Tuesday, May 22, 2007

Will iPhone define the market?Yes it may.

Off late Apple shares riding on high as iPhone release date is around the corner.Apple targeting 1% share in phone market means it believes it can sell 10mn units in a year time.Is that realistic??'Coz Apple is completely new to phone market and the device is too costly($499 for 4Gb,$599 for 8Gb models respectively).Apple says the price is worth 'coz it is coming with the most advanced software ever shipped on phone.Nevertheless the device may start very well 'coz it is coming with touch interface which generated lot of interest and buzz.Apple's brand loyalty can push it further.According to a harvard professor iPhone already got $400mn worth of free publicity.I am sure once iPhone releases in market You tube will be packed out.

According to IDC smart phone segment have reached only 100 million units in all of 2006. Leading this market is Nokia with about 47% share,followed by Motorola with 9% and Research in Motion with about 7%.Now Apple wants to take 3rd spot(10 mn units and 10% smart phone market share) directly in the first year itself.According to Gartner, even popular Blackberry shipments for the year 2006 came in between six and seven million.It looks bit unrealistic for Apple which doesn't have any experience in phone market.But when Apple entered music market back in 2001, everybody said Apple is a PC company and it can not compete in consumer electronics market.But Apple proved everybody wrong.

Apple going to hit a gold spot with iPhone and according to iSuppli the 4 GB model, which will retail for $500, will cost Apple about $246 (total expense, bill of materials only: $230) to get the device to the buyer, yielding a 49.3% margin. The 8 GB model ($600 retail) is about $281,which is estimated to reach a 53% margin.It estimates that Apple going to churn out iPhone profits worth of $2.5bn if it meets the shipment goal.

Another big winner in iPhone game is Cingular which is expected to add 10mn new subscribers(if Apple meets the goal) 'coz it has exclusive contract with iPhone.Many subscribers expected to switch to cingular once they get iPhone in their hands.

So,who is going to be looser??Obviously heat is on RIM,Palm,Nokia etc. to comp up with some thing similar to iPhone.I mentioned it in one of my posts also.I predict by early 2008,market will be crowded with touch screen phones as some companies like LG,Samsung demonstrated it already.A Sweedish startup called Neonode also going to release touch interface phone this year.

I think iPhone may not cannibalize ipod sales 'coz it's initial price is too high,but as iPhone price goes down it may.But Apple may release iPhone look like wi-fi ipod(without phone functionality) separately in the market for sub $250 soonly to keep iPod juggernaut on.iPhone is the most awaited gadget in 2007 and its almost certain that it will hit Grand slam.It remains to be seen how iPhone will change the dynamics of industry.

1 comment:

sdfdsf said...

good insights..keep writing this kind of market related stuff