Analyst: 25% of iPhone Buyers are Switchers

July 12th, 2007 at 3:00 PM - Apple Stock Watch by Jeff Gamet

Appleis iPhone has proven to be a popular choice over the two weeks since its launch, and AT&T competitors are watching closely. American Technology Research analyst Shaw Wu estimated that about 25 percent of iPhone buyers are switching from other carriers to get their hands on Appleis combination iPod and smartphone.

"Our sources indicate that around 25 percent of iPhone-AT&T customers are iswitchersi from other carriers," he said. "We find these numbers impressive showing that a fair amount of customers are willing to pay high early cancellation fees (between US$125 and $200) to get out of their existing service contracts for an iPhone."

The figures suggest that cell phone customers are dropping their carriers and switching to AT&T because the company has an exclusive deal as the only service provider for the iPhone in the United States.

Mr. Wu added "The only other product we are aware of in recent history that commanded a similar type of respect (at least in the beginning) was the Motorola RAZR in mid to late 2004, priced at $500 with a service contract and $800 without."

In comparison, the iPhone costs $499 for a 4GB model, or $599 for an 8GB model.

Mr. Wu is also predicting that Apple will bring smartphones out of the realm of business users and into the consumer mainstream within two to three years by offering additional iPhone models that fall in the mid and entry-level.

The iPhone popularity means that Apple is now in a stronger position to negotiate deals with cell carriers in Europe, and may end up signing deals with multiple carriers that focus on specific regions or countries. Those deals will likely be on Appleis terms. "Regardless of which companies get picked for iPhone rights in Europe, we believe Apple is in a strong position to end up with favorable terms similar to what it was able to get from AT&T," he said.

Mr. Wu is maintaining his "Buy" rating and $165 target price for Appleis stock. Apple is currently trading at $135.21, up 1.14 (0.85%).

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