        msalzberg
        • I think he secretly wants an iPhone, BADLY....

          ... but is too poor to buy one,
          or he's a paid forum troll to lure more visitors (who click on ads),
          or he's just a very frustrated individual. ;-)

          He's best ignored I think.
          Mikael_z
          • Would hope he is getting paid, otherwise feel sorry (nt)

            .
            dave95.
          • No Kidding,

            He better at least be making him some cash for as much time as he spends in here crying about Apple.

            I mean honestly, can you REALLY hate a company that bad that has done nothing to you?

            Did Steve Jobs rape his father or something?

            Geeeez!
            Kid Icarus-21097050858087920245213802267493
    • iDumbPhone?

      Hey, Zealot, you need to come up with a better new name for the iPhone than
      iDumbPhone. It really doesn't work, doesn't sound good. You're going to be bashing
      the iPhone for a long time and you need something catchier. You need to try harder.
      Why don't you go upstairs and ask your mother to help you out. You are in the
      basement, right?
      dolph0291
      • How about

        iM-A-MACTARD-PHONE?
        You are right thought they should just stick to the basics of bashing- funtions:
        1. what is the real talk time going to be? An hour?
        2. No business push through email servers, thus not touching the blackberry and MS Mobile market.
        3. Will never cost less then $300
        4. No expansion slot for adding memory
        5. No removable battery - the biggest "DUH" flaw of them all.
        Seeing as most charge their phone and mp3 players everyday, using the same device for both splits the need to charge it in half! Sacrifice being out-of-contact because I wanna play tunes?!
        6. No 3rd party apps, (Jobs says so) only Apple will allow you to have a market THEY wish you to.
        7. Touch-pad screen as a keyboard, done before and still sucks, thus not good for kids who text all dammed day!

        So now that Apple isn't aiming for the business market, not for kids texting all day, and can't be used realistically as BOTH a phone and an mp3 player because of battery shortage time, what market are they selling it to?!

        Only one.. the MACTARD MARKET!!
        JABBER_WOLF
        • Hehe, nice post!

          Well done.
          NonZealot
  • Locked, Inviolable: Pure Hatred for iPhone

    Check this list out I found about why you should (AND WILL) hate the Apple iPhone

    http://www.listafterlist.com/tabid/57/listid/6373//Locked+Inviolable+Pure+Hatred+for+iPhone.aspx

    From www.ListAfterList.com
    prattosu@...
    • Funny?

      how easy it is to review something that is not even out yet. Whether be Zune or iPhone or whatever, I am sooo tired of all of the biased and misleading BS that is being spread on the web.
      massiv_design
    • How do you know?

      The phone isn't even out yet, Apple hasn't announced final features. They're said to be mulling over opening it up to 3rd party programs. Why not wait till you know what you're talking about before spouting off?
      tic swayback