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    Home Apple
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    Analyst Predicts iPhone Adoption, Pricing

    By
    Scott Ferguson
    -
    January 30, 2007
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      Since Apple introduced the iPhone at the Macworld Expo earlier in January, the company has generated a good deal of interest in its first smart phone.

      A number of questions surround the iPhone, such as its pricing, potential adoption by the enterprise and general availability. In a Jan. 30 note to investors, Gene Munster, an analyst with Piper Jaffray, examined several of these issues and drew some concrete conclusions.

      First, Munster wrote that the iPhone will launch, as scheduled, in June. During his keynote address in San Francisco on Jan. 9, CEO Steve Jobs told the audience that the iPhone must first receive approval by the Federal Communications Commission, which should take several months.

      On Jan. 29, the Apple Insider Web site, citing sources, claimed the iPhone might appear much sooner. In his analysis, Munster said he believes June is still the firm launch date.

      Also, Munster wrote that Cingular Wireless, which is the exclusive carrier of the iPhone, will not subsidize the phone, but could offer a reduced plan or discount for iPhone customers. This arrangement, he wrote, will help keep the balance between phones sold at Apples retail stores and those sold by Cingular at its stores. (For those looking to switch to Cingular right away, termination fees from other carriers will likely range from $175 to $200.)

      /zimages/3/28571.gifClick here to read about Cisco lawsuit against Apple over the use of the term “iPhone.”

      Munster also wrote that the current projected iPhone prices—a 4GB phone for $499 and the 8GB model for $599—will stay unchanged for the time being, although he predicted that Apple may reduce the price “slightly,” possibly dropping it as low as $399. As with its signature iPod music player, Apple will later release a model aimed at more price-conscious consumers, Munster said.

      /zimages/3/163255.jpg

      When Apple does release new models, it could also mean that the company will expand and start using other carriers. Currently, users who want to buy an iPhone must sign a two-year contract with Cingular. However, once Apple expands into Europe and Asia, it will need to seek out additional carriers, and this will affect the U.S. market.

      “These devices will eventually be open to other wireless carriers, possibly even before the Cingular contract expires,” Munster wrote.

      Regarding enterprise adoption, Munster said he believes that some companies that already use Cingular will offer iPhones to employees, but that it will be an exception.

      /zimages/3/28571.gifTo read about the first “Mac tablet,” click here.

      “The iPhone is significantly more expensive than the cheapest BlackBerry handsets, and we dont believe businesses will pay a premium for the added media features,” Munster wrote. However, “So while we do not anticipate widespread enterprise adoption of the iPhone, we also believe that most employees carry a personal mobile phone as well as their company e-mail device (as well as an iPod) and these users will be candidates to simplify from three devices to two by switching to the iPhone.”

      Who, then, will buy an iPhone when it becomes available?

      Munster calculates that about 10 percent of Cingulars 58 million customers have a cell phone or smart phone that is worth more than $300. However, about 14 million Cingular users own an iPod, according to his estimates, and about 60 percent of those 14 million—in other words, 8.4 million customers—are potential iPhone buyers. This fits in with Apples target of selling 10 million iPhones in the first year.

      Munster wrote that Apple will have about or more than a 30 percent gross margin on the iPhone. A Reuters report found that several analysts pegged Apples gross margins at closer to 50 percent.

      On the downside, Munster reports that Apple may have chosen the over-the-air EDGE (Enhanced Data for Global Evolution) standard instead of third-generation high-speed wireless for the iPhone in order to keep price down. “Eventually, however, we believe Apple will reap the benefits of economies of scale and favorable component markets and release a 3G model,” Munster wrote.

      /zimages/3/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis on mobile and wireless computing.

      Scott Ferguson

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