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 Prior to its June 29th release, Apple's iPhone had already seen the kind of media hype and expectation that other consumer products could only dream of. If the iPhone proves as successful as the hype, it could benefit a number of companies involved in its manufacturing and distribution, while sidelining their competitors. Additionally, the iPhone could potentially invert the existing power dynamic between cell-phone handset manufacturers and the telecommunications companies that control the mobile networks on which these handsets operate. Today, service providers dictate terms to handset manufacturers, often specifying the features that should be included in a device, the messaging and marketing the company should employ, and even the price that can be charged for it. Apple changed that dynamic. Because of Apple's past success designing game-changing consumer electronic devices such as the iPod, it was able to strike a different kind of deal with cell phone carriers. AT&T had to cede virtually all control over the device to Apple in exchange for an exclusive deal on the phone.[1]  A survey done by ChangeWave research showed that as on 1st Apr 2008, an extraordinary four-in-five iPhone owners (79%) report they're Very Satisfied with their iPhone - a significant lead over number two RIM (54%) and far ahead of all other major manufacturers. This shows us how well the iphone has done amongst users. [2]
[edit] IPod CannibalizationIt’s not a surprise that sales of iPods have been slowing. Since we live in a world of limited resources, growth cannot persist indefinitely. As iPod sales have grown to staggering heights, the Law of Large Numbers takes effect. To continue its FY07 31% unit growth rate, Apple would need to sell close to 70 million iPods in FY08, which is one-half the 140 million total sold over 6 years. At that growth rate, iPod sales would be 200 million FY12. It’s Highly unlikely that annual sales volume would ever achieve that level. Unit growth has been trending towards a rate in the teens, possibly single-digits. Last quarter, Q1 2008, units increased 5%, compared to 50% growth in Q1 2007. Yr/Yr 2007 growth rates were 24% (Q4), 21% (Q3), and 17% (Q2). Unit growth was 31% in FY07, compared to 75% (FY06), 409% (FY05), 371% (FY04), and 149% (FY03).
iPod unit sales only grew 5% yoy for Q1, but dollar sales increased by 17% due to a higher average selling price (ASP). After 8 consecutive quarters of declining ASP, the Touch reversed that trend as ASP rose last quarter to $181/unit. You would have to go back 6 quarters to find a higher ASP. Boosting the ASP is a very positive sign in light of the slowdown in volume. Going forward, ASP will be the key metric to focus on. iPod sales have mirrored the S-curve, which generally depicts the product life cycle. There are 5 stages in the PLC. Initially, sales growth is flat and then begins to increase in the introduction stage. The product enters the rapid growth stage, where sales increase at an accelerating rate. In the slowing growth stage, sales increase at a decreasing rate, finally to a point where sales turn flat as the product enters the maturity phase. Sales growth turns negative in the decline stage.
To avert the Decline (or mature) stage, product innovation is needed to rejuvenate sales growth. Introducing improved models with new features can sprout a new curve from sales growth reaccelerating. The S-curve then takes on a more scalloped shape. [edit] Companies that benefit from the iPhone's success
[edit] Component suppliers that benefit from the iPhone's successApple uses a number of contract manufacturers and suppliers to make its products. Most are Taiwan-based. While shares of some of these companies are listed on U.S. exchanges as ADRs, others can only be purchased through the Taiwan or Hong Kong stock exchanges.
[edit] Companies that benefit from the iPhone's failure
[edit] What is "success" for the iPhone?The iPhone already faces high expectations. Steve Jobs has said the company expects to capture 1% of the cellphone market by 2008 -- which would correspond to 10 million handsets sold. The goal is ambitious but not unheard of -- Motorola had sold 50 million RAZR handsets as of July 18th, 2006 -- about two years after the phone's launch. However, the phone faces several challenges:
[edit] The launching days: recent iPhone newsAs expected, crowds swarmed the Apple stores on and after June 29th--according to the LA Times, half of the West Coast Apple stores sold out on the very first day. Cnet.com's Jaffray estimates first weekend sales tally to about 500,000. The iPhone seems to be living up to its hype--reviewers are not gushing, but they're almost uniformly pleased. The launch wasn't all golden for iPhone, though--until a few days after launch, about 2% of new iPhone owners faced a nightmarish activation process. (Macworld's Dalrymple relates his "iPhone activation disasters" here.) Most of these issues have been resolved by now; it remains to be seen how big an effect this will have on iPhone's sales. Recent speculation about the possible introduction of a smaller and less expensive iPhone was received so well that Apple's stock jumped to a new all-time high (as much as $134.50) that morning, according to the Associated Press (see Apple's WikiChart entry, July 10th, 2007). But the rumors haven't been confirmed, and doubts resulted in a gradual decline later in the day--iPhone's hype aura is a volatile catalyst in more than one direction. (Patents filed earlier in the year that seemed to show an iPhone/iPod nano hybrid fuel the speculation.) [edit] Footnotes and References
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