Global Sources
EE Times-Asia
Stay in touch with EE Times Asia
EE Times-Asia > Embedded

Will iPhone hit the 10M mark?

Posted: 27 Feb 2008 ?? ?Print Version ?Bookmark and Share

Keywords:iPhone? Apple? handset?

Apple Inc. may stand by its target of selling 10 million iPhones in 2008, but analysts questioned whether the demand for the much-hyped handsets is high enough to meet the goal. This is according to a Dow Jones report, which cited several concerns surrounding the iPhone that may affect meeting Apple's targeted sales.

While iPhone will only account for a small portion of the company's overall revenue this year, Bernstein Research analyst Toni Sacconaghi forecasts that the device could make up a quarter of Apple's total sales within the next four years.

Sacconaghi added that since the iPhone likely generates gross margins of 55-60 percent for every device soldcompared to 30-33 percent gross margins for the rest of Apple's product linethe handset could be responsible for as much as 80 percent of Apple's future earnings growth.

With these forecasted figures, Sacconaghi warned that the challenges facing the iPhone business could have a significant impact on the company. He said that while the handset has the potential to drive material earnings growth for Apple, recent data points suggest the business is facing two significant challenges. Sacconaghi said in his report that overall demand for iPhone appears to be falling short of expectations and the incidence of 'unlocking' has been much higher than expected.

iPhone sales averaged 180,000 units a week in Q4 07 and based on that estimate, Sacconaghi forecasts that Apple should sell 7.9 million iPhones in 2008.

Other analysts have expressed worries about the iPhone's outlook due to the new 16Gbyte model announced earlier this month that costs $499. Keith Bachman of BMO Capital Markets said in a report that Apple would be better off with lower-priced models, as it could ensure steady revenues over the phone's two-year life.

Unlocked magic
With much of the iPhone's profitability coming from revenue-sharing agreements with AT&T Inc. and three European wireless partners, having unlocked iPhones in the market poses a threat to Apple's targeted revenues.

Apple does not disclose how much revenue it gets from AT&T or its European partners, but the wireless carriers each give the company payment every month for each customer that activates an iPhone on their networks.

Apple's latest quarterly earnings report showed a possibility that users may be buying iPhones to unlock them from the carriers. Analysts noted a discrepancy between sales figures provided by Apple compared to those of AT&T and some even concluded that as many as 1 million iPhones had been unlocked since its launch in June 2007.

Sacconaghi estimates that between 25 percent and 30 percent of the more than 4 million iPhones sold have been unlocked and that each unlocked iPhone results in Apple missing out on $370 in earnings over the iPhone's two-year contract period. Also, the unlocked iPhones present concerns in the company's ability to cut the price of future devices and sign up new carriers to revenue sharing plans.

Article Comments - Will iPhone hit the 10M mark?
*? You can enter [0] more charecters.
*Verify code:


Visit Asia Webinars to learn about the latest in technology and get practical design tips.

Back to Top