Analyst: Big Apple iPhone orders, sales goals 'make sense'

Reports that Apple has put in orders for 10 million 3G-ready iPhones

Talk of Apple placing large iPhone orders to its Asian suppliers and predictions that the company will dramatically ramp up sales later this year and into next "make perfect sense," according to one analyst.

Ezra Gottheil of Technology Business Research said reports last week that Apple had put in orders for 10 million 3G-ready iPhones were probably on the money. Like other analysts, Gottheil had previously pegged June as the most likely date for an Apple launch of a next-generation iPhone able to use the faster 3G networks.

"A 10 million order for 3G iPhones for delivery over the remainder of the year makes perfect sense," Gottheil said. "Apple's going to try very hard to make its [sales goal] number, and that means releasing a 3G model or lowering the price or both. All of that is consistent with what it's said already."

Apple has repeatedly said it will sell 10 million iPhones by the end of this year.

Currently, iPhones connect only to an EDGE-based network for data-transmission chores such as Web browsing and e-mail. EDGE (Enhanced Data Rates for GSM Evolution), however, is considerably slower than 3G, which in the case of AT&T, uses HSDPA/UMTS technology (High Speed Downlink Packet Access/Universal Mobile Telephone System).

Last November, AT&T CEO Randall Stephenson said that a 3G iPhone would debut in 2008.

The large order was initially reported last week by the iPodObserver Web site, which said that Gartner analyst Ken Dulaney had noted rumors out of Asia to that effect. Some sites and blogs that picked up on the iPodObserver story, however, amplified Dulaney's comments and made it sound like the 10-million 3G iPhone order was a fact.

"This was a rumor from an unnamed source I was commenting on in terms of the likelihood of being possible," said Dulaney in an e-mail last week when asked to clarify his comments. "Some of the press articles interpreted this as being a fact that I knew about or that Gartner had predicted this. That part was incorrect."

But like Gottheil Monday, Dulaney last week said the rumors sounded credible. "Since Jobs said he will sell out all 10 million of the current order, it is likely another order has already been put in place," Dulaney said. "It seems logical. As to when and the exact amount, it's open to speculation."

Monday, another prominent analyst weighed in with a sales projection that said Apple will sell a total of 45 million iPhones by the end of 2009. In a research note released Monday, Gene Munster of Piper Jaffray & Co stuck to an earlier prediction that Apple will reach that mark by the end of next year.

To get there, Munster said, Apple will roll out a 3G-capable iPhone in the next three to six months, launch a larger range of models that feature units priced as low as US$200, and ramp up internationally, including taking on the Chinese market, where it may have to forgo the revenue-sharing business model it's struck with carriers.

Entering the Chinese market, said Gottheil, is the most important move Apple will, and must, make between now and the end of 2009. "It's all about China," he said. "Apple needs China to make those kinds of goals, and if that means doing without [the revenue sharing business model] in China, they'll just suck it up and do it."

Reports earlier this year said that Apple and China Mobile Communications, the country's largest mobile service provider, have held talks, but that China Mobile rejected Apple's demand for a share of subscriber fees.

"I think that they've signaled that they could be flexible" on sharing customer revenue, Gottheil continued. "They'll take the straight profit from the iPhone if they have to, to have a large installed base, which is what they need."

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Gregg Keizer

Computerworld
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