The default screen in any public computer in both the New York 59th St and Soho Apple Stores was a big "Introducing iPhone" that I couldn't miss. And at this very moment, the home page of www.apple.com US website is also an iPhone.
So I guess it's the opportunity to come back on that product, all the more the trademark dispute with Cisco has now been settled (or so it seems, here), though it will not reach retail outlets before another 3 months (due date June, I should then be back in NYC for the occasion).
Back in January after the launch of the product, I wrote I was very confident on its future.
True however that Apple is charging a hefty price for the device, up to $599. There is a great number of Apple affionados/early adopters who will rush to buy it as soon as it is available, but this will not add up to 10M units and a 1% market share !
As for myself, I'm not too price sensitive as when it comes to have a piece of design in my hands (or at my place), I recently replaced my dying Tréo 650 by the new 680 for 429€, and I believe this was not as good value as the coming 8Go iPhone. But 599€ is definetly a dent in my budget.
The today-defined price points are definetly a concern and a hurdle for Apple if they want to sell 10M units, but Steve Jobs has some flexibility to lower the price. The 10M goal is in 2008, and by the end of that year, I assume that new devices will have been introduced (may be cheaper ones, say at a $299 level) and price points for the 2 original models may have been lowered to $399 and $499.
I don't expect the competion
to stay sleepy. Samsung and LG, among others, are very aggressive and have already announced touchscreen models.
Sure they won't have the cute design and the versatility of the iPhone,
but they will compete and install some price benchmarks which will have
an impact which will force Apple to revise prices.
Some analysts believe Apple will replicate the iPod strategy and will take its time to introduce lower-priced models. Well, I don't believe so, because the phone market is already a big, mature and competitive one, much unlike the iPod/MP3 player market back in 2001. Apple basically created this market and still corners around 75% of it. If they really want to grab 1% share of the mobile phone market and sell 10M units by 2008, they have to attack different segments with lower price points.
Fundamentally, I think the phone market is a tremendous opportunity for Apple and they will do what it requires to grab a good portion of it, 1% being only the beginning. Let's project ourselves in 5 years time, we can be sure that portable phones will be used to do many more things than what we use them today. Technology and accessible prices will bring new phone applications to a vast public : TV and video, online shopping, geo-localization, etc.
In this world of convergence, I'm convinced the phone market will change tremendously and I believe that Apple is ideally positioned, in terms of technology, design, brand, component sourcing, media deals and software, to be a significant player in this industry. They will of course never be a Nokia or Motorola with a 20%+ market share, but they will carve out a decent nich in the high-end market, and that could amount to 2-3% global market share. That would means tens of millions of units sold, billions of additional revenues and hundreds of millions, if not billions, of additional profit.
By the way, it's always the same story in investing (be it stock exchange or Private Equity), it's all about market dynamics and positioning, and I love when a company is ideally positioned in a fast growing market ! Especially when the market is changing fast with new skills and assets required to succeed : incumbent players usually are not reactive and flexible enough to exploit all opportunities.
Back to the iPhone, in the more near future and technicallywise, the device incorporates lots of R&D but its manufacturing cost is somewhere between $200 and $300 depending on the model and the assumptions (analysts diverge). This leaves a hell of a nice gross margin to Apple and the flex to lower prices if needs be.
And there's another joker : Cingular may well offer a discount for the iPhone in an effort to attract new upmarket customers.
As in any consumer goods market, the issue of distribution is crucial : where will the iPhone be distributed ? Will it only flow through Apple Stores (including web store) and Cingular stores (for the US) ? And how about the International, which carriers will they use ? As for France, there's no Apple Store yet : will the "Apple Centers"' (or the Apple Premium Resellers as I believe such is their today new name) be authorized to sell them ?
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