Apple Must Act to Maintain iPhone Sales Momentum - Analysts
SAN FRANCISCO -(Dow Jones)- With the launch over, the lines evaporated and the initial buzz fading, Apple now faces its next iPhone challenge - keeping the marketplace momentum going.
Although official sales numbers have yet to be released, many consider the iPhone debut a success. However, with the early adapters and Apple enthusiasts among the early buyers, and concerns bubbling about the phone's network limitations, high price and potentially short battery life, some are wondering if Apple can maintain the momentum needed to achieve its ambitious sales goals.
Already, speculation is increasing about overseas models and next-generation iPhones. While such interest is generally good for Apple, too much focus on future versions could limit current sales. And maintaining sales momentum is important because, for every million iPhones sold, Apple profit is said to jump 2 cents per share.
"The iPhone had a great first weekend, but now the question is what is its staying power," said Bill Hughes, an analyst with In-Stat. "Its staying power is due to how many features they get right.
The Cupertino, Calif.-based Apple has already taken several steps to try and keep the phone sales strong, including preparing to sell the phone outside the U.S., according to a posting on the Best Buy Web site that promises a version of the device for Canadian users.
But will these and other steps be enough? Here is where opinions differ.
Pacific Crest Securities consumer electronics analyst Andrew Hargreaves is among those very bullish about the phone.
Following the first weekend's sales of between 400,000 and one million, Apple will sell 1.2 million of the devices this year, up from his original 800,000 estimate, Hargreaves now believes.
Next year, Apple is likely to sell 7.3 million, nearly twice his original estimate of 4.8 million.
Goldman Sachs analysts are even more bullish, predicting Apple will sell 12 million of the devices next year, up from the 10.5 million they originally believed.
Analysts at both firms say Apple has demonstrated it has ample supply of the devices, and has worked to ease early concerns about the device's battery life, fragile-looking screen and other functionality issues.
"We believe this clears the way for strong follow-on sales in the coming quarters," Hargreaves said, in a note to clients.
Meanwhile, Apple is expected to attempt to keep momentum going by introducing two new versions of the iPhone that address concerns about the device's relatively high price, and how fast it can surf the Internet.
Presently, the phone uses AT&T's second-generation cellphone network which, at its peak, operates at speeds of about one-tenth that of a wired broadband Internet connection.
Even before the combination cellphone, digital entertainment player and Web surfing device went on sale June 29, Apple was facing pressure to create an iPhone that uses the fastest of cellular phone networks, thus creating a Web experience that is near the speed of a wired connection.
Citing unnamed sources, several news outlets have been reporting that Apple has already signed a pact to sell a faster version of the phone in Europe.
Also, the device's price tags of $500 and $600, depending on configuration, also must come down in order to attract more mainstream customers, and non-Apple computer users unfamiliar with the price premium attached to Apple products.
Analysts at Gartner say a lower-priced device is needed within nine months to keep the momentum going.
Here, too, Apple appears to be taking steps. The company filed a patent early last week for a version of the iPhone that could sell for under $300, and Goldman Sachs analysts said the device may be out by year's end.
To be sure, there are doubters out there. In-Stat's Hughes believes that, despite the changes Apple has made to the device, disappointments over battery life may be a key momentum killer.
"Battery life may be one of those momentum killing clinkers," he said.
-By Ben Charny, Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com
(END) Dow Jones Newswires "
Posted to the site on 11th July 2007