Slash LaneApple's goal of selling 10 million iPhones in 2008 is being tossed under the microscope just as Blackberry maker Research in Motion (RIM) announced that its smart phone business has remained uncharacteristically strong through the start of the new year.
The analyst noted that iPhone sales averaged 180,000 units a week in the fourth calendar quarter of 2007, which stands as Apple's busiest period of the year. As such, he estimates to company will sell just 7.9 million units during the course of the year, given no change to its strategy.
"While we believe the iPhone has the potential to drive material earnings growth for Apple, recent data points suggest the business is facing two significant challenges: (1) overall demand for the handset appears to be falling short of expectations; and (2) the incidence of 'unlocking' has been much higher than expected," Sacconaghi wrote.
The Bernstein analyst was referring to recent reports that Apple has scaled back first calendar quarter iPhone production, and that unlocked versions of the handset may comprise 25 percent or more of the company's total shipments.
Should Apple hit its 10 million iPhone sales target, the number of unlocked devices would cause the company to forego between $1.1 billion and $1.3 billion in deferred subscriber revenues over two years, he added.
Meanwhile, RIM said Monday that it, unlike Apple, has not witnessed a decrease in subscriber growth since the start of the new year, as it had originally projected. Instead, the Blackberry maker now expects fourth-quarter subscriber additions to be approximately 15 - 20 percent higher than the 1.82 million it forecasted in December.
"BlackBerry smartphones proved to be a big hit throughout the holiday selling season and we’re pleased to see RIMM’s business momentum continuing in the new year," said co-chief executive Jim Balsillie. "The seasonal slowdown in net subscriber account additions that we expected in the new year did not occur and our focused execution with partners has continued to produce strong results within both enterprise and consumer segments."
RIM's ability to maintain its subscriber momentum has been attributed by some to its lower-cost offerings, such as $99 Blackberry Pearl, for which Apple offers no competitive option. Following the introduction of a $499 16GB iPhone earlier this month, BMO Capital Markets analyst Keith Bachman suggested that the Cupertino-based company may be going in the wrong direction when it comes to pricing.
"We believe Apple generates more than $200 in gross profit over the life of the phone, compared with approximately $100 for the actual sale of the phone," he wrote in a research report. "Consequently, we believe Apple would be much better off with lower-priced phones, with less profits at the time of sale, and significantly higher revenues/profits over the approximately two-year life of the phone."
Still, it's believed that Apple will aim to maintain its current course and the higher average selling price of its iPhone handsets later this spring with the introduction of a 3G model that should also help spur new demand. Reports have suggested that a target introduction is again planned for the June timeframe.
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"We believe Apple generates more than $200 in gross profit over the life of the phone, compared with approximately $100 for the actual sale of the phone," he wrote in a research report. "Consequently, we believe Apple would be much better off with lower-priced phones, with less profits at the time of sale, and significantly higher revenues/profits over the approximately two-year life of the phone."
Well that would be great if people weren't unlocking the damn things at an astonishing rate. Does this guy not know how many are bought and unlocked or has he chosen to ignore this fact?
How would Apple make any money on unlocked phones on carriers that don't share revenue with them if they lowered the price much more?
RIM's ability to maintain its subscriber momentum has been attributed by some to its lower-cost offerings, such as $99 Blackberry Pearl, for which Apple offers no competitive option.
Well golly, the iPhone has not even been out a year yet - if you think Apple is not going to borrow from its iPod playbook then you're
" if the company insists on maintaining carrier revenue share agreements without a significant price cut or new model introductions."
So... this analyst thinks there is ANY chance at ALL of there being NO new iPhone models or price changes all year?
"the number of unlocked devices would cause the company to forego between $1.1 billion and $1.3 billion in deferred subscriber revenues"
As the Macalope points out, that's not true: Apple's not "foregoing" that revenue-sharing, because there would BE no (or at least less) revenue-sharing agreements without the exclusivity. It's like saying "AT&T pays Apple to be the exclusive carrier. Apple is stupid not to make ALL the carriers be exclusive (?) so they can get ALL of them to pay Apple the same amount AT&T does." Obviously, they can't all be exclusive, and would not be willing to share as much without exclusivity. Apple's not "foregoing" that revenue-sharing... but they ARE making money on all those unlocked phones. Making--not losing.
Why they care about unlocking device ???? the majority of the unlocking iPhone is for other country were no carrier offer the iphone. So, apple do not loss any money from carrier, the iPhone is not available in those country (Canada, China etc..), they just sell more iPhone.
Quite honestly, I prefer the BlackBerry to the iPhone for business, and so does my son, who works for AT&T, and sells to enterprise. I like buttons versus touch when it comes to business. Apple will eventually get to where it is going with the iPhone, but Apple is not there yet. BlackBerry's have great speakerphones, and other basic features that work well such as GPS.