Analyst: iPhone OS 4 Could Spur iPhone Sales, iAd Could Boost AAPL Profits

| Apple Stock Watch

Apple’s new iPhone OS 4 could spur additional iPhone upgrades due to compelling new features in the OS, according to UBS analyst Maynard Um. In a research note obtained by The Mac Observer, Mr. Um also said that Apple’s new iAd mobile advertising network could be a new profit center for the company.

The key feature of iPhone OS 4 is multitasking, according to Mr. Um. saying, “[This] should improve the competitive position of the iPhone vs. other smartphones which already have this functionality. We believe the new OS functionality could spur upgrades to new iPhones as OS 4.0 upgrades are available for iPhone 3GS models, not the 3G version (could also benefit iPad as well).”

As for iAd, Mr. Um expects the service to scale with the iPhone platform itself, just as the App Store has. Even with investments in infrastructure and other costs, Mr. Um believes that this will lead to the company seeing real profits from the service over time.

Other notes included deducing March iPhone sales at 7.5 million units, in line with his most recently raised estimates, based on the total number of iPhones sold. Apple CEO Steve Jobs announced during the iPhone OS 4 media event Thursday that Apple has sold a total of 50 million iPhones (and 35 million iPod touches), allowing Mr. Um to extrapolate March iPhone units.

The analysts maintained his US$280 price target on the stock, as well as his “Buy” rating. AAPL closed Thursday at $239.95, down $0.65 (-0.27%), on average volume of 20.5 million shares trading hands.

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.  



Could is an understatement. I have an iPhone 3G and my contract won’t let me upgrade until June 21st. The timing of this and the removal of the first gen iPhone and 3G from the bulk of features means a LOT of people will replace their iPhones this summer and fall.


“As for iAd, Mr. Um believes that this will lead to the company seeing real profits from the service over time.”

IMO, those potential ad revenues to Apple are not the most potentially beneficial effect of the iAd service for Apple & its iPhone/iPad platform. 

Rather, if iAd can provide developers with a reliable revenue stream that would be less directly dependent upon app sales, then those developers will have a much stronger incentive to let their apps sell much cheaper in the iTunes Store. 

And obviously, apps thereby becoming much cheaper (or at least not growing increasingly expensive, as many seem to be doing, or becoming less likely to require “Pro” version upgrades and/or subscription agreements) should serve to accelerate the iPhone/iPad platform’s growth in the marketplace.


That being said, I still hate ads.

I expect to resent & hate iAd, and to grieve for my loss of “the good old iAd-free days” no my Apple devices.

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