inbabble.com

The UK’s Sunday Times ran an article this weekend, by Grant Ringshaw, on the impending launch of the iPhone on June 29. The closing paragraph summed up the article:

“The iPhone will sell in large numbers, not least to iPod and Mac computer lovers. But expectations are set so high, disappointment looks almost inevitable. And if it comes, Apple’s shares will fall heavily”

On reading Grant’s article I have to admit I agree with him. The context of the article is the 50% share price rise, or US$35B value, in Apple shares since the iPhone was released. The key reasons raised leading to quoted paragraph above were;

1 - Apple has a sales target of 10m by end of 2008. This is only 1% of the annual mobile handset market, but a much larger percentage of the US$100M smartphone annual sales. Ringshaw references that Blackberry only has 7m customers to date worldwide.

2 - Parallels between the iPod and the iPhone are misplaced. The iPod took hold of a developing market, the iPhone is launching in a very developed market.

3 - Apple has announced a single operator agreement in the US, AT&T. There have been no agreements announced anywhere else in the world.

All three points are valid. The iPhone may well have a high demand, and the smartphone market may well be rapidly growing, but competition will be fierce from carriers and handset vendors, and growing geographical presence for the iPhone will require carrier by carrier negotiation. It is hard to reach any other conclusion that there is definitely a significant risk in a large share price drop due to sales targets not being achieved.

- Richard T