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Summary:

Hey Wall Street, if you need help writing about iPhone, its features and projections, here is a cheat sheet of things you can mix-and-match for your next research report. And while you are at it, play some bingo too. Talking about the Apple iPhone has become […]

Hey Wall Street, if you need help writing about iPhone, its features and projections, here is a cheat sheet of things you can mix-and-match for your next research report. And while you are at it, play some bingo too.

Talking about the Apple iPhone has become the new new thing on Wall Street. Not a day passes when one analyst or another comes up with another twist on the Apple iPhone. In fact, many of them are simply regurgitating what you might have read on various Mac blogs.


The problem is that while you view their so-called insights (rumor mongering really) with skepticism, you cannot ignore them. Because one of them just might be right. It’s almost like that Aaron Boone home run in the famous New York Yankees-Red Sox game. These days, anyone who swings is capable of hitting one out of the park.

For most of the analysts, it is a way to get in front of their institutional clients, and prove that they are relevant and have the latest information. As I have written in the past, the weeks leading up to the Steve Jobs Show, aka Macworld in San Francisco, are weeks of hectic trading and speculating in Apple stock. It is a cycle that repeats itself every year, almost without fail.

The iPhone is a good talking point for a growing number of Apple analysts, though most of them have failed to offer any concrete evidence about the device. Some of them are just totally loco!

I remember reading the $6 billion-plus in iPhone sales for fiscal 2007 projection, and laughed my head off on those silly projections. The analyst estimated a whopping 29 million phones. All that sold before September 2007 rolls around!

No one even juxtaposed it with the total net adds for say a Cingular in a given quarter – about 1.4 million – or that Cingular has a total of 58 million customers. Given that Apple is very strong on its own backyard – not so much in hot mobile markets in Asia – it is fair to assume that the bulk of its sales could come from the US. (Cingular and T-Mobile total up to about 74 million GSM customers in the USA.)

There was another report that tried to correlate the flash memory with Apple and iPhone, though it was hard to figure out how much of it was fact, and how much fiction. Rui, fed up with the bullshit has come up with iPhone Rumor Bullshit Bingo.

  1. Om,

    I have been a faithful reader of your Blog since it started. I have never felt compelled to comment until you gratuitously linked to the Aaron “Ahem” Boone home run story. Perhaps I should remind you of the more recent and important Yankees story:

    http://newyork.yankees.mlb.com/NASApp/mlb/nyy/news/nyygamedayrecap.jsp?ymd=20041020&content_id=901385&vkey=recap&fext=.jsp

    Cheers!

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  2. Om, just for clarification, they sell around 30 million handsets per quarter in the US. The majority of the handset sales is the replacement sales, not the net adds sales. So, Cingular sells more than “1.4 million handsets in a given quarter.” But I agree with you that the 29-million forecast of iPhone shipments is still way too optimistic.

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  3. While there is certainly a good market for the iPhone, I’m a lot more interested in the iTV.

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  4. I’m holding out for the iPocket.

    wish list: TV, Voice, music, photos, video, mail support for blackberry or good type service, touch screen monitor, fold out keyboard, support removable storage, and a camera.

    did i miss anything? ;)

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  5. Yaromir’s 30M for Cingular is closer to the truth. Don’t confuse net adds with gross adds though. With churn at about 2%+ (pick your exact number), gross adds need to be 2*12=24% of the base, or ~15M just to stay at 58M subs. Add Om’s quarterly net adds of 1.4M x 4 quarters=another ~6M and then add people who estay with Cingular but ‘upgrade’ or are ‘saved’ with a new phone and get another 10% (?) of the base for another 6M. 15+6+6=27M. Close enough to Yaromir’s number.

    Net net, the iPhone will change the way the carriers behave. They’ll realize their best bet is to be a good pipe and sell good phones. Verizon and T-Mobile will both learn not to pretend they have any idea about the content customers want or how they should receive it and will eventually learn to stop trying to control what customers can and cannot do on their phones. Sprint and Cingular have already wised-up. Apple probably would have chosen Sprint if they weren’t CDMA.

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  6. Sorry for confusiion, but I meant that around 30 million handsets were sold by all U.S. carriers per quarter. While Ol’ Yeller made the calculations for the whole year and for Cingular only.

    Ol’ Yeller,
    In your calculations you assumed the churn rate to be 2% per month, but I think the churn rate is reported on a quarterly basis.

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  7. I generlaly find Om lacking when he starts talking about mobile phones as they relate to contemporary culture — he can’t help it, he’s too old to really understand. There will be immense power in putting into the marketplace a truly interesting and cool device with instant brand recognition not linked directly to carriers. Apple’s true capabilitity is in being a branding machine — this will become evident when the iPhone hits the market and blows away terrible phones like the Razr.

    I honestly don’t think the 29 million sales projection is accurate, but I will say that whatever number Om is thinking of is likely just as off.

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  8. yaromir, churn is reported every quarter by the number reported is the average monthly churn rate. Yes, carriers really do have about 25% annual churn!

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  9. Notwithstanding the usual frenzy associated with anything Apple these days, let’s not overlook some industry factors. Granted Apple has done amazingly well with iPods, but why that should necessarily translate into the mobile phone world right away is not that apparent to me.

    • mobile operators are still a dominant force worldwide. Why would they allow Apple or anyone else to easily get around them? After all, device manufacturers have been trying for years – including Microsoft.

    • there are several name brands already in the mobile phone world – Nokia is #6 brand in the world. Motorola is also well known. Brand alone will not be enough for Apple to muscle their way in.

    • Nokia NSeries phones have done well in Europe and Asia, thereby showing the world that there is a good market for music / multimedia focused devices; however, we are still looking at a small segment of the overall market, not the mainstream.

    • There is a long and steep learning curve associated with mobile devices – 1st and 2nd gen devices are not very robust and durable – some examples that come to mind are the early Treos, early HTC Windows Mobile phones, Danger Sidekicks, etc.

    • Purpose-built devices take a long time to replace voice-focused mobile phones. Take the Blackberry example. According to various analyst estimates, even today over 50% of Blackberry users still have a separate voice phone.

    I’m sure there are several other hurdles that would need to be overcome for an Apple mobile phone device to be successful.

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