Summary
With over 20 million iPhones sold in fiscal 2009, the iPhone appears to be just beginning to build steam. Too soon to ask how long Apple can continue its dominance, the question is how dominant can it become.
Analysis
Competitively there have been many self-proclaimed iPhone killers – none that have lived up to or sustained their own hype. With the introduction of many new Android handsets on the way, there will likely be several, if not many, compelling models that collectively will start building market share in the growing smart phone segment, but none that I see becoming as singularly strong, or as popular, as the iPhone.
The iPhone has a lot going for it, including:
- It’s a really good product. When you can take the phone feature out of a phone and people still love it – that’s a good phone. (Without breaking out the numbers this quarter, Apple reported a 100% increase in iTouch sales in the last quarter; with an estimate at the end of 2008 of 13 million sold, or 75% of the rate of iPhones, 20 million units is probably a low estimate for calendar 2009 iTouch sales.)
- Significant corporate upside. With the release of the iPhone3Gs, many concerns of corporate IT managers were addressed and now hundreds of companies (Apple quoted roughly half of the Fortune 100 companies, and the same percent of Financial Times 100) are actively evaluating the iPhone for widespread deployment within their organizations. There’s a lot of pent up iPhone lust in corporations that may soon get satisfied.
- China. The world’s largest mobile phone market with over 700 million subscribers gets the iPhone legitimately the end of this month. Apple is launching with China Unicom, with ‘just’ 141 million subscribers to China Mobile’s 498 million, but China Mobile and Apple are reportedly still in talks. In the meantime, China Unicom’s 141 million serves as a good start.
- Ongoing demand is strong. The 7% sales increase this quarter is not as indicative of demand as the 38% increase in sell through. Sell through is a much better indicator of market demand. And, 38% is terrific growth in the current environment, albeit likely somewhat suppressed by tight supply in the quarter.
The only notable limiting factor I see at the moment is being limited to one carrier (AT&T) in the U.S. There are so many people that can’t or won’t use AT&T, a great many due to 3G coverage issues. So the iPhone isn’t available to them. And unless some surprise derivative product comes out through Verizon, that won’t change anytime soon. While I would love to see the iPhone on Verizon, as would a lot of other people, realistically Verizon would be just a nice to have for Apple right now - it’s not a must have, yet. Bottom line, the current global TAM (total available market) for the iPhone is enormous, and can support tremendous growth.
Cathy Stauffer consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
