iPhone demand in question? Read on…

Bob Faulkner
iPhone 3G Seeing Strong Global Demand
6/16/2008 12:07 PM EDT

I received an email from a subscriber in Portugal this AM indicating that Vodaphone (VOD:NYSE) and Orange were so swamped with orders for the new iPhone 3g, that they’ve ceased taking new orders. I have nothing to corroborate that comment, but if some of our international subscribers can provide some insights into what they’re seeing (good or bad) in their respective countries, the information would certainly be appreciated.

[quote author=“Tommo_UK”]iPhone demand in question? Read on…

Bob Faulkner
iPhone 3G Seeing Strong Global Demand
6/16/2008 12:07 PM EDT

I received an email from a subscriber in Portugal this AM indicating that Vodaphone (VOD:NYSE) and Orange were so swamped with orders for the new iPhone 3g, that they’ve ceased taking new orders. I have nothing to corroborate that comment, but if some of our international subscribers can provide some insights into what they’re seeing (good or bad) in their respective countries, the information would certainly be appreciated.

Vodafone Italy is still taking note of potential interest. They have a page where potential customers can register to receive information regarding pricing and plans about the iPhone as soon as they have them figured out.

[quote author=“Tommo_UK”][quote author=“Constable Odo”]You can hardly get more positive news than this, but I’m curious to see what it does to Apple’s stock this month.  Probably hold it from slipping further, I hope.

  iPhone sales to triple

He’s completely wrong.

They’re going to quintuple at the very least

I’ve heard and or read a few times that when a product priced is halved, sales typically go up 3 to 4 times.  AND, I believe this does not factor-in a product improvement.  Tommo’s 5x might be spot-on!

[quote author=“HammockGuy”][quote author=“Tommo_UK”][quote author=“Constable Odo”]You can hardly get more positive news than this, but I’m curious to see what it does to Apple’s stock this month.  Probably hold it from slipping further, I hope.

  iPhone sales to triple

He’s completely wrong.

They’re going to quintuple at the very least

I’ve heard and or read a few times that when a product priced is halved, sales typically go up 3 to 4 times.  AND, I believe this does not factor-in a product improvement.  Tommo’s 5x might be spot-on!

Providing Apple can supply that many iPhones on short notice.  I certainly hope Infineon doesn’t have any production problems.  I don’t doubt that Apple can sell a lot of iPhones and other products.  My main concern is that investors may worry about other things aside from sales and be thrown offtrack by media FUD which will hold down Apple’s stock price.

This media rumor mongering won’t go away any time soon: 
  Media crap

No facts behind any of it.

Macworld reports:

UK consumers appear four times more interested in the iPhone 3G, according to O2.

Apple’s UK network partner has confirmed that almost four times as many people have registered their interest in the iPhone 3G than those who registered an interest in the original model.

Link

The article goes on to say:

O2 claims in excess of 130,000 people have registered their interest in the new device when it ships, with interested customers giving O2 their email address in a form hosted on the network’s site.

The network saw 35,000 customers registering an interest in the first iteration of the iPhone, O2 observes.

Ronan Dunne, O2 UK chief executive, told The Telegraph that the price of the original phone had been “an issue for some segments of the market”. Despite that, Dunne points out that iPhone users spend 30 per cent more per year on their mobile bills.

35,000 pre-registered in November ‘07 before the launch of iPhone 1.0.

O2 sold @ 200K in the first two months.

130,000 have pre-registered for iPhone 3G…

Does that equate to more than 5x sales again?

Hmmm…

Cha-ching.

[quote author=“dmbream”]35,000 pre-registered in November ‘07 before the launch of iPhone 1.0.
O2 sold @ 200K in the first two months.
130,000 have pre-registered for iPhone 3G…
Does that equate to more than 5x sales again?
Hmmm…
Cha-ching.

I would say a million units in the UK in the first quarter of release is a given, if the availability is there.

[quote author=“Tommo_UK”][quote author=“dmbream”]35,000 pre-registered in November ‘07 before the launch of iPhone 1.0.
O2 sold @ 200K in the first two months.
130,000 have pre-registered for iPhone 3G…
Does that equate to more than 5x sales again?
Hmmm…
Cha-ching.

I would say a million units in the UK in the first quarter of release is a given, if the availability is there.

That’s a tad bullish given how it sold before, the contract required, the size of the UK market, etc IMO

status Netherlands

-More than 40.000 people subscribed to the t-mobile iphone newsletter
-stories pop up about the fact that the iPhone will be available form others sources, other than t-mobile. Price would be around 600 euro LINK it’s unclear if this model is unlocked.
Cheapest account is 29 euro, like in Germany LINK

I can’t imagine iPhone demand being called into question. I was at a work meeting tonight at the same as the Celtics-Lakers game. I hooked up my iPhone to the room’s WiFi, set the Web page to si.com and passed the phone around the room for score updates. The meeting leader paused the discussion so I could give live updates on the game.

The iPhone is not only universally known and accepted as the cell phone “gold standard” enough mention was made of the release of the 3G iPhone for me to make note of pending demand.

I stand by my estimate of 5 million units shipped within 30 days of release.

[quote author=“oranger”][quote author=“Tommo_UK”][quote author=“dmbream”]35,000 pre-registered in November ‘07 before the launch of iPhone 1.0.
O2 sold @ 200K in the first two months.
130,000 have pre-registered for iPhone 3G…
Does that equate to more than 5x sales again?
Hmmm…
Cha-ching.

I would say a million units in the UK in the first quarter of release is a given, if the availability is there.

That’s a tad bullish given how it sold before, the contract required, the size of the UK market, etc IMO

I am a “tad” bullish

[quote author=“Tommo_UK”]I am a “tad” bullish

Me too. 

[quote author=“sstenner”][quote author=“Tommo_UK”]I am a “tad” bullish

Me too. 

I think it’s good to attempt some kind of balance, despite the inherently partisan nature AFB members, myself included

OK run some additional numbers here:

IF they sell the phone at a $50 discount to the carriers, say $350 and it costs them $125 to build {I added a little added parts cost for conservatism } that gives them a gross margin of 64%, about double the margin on the computer lines.

And that money HITS THE BOTTOM LINE now, instead of being prorated over the 24 months life of the ATT contract as before.

Now we start the GOODIES:

1 - MobileMe, the replacement for .Mac, which is the central hub of the PUSH and SHARE system, annual cost is $99, I would imagine that at LEAST 1/2 of the buyers will opt in on that.

2 - Repair and replacement APPLECARE, if anything goes wrong, for two years they will fix it for free, ANYTHING but abuse. That goes for $70 a unit, say 1/3 opt for that one.

3 - Many of the units will be 16 Gig, not 8 Gig, that adds another 100 bucks, say 1/2 are the upgraded units, that number seems to be what I’ve seen on the other products, people go bigger, to make the planned obsolescence factor take longer.

4 - Applications store. This is THE SLEEPER, with the unit good for gaming, professional apps, and sharing apps, and apps for this and that all one CLICK away from a purchase, and Apple gets 30% of the revenue for each such purchase. If the average user buys 5 apps a year, for $15 average an app, that is $75 x 0.30 = $22.50.

5 - it is ALSO a movie player, and an media/song player, and most will buy a few movies, rent a few, and purchase some song. I’m ignoring this, as most could most likely do that with an iPod before, BUT many of these will be sold in countries without much Apple presence, they will be net new buyers, but factoring that in is tough to compute, so on IGNORE.

ADD these all up:

MINIMUM TOTAL for YEAR one of ownership - $420 per unit average

NOW… if they sell 15 million units over first year, starting with July 11, that works out to $6.3 Billion and that works out to $7.250 per diluted share less overhead, operations, and taxes etc.

Given that the street is looking for UNDER $6 per share earnings now, over the next year, this is a pretty impressive JOLT flowing towards the bottom line { lots of factors will influence that, but this is a down and dirty looksee }

AND….

AND….

The “Halo Effect” of 70 nations with hands on OS X, the superior operating system, and this will GOOSE the rest of the system hard too. I suspect that the users will see the obvious benefits of this well designed, well executed system, and the sales of Macs, both lap and desk will experience a QUICK and persuasive move in places that had never produced any sales whatsoever.

This is NOT a phone guys, this is a PLATFORM, and like the iPod, it will spawn off software, peripherals, third party apps {20,000 in the pipeline already according to some } and be a PARADIGM CHANGER.

{ if anyone catches any mistakes on my math or thinking, PLEASE let me know, and remember I’m doing this off the top of my head here, thinking out loud as I type }

[quote author=“TanToday”]OK run some additional numbers here:

IF they sell the phone at a $50 discount to the carriers, say $350 and it costs them $125 to build {I added a little added parts cost for conservatism } that gives them a gross margin of 64%, about double the margin on the computer lines.

And that money HITS THE BOTTOM LINE now, instead of being prorated over the 24 months life of the ATT contract as before.

Now we start the GOODIES:

1 - MobileMe, the replacement for .Mac, which is the central hub of the PUSH and SHARE system, annual cost is $99, I would imagine that at LEAST 1/2 of the buyers will opt in on that.

2 - Repair and replacement APPLECARE, if anything goes wrong, for two years they will fix it for free, ANYTHING but abuse. That goes for $70 a unit, say 1/3 opt for that one.

3 - Many of the units will be 16 Gig, not 8 Gig, that adds another 100 bucks, say 1/2 are the upgraded units, that number seems to be what I’ve seen on the other products, people go bigger, to make the planned obsolescence factor take longer.

4 - Applications store. This is THE SLEEPER, with the unit good for gaming, professional apps, and sharing apps, and apps for this and that all one CLICK away from a purchase, and Apple gets 30% of the revenue for each such purchase. If the average user buys 5 apps a year, for $15 average an app, that is $75 x 0.30 = $22.50.

5 - it is ALSO a movie player, and an media/song player, and most will buy a few movies, rent a few, and purchase some song. I’m ignoring this, as most could most likely do that with an iPod before, BUT many of these will be sold in countries without much Apple presence, they will be net new buyers, but factoring that in is tough to compute, so on IGNORE.

ADD these all up:

MINIMUM TOTAL for YEAR one of ownership - $420 per unit average

NOW… if they sell 15 million units over first year, starting with July 11, that works out to $6.3 Billion and that works out to $7.250 per diluted share less overhead, operations, and taxes etc.

Given that the street is looking for UNDER $6 per share earnings now, over the next year, this is a pretty impressive JOLT flowing towards the bottom line { lots of factors will influence that, but this is a down and dirty looksee }

AND….

AND….

The “Halo Effect” of 70 nations with hands on OS X, the superior operating system, and this will GOOSE the rest of the system hard too. I suspect that the users will see the obvious benefits of this well designed, well executed system, and the sales of Macs, both lap and desk will experience a QUICK and persuasive move in places that had never produced any sales whatsoever.

This is NOT a phone guys, this is a PLATFORM, and like the iPod, it will spawn off software, peripherals, third party apps {20,000 in the pipeline already according to some } and be a PARADIGM CHANGER.

{ if anyone catches any mistakes on my math or thinking, PLEASE let me know, and remember I’m doing this off the top of my head here, thinking out loud as I type }

Welcome to AFB Tan Today. I am not sure of your pro Forma numbers but I do like your thinking

Welcome, TanToday; a nice juicy first post.

While I agree entirely with the general thrust of your post, there’s changes I’d make in details.

1. your selling price for iPhone is far too low. The carriers are buying data revenue streams from Apple. You need to add back an adjustment corresponding to the iPhone 1 revenue share. I’d say $550-$800 ($200 coming from the end user).
2. Your general guesses about consumer behaviour are based on the US, I suspect. They are going to be far different in 90% of the countries where iPhone sells. So I find your Applecare and MobileMe figures far too high. The BRIC countries is where this is going to take off like a rocket, because many those customers don’t have a PC at all; iPhone is their first internet device. Nothing for MobileMe to sync with.
3. You haven’t factored in subscription accounting which averages the revenue and cost of each iPhone over 2 years. But it will show up immediately in Apple’s cash/receivables mountain.

edit: what you need to understand about the carrier business is that it’s like Las Vegas; once you’ve got your space on the strip and built your fabulous casino at crippling expense, it’s all money for nothing. Carriers have been shown how iPhone users are heavy data users, and spend more than other users. Their eyes were bulging with excitement at the prospect of stealing such users from other carriers, but they couldn’t swallow Apple’s “revenue share in perpetuity” demand. This was (reverse) bait and switch by Apple, who knew carriers were absolutely comfortable with huge up front costs so long as they were fixed, so Apple switched to a single payment to replace rev sharing. The numbers will work well for the carriers for the first couple of years. After that, I’m not so sure. (AT&T customer churn is 1.7% per month BTW).