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Column: Competitors Show No Signs of Duplicating Apple’s iPhone Business Model
Tuesday, February 26th, 2008 at 3:00 PM - by John Martellaro
A detailed examination of Apples iPhone business model for the iPhone shows that Apple has completely understood the economics of the mobile phone industry and exploited them fully. Moreover, Apples competitors are showing no signs of either extracting themselves from their plight or producing a phone that can compete with Apples, according to Daniel Dilger at Roughly Drafted on Wednesday.
Mr. Dilger outlined the five money making elements that give Apple a competitive advantage over the competition. Those revenues can be used for technology development that the competition just cannot equal.
Those five elements are: 1) Manufacturing profits, 2) Retail profits, 3) Carrier revenue sharing, 4) Accessory sales, and 5) Software and media sales.
Essentially, Apple has created a broad in scope financial engine that generates a considerable cash flow. Most analysts have appreciated this cash flow engine, and investors, seeing that, brought Apples stock to the US$200 range in late 2007.
Mr. Dilgers broader point, however, is that the financial leverage will allow Apple to climb the ranks of cell phone sales and seriously challenge the competition. For those observers who think that competitors will be able to conjure up an iPhone killer, Mr. Dilger suggested that, almost a year after the iPhone introduction, no one has been able to create viable competition not just for the phone itself, but Apples revenue model. He pointed to the continuing success of the iPod as an example. Making a small MP3 player is not all there is to this business.
"Of course, over the last decade no hardware maker has been able to offer a popular iPod replacement either, which should cause at least some pundits to rethink their fantasy position on the imminent arrival of a far more complex product to take on the iPhone, and by extension, its sophisticated iPod Touch cousin, both of which make the original, unrivaled iPod look like a rather simple gadget," Mr. Dilger concluded.
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