By How Much Will Apple 'Blow Away' Its 10M iPhone Target?

by: Larry Dignan May 29, 2008 | about stocks: AAPL    

Larry Dignan

From ZDNet:
ZDNet Reviews:
Too busy to scour the web for the best products on the market?
ZDNet does it for you. All About Microsoft:
Staying on top of all the latest from Redmond Zero Day:
The latest in security research, vulnerabilities, threats and computer attacks
Become a Contributor Submit an Article
  • Font Size:
  • Print

The iPhone ante is being raised by the minute for Apple (AAPL). The question now shifts from whether Apple will ship 10 million iPhones by the end of 2008 to by how much it’ll blow away its own target.

To wit:

Add it up and it’s safe to say analysts think that Apple is bluffing.

Can Apple deliver? You bet, but it won’t be because of a shiny new iPhone. Apple is expected to deliver a 3G version of its iPhone (all resources), but the real impact of that rollout won’t be seen until the September quarter. While speculation about the next iPhone abounds with folks circulating tips, rumors and even customs data on imports, a 3G phone isn’t the reason why Apple will blow past its 10 million iPhone target.

The real reason: International distribution. Apple in just a few weeks has acquired a global footprint for the iPhone. It lacks a deal with China Mobile, but the available subscriber base globally has swelled. And with Apple shipping 5.4 million iPhones so far all the company has to do is skim a few global customers via these carriers in the December quarter to hit its target.

On Tuesday, TeliSonera, a wireless carrier, said it will offer the iPhone in Sweden, Norway, Denmark, Finland, Lithuania, Latvia and Estonia later this year.

That latest deal only adds to the following list of global heavyweights (chart courtesy of Merrill Lynch).

Within a few short weeks Apple has 32.6 percent of the total addressable global market. Simply put, Apple doesn’t have to do a whole lot to surpass its 10 million unit target. Reiner notes:

We believe current consensus estimates for the iPhone are far too timid in assessing the significance of the iPhone’s expanding international channel. Early evidence suggests that the iPhone is approximately a third as popular in the international markets where it is already available as it is at AT&T-enjoying roughly the same relative popularity as Apple’s computer do outside of the U.S. Our above consensus target of 14.5 million iPhones in 2008 assumes that this relatively popularity will merely be sustained as the iPhone becomes available to 480 million new international subscribers in 2H08.

And if Apple does hook up with China Mobile perhaps even Munster’s wild projection of 45 million iPhone in 2009 is in reach.

Related Articles

This article has 36 comments:

  •  
    May 29 05:37 PM
    9,170 shares long in AAPL.

    I intend to be a millionaire before Santa brings me another sack of money this Christmas.
    Reply | Link to Comment
  •  
    May 29 05:51 PM
    May 29th HONG KONG (AP) - Hutchison Telecommunications International Ltd. said Thursday it signed an agreement with Apple Inc. to offer the popular iPhone in Hong Kong and Macau later this year
    See link to article below

    news.moneycentral.msn....
    Reply | Link to Comment
  •  
    May 29 06:34 PM

    Hmmm, with this many iPhones in one year (presumably, that will grow in succeeding years) and iPhones' popularity for web usage among cell users, who needs WiFi?
    Reply | Link to Comment
  •  
    May 29 06:59 PM
    My haunting question of selling to take profits or letting my Apple stock ride...

    20smoney.com/2008/05/2.../
    Reply | Link to Comment
  •  
    May 29 07:15 PM
    Mr. A: You "intend" to be a millionaire before Christmas? 9,170 shares of AAPL @ $186 per = $1,705,620. Unless you are way out on a margin limb, you have already exceeded your goal, and then some. Either that, or you are pulling our leg a little ;-)
    Reply | Link to Comment
  •  
    May 29 07:16 PM
    Geez - you guys are abnormally obsessed with iPhone sales projections. 10M, 11M, 12M....?? Who cares!! The core business engine for AAPL is the MAC. Taking maket share in the PC space, growing MAC shipments, and expanding margins in that sector dwarfs the business potential of the phones. If the analysts paid attention to the core business model, and then factored in pods and phones for what they are (extra gravy!!), then they'd finally get on the right track. At the rate AAPL is growing their core business, any miss on phone projections just isn't going to matter.
    Reply | Link to Comment
  •  
    May 29 08:43 PM
    A cautionary note to dampen bottom line enthusiasm.

    { long AAPL 2k shrs }

    One, AAPL has used a deferred version of accounting, that may or may not be applicable to these new deals around the world. They took the sale of the iPhone with ATT and spread out recognizing the income over the life of the contract, two years if I remember correctly. That means that NONE of the impact will show up other than the amortized portion in any quarter. It does mean that even units sold last summer will be adding to the bottom line in the remaining quarters of this year.

    Two, AAPL said that NONE of the income from ANY iPhone sold from the SDK announcement would be recognized until the release of the application store presumably after the WWDC expected rollout of the 3G phone.

    These two factors are good for the leveling out of, and support of, the AAPL profits over the next year, but will NOT materially goose the bottom line no matter how many are sold...IF, and I stress IF they continue to book the profits on a incremental basis over the life of any contracts. There is no way of knowing now if that will be the case.

    What IS going to massively hit the bottom line, immediately, is the overlooked workhorse that is really adding to the cash horde, the old standbys the desktop lineS { plural } and the notebook lineS { plural }. The next quarter, leading up to September is when the back to school market hits. And studies seem to show that going to school WITH an Apple is cool, and with a PC is just so...DROIDISH and uncool. Some schools are reporting that in excess of 80% of students either have a Mac or want a Mac, and the profits on these are good, and the money goes right to the bottom, as sold. The desktop lines, while overlooked, are poised now to RAPE the PC sluts, Vista is a known dog, OS X is a high priced but very attractive lady of the night...with all the charms of the best courtesans!

    Not to mention the LOCK IN MARKET the applications store, added onto the iTunes store will have, every single user of an iPod Touch, or iPhone will be furiously downloading this or that new application as they flood out there, with AAPL taking a cool 30% off the top for each download. That alone, could and most likely WILL account for more bottom line profit than the hardware profit on the actual handheld unit will.

    And NEVER forget the retail end, the juggernaught, grossing in excess of $4.6k/SF retail, numbers TWICE as high as Tiffanies, or the very best retaillers out there. And they are now opening as many as five stores a month, directly, and some partners, such as the Indian franchise, promise over 600 outlets within a year selling partial lines.

    Add 'em all up, and you have a KA-CHING thing going.

    Don't think the iPhone is the horse driving the buggy, it is the jockey leading folks TO the horse and buggy, which is the ongoing relationship, that equates to the online sales, online programs, to the desktops and laptops, and even and eventually to EVERYTHING digital.

    This is going to shape up as the APPLE DIGITAL LIFESTYLE company!
    Reply | Link to Comment
  •  
    May 29 09:52 PM
    I love any post on aapl,lots of responses,lots of volatility...young guys hear me..just because you like the platform,don't forget you're in it for the investment..nothing else means shit!!
    Reply | Link to Comment
  •  
    May 29 11:08 PM
    Tan2Day - does it really matter how apple recognizes the revenue from the iPhone to impact the bottom line because it should be worked into there forecast....so any increase in sales of the projected amount should lead to a bottom line increase? I htink it will have an impact.
    Reply | Link to Comment
  •  
    May 29 11:19 PM
    302 shares and going long.

    Tan2Day: Do you really think apple software is "high priced"? I find it to be much lower than ms and an exceptional value.

    cheers
    Reply | Link to Comment
  •  
    May 30 12:02 AM
    200 shares long- 60 calls long jun 21 @ 220

    Just a thought but why not play the option market on the news of the release date of the new iphone and ahead of the conference and sell the calls before the news or on the day of the news and reap the rewards while keeping the shares long then turn the profits from the options into additional shares by buying on the dips- I did this in the summer of 2005 and made a killing and am doing it once again. A stock, or rather, a company like this only presents itsself once in a great while and you can't afford to miss the leveraged opportunities that it presents especially to the small timers out there like myself.
    Reply | Link to Comment
  •  
    May 30 12:41 AM
    I'm definitely AAPL long. But, have just a little concern. Is anyone else worried about all this talk of AAPl running strong until the announcement and then plummeting? e.g., AAPL goes to 220 then retracts to 160. Fundamentally I haven't seen a company as strong as AAPL in a long time, but it worries be that Jim Cramer types are telling everyone to sell after the announcement. And we all know that even good stocks are subject to general hype/fear. Hope this isn't the case, but I am somewhat concerned. Thoughts?
    Reply | Link to Comment
  •  
    May 30 01:04 AM
    Personally I don't think there is going to be a jump and then dump in the stock. AAPL the stock is performing a little on the weak side the last week- which means that it has bumped up against what was considered to be its top value recently at around 190. So, I wouldn't play the sell just before the sell the news. That wasn't the way it happened with the last earnings report either. A good report: in the first minute the stock was up 10 points, then it dropped down some 18 points then wound up at about the same price in the after hours trading. The next few days it persistently rose higher. I think the big drop offs are done for awhile. What we are going to see IMHO is a slow, almost agonizingly slow, and gradual climb into the mid 190's- up a few, down a few, etc. with perhaps a few points of gain a week. By the end of the year we should make and hold 200 - 210. However, 2009 will be one of the most incredible years ever for Apple and AAPL though: 300 is in the cards.
    Reply | Link to Comment
  •  
    May 30 01:14 AM
    chanat, as long as steve jobs is running aapl, don't try to trade this stock. just hang in there, add to your position on pull-backs if your portfolio warrants (but don't get too greedy).
    Reply | Link to Comment
  •  
    May 30 01:36 AM
    Now that everyone is aware that there might be a media driven sell off right before the release, no one will want to add the stock to their position at that time. Maybe the sell off will come earlier or not at all. I wonder if Cramer was actually trying to prevent a sell off by mentioning it. The games we play.....

    I agree that the stock has stablized and it will only go up on quarterly results being exceeded and more "substantial"... news.

    I also agree you dont sell as long as Steve is there unless you need to make a little withdrawal for maybe a hmmmmm lets see.... a 3G iPhone =P
    Reply | Link to Comment
  •  
    May 30 02:18 AM
    The iPhone might have a stronger halo effect than the iPod.
    Reply | Link to Comment
  •  
    May 30 02:36 AM
    This would go down to 20 million units really easily before the end of the year.
    Reply | Link to Comment
  •  
    May 30 06:21 AM
    ---->Tan2Day - does it really matter how apple recognizes the revenue from the iPhone to impact the bottom line because it should be worked into there forecast....so any increase in sales of the projected amount should lead to a bottom line increase? I htink it will have an impact<.----

    In the long run, it all hits the bottom line. But in the over three years I have watched the ANAL-ists at work with AAPL, I have observed they have this uncanny and GROWING inability to SEE the bigger picture. They are lemmings, they are myopic, they are basically TRADERS mentally, and the window a trader see's through is never much longer than the time it takes to read an article in People Magazine while visiting the .... yeah, that place.

    So, whereas the money WILL all hit, expect to see sales skyrocket, and THEN expect the slew of articles like this "Apple SALES SOAR, PROFIT languishes.." or the like.

    I saw them go bazonkers over the iPod sales slowing down in UNITS, never mind that three years ago, they were little MP3 players, and now they are baby multimedia wireless machines with average price tags DOUBLE before.

    Sadly, for a trader, or those with trader mentalities { that isn't a bad thing, but it isn't normally associated with fully understanding the why's and wherefore's of the strategic growth, and long term viability of a paradigm changing firm } they will ACT on the nits, and ignore the chestnuts that were planted but not yet ready for harvest.

    As most studies show, a patient, SMART investor, who will trade out the LOSERS but let the winners ride { that is why they invented trailing stops } generally will outperform the in and out boys almost every time. Apple is such a firm, so watching the MACHINE of the SYSTEM being assembled, and pretty much ignoring the minor ripples, seems to me to be a less risky endeavor than any other course of action.
    Reply | Link to Comment
  •  
    May 30 06:27 AM
    ---->Tan2Day: Do you really think apple software is "high priced"? I find it to be much lower than ms and an exceptional value.<----

    As compared to what? Seriously?

    Are you buying a computer company? Then yes. They ARE really a dime a dozen frankly.

    Are you buying a REVOLUTION with a few million zealots that will sweat blood to pay for just about ANYTHING that is cool, nifty, neato, sleek, and hot to trot? Then no, those are rather rare.

    I like to watch the discussion boards, and there are many, for all things Apple. It never ceases to amaze me, the passion, the involvement, the subsuming of one's own self into identification with Apple products and lifestyle. THAT isn't something that Wall Street can factually measure, but what OTHER firm could bring out a new can opener, have 1/3 the media give it free publicitiy, and have swarms of fanboys and gals standing in LINE for hours on end to purchase it, even sigh unseen?

    NOW THAT is what I call a FRANCHISE, and that is MONEY SECURITY, even better than a depreciating money horde that they have too.
    Reply | Link to Comment
  •  
    May 30 08:27 AM
    are we there yet ---$300.00 per share
    Reply | Link to Comment
  •  
    May 30 08:32 AM
    FRS....iphone is so huge because it's introducing Apple to the potential masses, iphone users will start to think twice before buying that PC.....the Ipod is different because it's not a miniature computer, while there was/is that halo effect with the ipod, because you are talking OS X with Iphone, the potential halo is even greater.
    Reply | Link to Comment
  •  
    May 30 08:36 AM
    2003 - iPod scores 7/10 versus other MP3 Players: 5/10

    2008 - iPhone scores 9/10 versus other smartphones scoring a maximum of 3/10

    iPhone impact will be hugely more than the iPod.

    Just look at all the desperate efforts by every other phonemaker to copy it.
    Reply | Link to Comment
  •  
    May 30 08:37 AM
    Tan2Day: brilliant discussion. Thanks for the good read.
    Reply | Link to Comment
  •  
    May 30 08:45 AM
    "The iPhone might have a stronger halo effect than the iPod."

    iPhone = halo for DEVELOPERS. The iPhone SDK has much in common with the OS X SDK (XCode). When developers see how much more efficient Apple's tools are compared to the cr*p they've been using all these years for Windows, a little little bulb will light up over their heads; to "go Biblical" "The scales will fall off of their eyes.".
    Reply | Link to Comment
  •  
    May 30 09:57 AM
    If Cramer tells people to dump Apple, they will. It may not stay down for a long time, but him saying anything like that will immediately make the stock head downward. These media pundits really have too much power over stock prices. Apple seems to attract investors who are timid which I suppose what makes Apple so volatile. I'm very concerned that the stock will run up and then take an undeserved dive. It makes little sense to me since the company seems very solid, but that's my gut feeling.

    I often see articles on how WS doesn't quite understand Apple or it will take WS some time to figure out Apple's accounting model. Aren't these people analysts? Don't they understand math or something?

    Does Steve Jobs have to stand on a stage and explain in detail how the company does it's accounting? I'm just puzzled. Does RIM have some easily understandable accounting model that makes better sense to WS? Apple with all of its products and stores just seems to me a stronger company than RIM could possibly be, yet over the past months, RIM's stock price shows more strength than Apple's.

    I'll wait until the 3G iPhone is introduced and see if Apple's stock price takes off and stays up. No point in my speculating on the future.
    Reply | Link to Comment
  •  
    May 30 11:14 AM
    small timer, am I reading you correctly? long Jun 08 220 calls?
    Reply | Link to Comment
  •  
    May 30 11:35 AM
    deos anyone see apple going to 250 by june 13th?
    Reply | Link to Comment
  •  
    May 30 11:49 AM
    I really do hope that Cramer or something makes the stock drop - I missed buying more at $120 and I've regretted it since. Short-term panic drops like that are like finding money on the floor - if you've got the guts to ignore the panic.

    On the delayed revenue side, I'm not sure I understand the issue here. Wasn't the AT&T revenue sharing deal the reason for not wanting to record all the income up front? The revenue sharing doesn't apply to about 30% of the sales, so I'd imagine those sales are counted up front. And if they're not, they mean guaranteed income for four quarters, pushing up the base for all calculations and making the bottom line even more secure.
    Reply | Link to Comment
  •  
    May 30 12:27 PM
    The deferred income goes exponential as the number of iPhones continues to rise geometrically. That is the point when Apple's valuation goes beyond the 'beleagured' Microsoft. You owe it to yourself to follow tech news if you are an APPL investor. Microsoft is in serious trouble. Look at the painfully pitiful demo Gates and Ballmer gave this week. The pundits compared it to Apple's 1984 demo of mac paint, on a touch screen, and that is accurate. There is no vision there whatsoever. The only logical competitor to take up this slack is Apple, plain and simple. The fact that Apple invented more of what Microsoft has sold than MS did, well, that may be irrelevant to the bottom line, it's a pretty important fact to keep in mind.

    My question is, when does Apple decide to go after the low end market. I do not rule this out, I just thing they are waiting for the right time, perhaps after Microsoft so foolishly goes in debt!!! to by a 2nd rate search company like Yahoo!

    In america, profits are king. Companies who have actually never done anything innovative or good are admired hugely just because they keep the money coming in (not talking about in the eyes of investors here but in the eyes of the man on the street, business owners, etc...) We give this credence and respect to individuals as well, to a point. i.e. One needed be a good person to be respected if they are very successful they will be respected. This respect as a stellar company continues to grow for Apple as Microsoft continues to lose money from their huge hoard. And there is no comparison how the 2 companies have treated investors in the past 10 years...

    When Apple surpasses Microsoft in market capital, all hell will break loose, Apple marketshare will skyrocket more than we have seen now--and we have only really recognized Mac marketshare gains for LESS THAN ONE YEAR SO FAR!

    This whole machine is ramping up. I love the way the iPhone profits are deferred and forward looking. What will happen pretty soon is that the volatility will come out of the stock. I don't want to sell now for a quick profit and potentially miss out on what is to come over the next few years. Even if it dipped to $120 again, I have still doubled my initial investment of 2 years ago. And as we have seen, it can come right back, even in this weak economy. If only our dollars were worth what they were even last year, but I digress...

    Finally, I think it's extremely important that Apple continues to drive their acceptance globally, and iPhone is their ticket to do that.
    Reply | Link to Comment
  •  
    May 30 01:27 PM
    when they talk of forecasts for 2008, do they mean calendar 2008 (dec 08)or Apple's fiscal 2008 (sept 08)
    Reply | Link to Comment
  •  
    May 30 01:39 PM
    Personally I'm getting a bit tired of Cramer! I really think his impact is becoming much less of a factor as more and more people are realizing that he has many more misses than hits in his stock recommendations. The show is such a joke considering how slap stick he acts. He is a bright guy, but they have cast him as the village idiot. And true to form, he acts like one!
    Reply | Link to Comment
  •  
    May 30 01:39 PM
    Personally I'm getting a bit tired of Cramer! I really think his impact is becoming much less of a factor as more and more people are realizing that he has many more misses than hits in his stock recommendations. The show is such a joke considering how slap stick he acts. He is a bright guy, but they have cast him as the village idiot. And true to form, he acts like one!