Friday, May 15, 2009, 11:00 am PT (02:00 pm ET)
Apple execs disclose options for boosting iPhone market shareApple executives said this week they believe the iPhone remains in its infancy and went on to — somewhat uncharacteristically — reveal a series of strategic measures they may employ in the near term to help grow the handset's share of the booming smartphone market.
The comments came during a meeting between senior company officials and analysts for Oppenheimer, who stopped at the iPhone maker's Cupertino-based campus Thursday as part of a bus tour that also swung by the headquarters of Synaptics, Trimble Navigation, Zoran, and Cypress Semiconductor.
In a report on the meetings issued to clients Friday, analyst Yair Reiner said Apple sidestepped his questions on new products but remained upbeat about the potential for "considerable" growth through share gains in two of its three core business segments: the Mac and iPhone.
On the Mac side, Apple indicated that some of its strongest prospects for share gains exist internationally, where growth has recently outpaced that of the U.S. For example, the company said last month that unit sales and revenue grew 5 percent and 18 percent, respectively, on a year-over-year basis in Europe compared to an 8 percent unit decline and 8 percent revenue increase in the Americas.
Meanwhile, Reiner wrote that the "iPhone is still in its early days and could gain share by: providing more functionality; lowering prices; growing geographically; or segmenting the market with different models."
Uncertain whether these assertions where those of the analyst or derived from specific comments by Apple, AppleInsider contacted Reiner for clarification. Surprisingly, the remarks came from management. "[T]hey are not saying they will necessarily do all of these," the analyst said. "This is basically the menu of options."
Still, the revelation is noteworthy given that it's the first time members of the company's leadership have expressed openly that they may be interested in catering to a broader demographic by fragmenting the iPhone line into a family of phones with materially distinct features and price points.
These comments may support the discovery of references to multiple new iPhone models in the company's pre-release builds of iPhone Software 3.0. The remarks on lower pricing are similarly interesting, though they've been made previously during earlier sit-downs with other analysts.
For his part, Reiner says he expects "some combination of all these" options to materialize over the next six months. In speaking to AppleInsider, he added that when it comes to segmentation of models, "Apple said that one thing would be a constant: iPhone will remain a software centric device."
Oppenheimer's visit to Apple's campus was the second in as many weeks by an equity research firm that provides ongoing coverage of the company. Last week, Kaufman Bros. analyst Shaw Wu made the trip in conjunction with a pack of investors that tagged along for the ride down from San Francisco..
In his write-up of the face-to-face encounter with Apple chief financial officer Peter Oppenheimer and Tom Boger, a senior manager in the company's Mac division, Wu similarly noted that no new product information was shed. However, he said he walked away from the sit-down with higher conviction in his "Buy" thesis on the company and a belief that Apple shares can support a higher trading multiple going forward.
"Apple seemed particularly excited about the China market but wouldn't comment on timing," he said, referring to the iPhone maker's prospects for capitalizing on the world's largest cell phone market, and suggesting a move into the region could come as early as this summer alongside new iPhones.
Government statistics indicate that there are more than 600 million wireless subscribers spread across the country, with market research firm iSuppli estimating that another 90 million are likely to sign up with a wireless provider this year. So the stakes are high and share ripe for the picking.
Both China Mobile, the world's largest wireless provider, and China Unicom, its smaller rival ranking second in the country, have both confirmed ongoing negotiations with Apple. However, recent reports indicate that momentum may have recently shifted in China Unicom's direction after talks between Apple and China Mobile, believed to be its first choice of partner with 415 million subscribers, reportedly broke down.
At the root of the issue were reported demands on the part of China Mobile that it be able to control the local version of the App Store. The carrier was also at one point said to be asking that Apple ship it iPhones with both Wi-Fi and 3G technology disabled for competitive reasons. And while there's no concrete information to suggest Apple would agree to make such concessions, references to "ChinaBrick" discovered in betas of iPhone Software 3.0 leave room for debate.
Apple could also approach China with a multi-carrier strategy, which turned out to be a healthy move in the land of Oz given that it led to increased competition, and ultimately more options for consumers, company officials told Wu during their meeting.
"In regards to new carriers beyond AT&T in the U.S., management commented that it remains happy with AT&T but that competition has been good and cited Australia as an example where there are three carriers carrying iPhone," Wu wrote.
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