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Analyst: Apple iPhone Numbers "Out of Hand"

Tuesday, June 3rd, 2008 at 1:25 PM - by

Every week, another telecommunications company worldwide makes a brief announcement about carrying the iPhone, then observers accumulate the potential worldwide audience in awe. On Tuesday, Pacific Crest's Andy Hargreaves said that the numbers are now out of hand and should be put in perspective.

Deals with Apple now reach a potential audience of 669 million subscribers, and increase of 520 million in the last month. However, Mr. Hargreaves has advised investors to slow down. While it's true that worldwide sales of mobile phones are expected to reach 1.27 billion this year, he reminded investors that not everyone wants a smartphone.

As such, most of those astronomical numbers can't be used as potential iPhone buyers. His estimate for smartphone purchases in 61 million units in 2008 and 81.3 million in 2009. With an estimate of Apple's market share of the smartphones only at 17.2 percent in 2008 and 18.8 percent in 2009, that puts iPhone sales at 10.5 million in 2008 and 15.3 million in 2009.

Gene Munster with Piper Jaffray has put the number considerably higher for 2009, 45 million.

Mr. Hargreaves added that demand could be driven higher by compelling enterprise applications for the iPhone. Subsidies could also boost demand as well as new deals in China, Russia and Japan

Recently, Apple struck a deal with Hutchison Telecom to sell the iPhone in Hong Kong and Macau, but that represents only a small fraction of China's population.

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geoduck said:

member since 30 Dec 2003 with 1922 posts, unranked, send him a message or view his profile

Tue Jun 03, 2008 2:00 pm

Quote:
While it's true that worldwide sales of mobile phones are expected to reach 1.27 billion this year, he reminded investors that not everyone wants a smartphone

Hear Hear for someone finally standing up and trying to introduce a bit of rational thought into the irrational exuberance of some in the press. I for one have a perfectly good iPod and high speed internet access at home and at work. A smartphone would be an expensive redundancy. My Rogers account has voice, and nothing else. No IM, no e-mail, no paging, no web, not even voicemail. So while I'm an IT professional and tech geek (ideally the core demographic for the iPhone) I have no interest in spending money on something and then not using most of its functions.

I don't think I'm alone in this.

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Brutno said:

member since 28 Aug 2002 with 198 posts, unranked, send him a message or view his profile

Tue Jun 03, 2008 2:23 pm

[quote="geoduck"]

Quote:

I don't think I'm alone in this.

Certainly not. I've only voice and voicemail. I have no need for other services, although this limits, economically, my phone choices. I'm not in the smartphone target market.

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derpassante said:

member since 23 Aug 2007 with 15 posts, unranked, send him a message or view his profile

Tue Jun 03, 2008 2:36 pm

Brutno wrote:
[quote="geoduck"]
Quote:

I don't think I'm alone in this.

Certainly not. I've only voice and voicemail. I have no need for other services, although this limits, economically, my phone choices. I'm not in the smartphone target market.

I remember when I got along without a cell phone. Let alone an iPhone. Not anymore.

Even my wife who at first got annoyed with me for pulling out my phone to check email or look something up now asks me to check something on the web while we are out.

YMMV

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vasic said:

member since 09 Aug 2005 with 279 posts, unranked, send him a message or view his profile

Tue Jun 03, 2008 2:36 pm

Neither of the two commenters above are included in the 669 million number above. You need to understand that the number doesn't represent total population in the countries where new iPhone will have market presence. It represents the number of potential buyers, based on purchasing power and other criteria. This estimate has most likely excluded people like you who don't seem to want or care for this type of technology.

I'm still very much ready to trust Mr. Munster and his projections. We'll see in a year or so.

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gslusher said:

member since 13 Nov 2002 with 2088 posts, unranked, send him a message or view his profile

Tue Jun 03, 2008 3:03 pm

I'm not sure that an IT professional and tech geek" is the "core demographic" for the iPhone. In fact, that may well be the antithesis of the iPhone's core demographic. There are very, very few IT professionals and tech geeks--a vanishingly small number in the cell phone market. If Apple had aimed the iPhone at them, it would look and work more like the BlackBerry.

Here's an experiment to do: get together a dozen or so 12-16 year-olds. Let them play with the iPhone for a while, then ask them if they want one. You'll probably get 90+% "Yes!" (Their biggest complaint might be the size--it's a bit large for a cell phone. OTOH, if they can jazz it up with bling, they'll like it.) Do the same with a dozen college students. Probably 80+% "Yes!" (If it had a video camera, it would be even higher.) Now, get a dozen grandparents and show them how to view photos & videos of their grandchildren on the iPhone, either through the web or stored. Not 90%, but very high. (I "sold" several iPods 5G that way--and, no, I don't work for Apple or a dealer. Now that the Nano 3G does video, it's an even easier sell. Several of the kids I work with in 4-H have new Nanos. When they bring them out to show videos & photos, the other kids cluster and pass it around.)

Before you say, "But kids can't afford an iPhone," understand that there is serious money in the 12-16 demographic, even more in the college-age group.

The major put-downs about the iPhone that I've read (no flash, no user-replaceable battery, virtual keyboard, etc) have mostly been from "geeks" and/or hardcore BlackBerry users. (On the battery issue, I asked about 20 people who use cell phones if they had an extra battery and, if so, if they carried it. Several didn't even know that they COULD replace the battery. Only three had an extra battery and only one EVER carried it. The other two left the spare in the charger and switched batteries in the morning, a pretty smart way to go.)

When the iPod first came out, there were many articles saying that it would be limited to "tech geeks." We all know how prescient that turned out to be.

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geoduck said:

member since 30 Dec 2003 with 1922 posts, unranked, send him a message or view his profile

Tue Jun 03, 2008 3:50 pm

gslusher wrote:
I'm not sure that an IT professional and tech geek" is the "core demographic" for the iPhone...The major put-downs about the iPhone that I've read (no flash, no user-replaceable battery, virtual keyboard, etc) have mostly been from "geeks" and/or hardcore BlackBerry users.

You could be right. I've seen a lot of Macs at IT geek gatherings, but few iPhones.

Actually the funniest article I ran across was one a couple of weeks ago where the author "liked the iPhone but wished it had a "good" keyboard, like the Blackberry". I laughed out loud. I've used a Blackberry. I hated the keyboard, it was too small.

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A guest said: (hide)

Tue Jun 03, 2008 4:02 pm

geoduck wrote:
gslusher wrote:
I'm not sure that an IT professional and tech geek" is the "core demographic" for the iPhone...The major put-downs about the iPhone that I've read (no flash, no user-replaceable battery, virtual keyboard, etc) have mostly been from "geeks" and/or hardcore BlackBerry users.

You could be right. I've seen a lot of Macs at IT geek gatherings, but few iPhones.

Actually the funniest article I ran across was one a couple of weeks ago where the author "liked the iPhone but wished it had a "good" keyboard, like the Blackberry". I laughed out loud. I've used a Blackberry. I hated the keyboard, it was too small.

Well I think you've just proven the niche market you are. RIM does not market the Blackberry to the IT field exclusively, nor have they ever. They targeted the Exec class that were never at their desk. Things trickled down from there, and today they still don't look for the geeks to drive their sales they look to those that require instant access to corporate data through things like the MDS, primarily sales and Execs and now the medical field.

While RIM headed into the market in 2000 aiming directly at the suits, Apple went from the other side and hit the consumer with a functional product that appealed to the everyday person. While a lot of people see these smart phones a geek gadgets, the geek market is not what they've been aiming for.

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YodaMac said:

member since 21 Mar 2007 with 29 posts, unranked, send him a message or view his profile

Tue Jun 03, 2008 5:40 pm

It took me just two weeks with the iPhone to know that I would never want to be without one again.

And before that I had only bought a single cheap cell phone (no camera, color screen, etc.) just to "use for emergencies" and only turned it on to make a call, then turned it off.

Two weeks with the internet, email, music, videos, phone, and most importantly Google Maps in my pocket - and I repeat: I never want to be without an iPhone again!

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A guest said: (hide)

Tue Jun 03, 2008 8:34 pm

The Pacific Crest guy, like most anal-ists, keeps making the same mistake of using backward-looking statistics. Yeah sure the recent statistics show only a small percentage of mobile phones purchased are smart phones. The question is, will that percentage hold when the new iPhones (yes plural!) come out. When the first cell phones come out, did any analyst ever predict that every monkey and his uncle will be owning one? Nooooooh.

This anal-isyst obsession with their fancy little Excel models makes them all look like fools when the market suddenly shifts. The good analyst gets a feel for the product, the customer, and the technology and is able to call it when the market is about to undergo a major shift that renders those nifty little Excel models obsolete.

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A guest said: (hide)

Wed Jun 04, 2008 7:06 am

Hargreaves premise is silly: the iphone is confined to the current market for smartphones. With that logic, we could have predicted when Apple was founded that it would sell zero PCs because the market for personal computers was zero... Apple and Microsoft created a market for personal computing. Apple is creating a market for personal smart phones. It will be huge. Hargreaves could be right about the numbers for 2008 and 2009, but the constraints would be economic--people not being able to afford it--not demographic, as his analysis suggests. --Greg Bates

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