All Things Digital

iPhone is launching in one carrier in one country. We’re in about 100 countries and 300 carriers. … The momentum we are seeing in terms of product launches, carrier support in terms of product launches of BlackBerries, and subscriber additions is exceptional, and we believe it will continue on into the second half of the year.”

– Research in Motion Co-Chief Executive Officer Jim Balsillie, June 2007

Looks like somebody’s got a case of the Mondays–Research in Motion. Shares in the company slipped more than 6 percent to a new 52-week low today. This after charting a new 52-week low last Friday driven by the 27 percent drop RIM took after it issued a lower-than-expected forecast for the current period. That decline was the company’s steepest in eight years, belying CEO Jim Balsillie’s claims that emerging competition from new handset makers isn’t undermining its competitive position. And though RIM’s product roadmap is relatively strong heading into the fall season, the company still has its work cut out for it scrapping with Apple (AAPL) and its iPhone and now T-Mobile (DT) and the Android-based G1.

“RIM’s business model is starting to show its pressure points. The company has become increasingly dependent on hardware sales. As a result, the timing of new product launches can have a big impact on their results,” wrote Brian Modoff of Deutsche Bank in a report. “We think this trend will only worsen and their numbers are now, more than ever, dependent on a steady stream of hit products.”

Needham and Company analyst Craig Bisagna was even more dubious of prospects for Research in Motion (RIMM), criticizing the company for its foolishly dismissive attitude toward new rivals. Just because Windows Mobile handsets haven’t proven themselves worthy competitors to the Blackberry doesn’t mean the iPhone or the G1 won’t.

“We continue to believe that the company has its head in the sand,” Bisagna said in a note to clients. “It’s delusional to think [Apple and HTC] won’t cut into BlackBerry sales as well, especially in the consumer market.”

The Googlefication of the mobile industry will begin a bit later than expected.

When the search giant announced its Android mobile platform last November, it said devices running it would arrive at market by the second half of this year. Well, turns out that deadline was a bit aggressive. Android-based handsets may not be available until the fourth quarter of this year–if Google’s (GOOG) lucky. Because some handset manufacturers are “struggling” to meet even that extended deadline. And at least a few wireless carriers have abandoned plans to launch Android-based handsets this year entirely.

Apparently, a multinational consortium of companies working to develop an open mobile platform–while a wonderful idea in theory–is, in practice, a pain in the ass. Software providers are finding it difficult to develop programs on a platform still going through revisions. Handset manufacturers are having a tough time integrating that software into their devices. And wireless carriers are finding that customizing Android to promote their Internet services isn’t as easy as they’d hoped. “This is where the pain happens,” Andy Rubin, director of mobile platforms at Google, said of this particular phase of development. “We are very, very close.”

Sadly for the Google, the pain to which Rubin refers seems decidedly Android-specific. Developers building applications for Apple’s (AAPL) iPhone 3G, which will launch in early July, seem to be having an easy time of it. So much so that some are prioritizing iPhone apps over their Android counterparts–at least until Android development is painless.

So those reports that AT&T (T) would subsidize $200 of the cost of the iPhone 3G? Way off. According to Oppenheimer analyst Yair Reiner, the carrier is actually paying Apple $325 in subsidies on each iPhone 3G. And another $100 if the purchaser is a new AT&T customer. That’s $425 in potential commissions per device sold. That’s unprecedented in the industry.

So what was AT&T’s reason for agreeing to pay it–other than the warm glow it felt during subsidy negotiations with Apple CEO Steve Jobs? AT&T’s faith in the iPhone’s ability to attract new subscribers, apparently. Not to mention those subscribers’ penchant for running up a $100 tab each month in data and calling services.

One last point worth noting here. That $425 Apple (AAPL) is said to be collecting is even more impressive when one considers the fact that the iPhone 3G costs about half as much to make as its predecessor. Tear-down specialist Portelligent put the new model’s bill of materials at somewhere around $100.

Next year is shaping up to be Apple’s (AAPL) best financial year ever–and we’re not even out of 2008 yet.

Last week Piper Jaffray (PJC) analyst Gene Munster said the company’s new App Store could end up generating $1.21 billion in revenue. And now Morgan Stanley (MS) is predicting Apple will sell 27 million iPhones in 2009. “We believe the market generally expects a doubling of iPhone units with the lower price point ($199) and we believe this is realistic, if not conservative,” the investment bank said in a note.

At $200 a phone that would generate roughly $5 billion in revenue. And that’s not accounting for whatever subsidy Apple’s collecting from its carriers.

So much for last year’s $27.5 billion privatization of Alltel …

Verizon Communications (VZ) will acquire Alltel, the nation’s fifth largest wireless-phone company, for $28.1 billion. Assuming the deal passes antitrust scrutiny, it will create a monstrosity of a wireless carrier with about 80 million subscribers–9 million more than AT&T (T), the nation’s largest cellphone company.

A savvy move for Verizon, which has clearly overcome whatever jitters caused it to sit out the Alltel auction in the spring of 2007. “Put simply, they can run Alltel more efficiently than Alltel can,” said Bernstein analyst Craig Moffett. “It takes a strong wireless franchise, and increases Verizon’s exposure to wireless, which is the best business in their portfolio. It lets them exercise their advantages of scale to run the business.”

AT&T (T) is on track to complete the upgrade of its 3G mobile broadband network by the end of June.

Good thing, too. Because we’re just weeks away from the eagerly anticipated launch of Apple’s 3G iPhone and AT&T–Apple’s exclusive wireless carrier in the states–certainly doesn’t want to foul up the debut of the second-generation iPhone, the way it did the first. Because if it does, AT&T Mobility CEO Ralph de la Vega won’t be activating his own 3G iPhone until it’s been surgically removed by a doctor. Apple (AAPL) CEO Steve Jobs does have a bit of a temper.

Anyway … AT&T’s network upgrade is just six markets away from first-phase completion in 275 cities (second-phase roll-out will extend it to another 75). And when it launches, it will be the first and only network to run on a technology called HSUPA, or High Speed Uplink Packet Access. HSUPA should provide speeds of 1.4 Mbps down and 800Kbps up, which AT&T asserts “will be as speedy as logging onto the high-speed Internet service that many consumers enjoy at home.”

Hope so, because logging onto AT&T’s Edge network is about as speedy as logging onto the Internet with a 56.6 Kbps fax/modem.

Apple (AAPL) CEO Steve Jobs is so intent on extending his company’s lead in online music sales to the mobile market that he may finally be willing to give up the one-price-fits-all model that’s long been a cornerstone of Apple’s iTunes Music Store’s business model.

Cupertino is reportedly in talks with some of the major music labels about adding over-the-air downloads and a greater variety of ringtones and ringbacks to iTunes in advance of the debut of the 3G iPhone. But getting the labels to agree to such a thing may come at a price, or rather a variable-pricing model.

The labels have long wanted iTunes to abandon its policy of selling songs at a flat rate of 99 cents in favor of a variable-pricing system that allows them to charge more for popular tracks. In the past, they haven’t had the leverage they needed to force Apple to do this. But with the mobile music market at stake and the company gunning for a big 3G iPhone launch come June, Apple may have no choice but to agree to the labels’ terms.

“[Mobile is] clearly an opportunity Apple is missing,” IDC analyst Lewis Ward told Wired News. “And Apple is going to want to do it all themselves, but these OTA music storefronts have not sold very well. Maybe there’s secret sauce Apple’s thinking about, but the track record [of mobile music and ringtone stores that require a credit card rather than charging users via their cellphone bills] has not been impressive to date. The real issue is billing. People are much more comfortable with paying through a carrier [because] you don’t have to enter a credit card number or be worried about security. … That puts the carrier in the supply, and the carrier is going to want their cut, which means the margin for Apple goes lower.”

Apple (AAPL) is expanding its iPhone empire with near Alexandrian initiative.

Today, the company struck an extensive deal with France Telecom’s (FTE.PA) Orange wireless carrier to distribute the device in more than 10 markets in Europe, the Middle East, Africa and the Caribbean.

Orange, which became Apple’s exclusive carrier partner in France last year, will soon sell the iPhone in Austria, Belgium, the Dominican Republic, Egypt, Jordan, Poland, Portugal, Romania, Slovakia and Switzerland, as well as the company’s African markets.

Interestingly, a few of these countries already have carriers with iPhone distribution agreements. It would seem then that Apple is indeed moving away from the exclusive iPhone distribution arrangements it’s been inking, as many suggested last week when Vodafone (VOD) and Telecom Italia (TI-A) both announced plans to bring the iPhone to Italy.

In any event, Apple’s deal with Orange will expand the iPhone’s reach to about 40 countries and will effectively quadruple its total addressable market. “Currently Apple’s total addressable market includes 153 million subscribers in six countries with AT&T (T), T-Mobile Germany and Austria, O2, and Orange,” Piper Jaffray’s Gene Munster observed in a research note today. “These announcements increase those numbers to 575 million subscribers in 42 countries, including recent agreements with Vodafone, SingTel, America Movil (AMX), Swisscom and Orange. … To give some context to these numbers, Apple sold 3.7 million iPhones in 2007 into a total addressable market of 148 million subscribers (or 3% penetration). Taking the recent carrier announcements into consideration, we are modeling for Apple’s penetration rate to remain at 3% in 2008 and double to 6% in 2009.”

The clever folks at Deutsche Telekom’s T-Mobile unit have figured out a way to comply with a court order prohibiting the sales of iPhones tethered to its network, and still remain the exclusive German carrier of the device: sell the iPhone without a T-Mobile contract at a wallet-shriveling price.

And so this morning, the company began offering prospective iPhone buyers a choice: purchase the device with a two-year T-Mobile service contract for 399 euros ($591) or without a contract for 999 euros ($1,478). And if for some reason you choose the latter, don’t expect your iPhone to be fully functional, because some iPhone services are only available with a T-Mobile subscription. Now which version of the device was it that you were interested in?

Analysts say that the arrival of an unlocked iPhone in the German market will likely signal the end of Apple’s exclusive deals with carriers, though that seems questionable given the unlocked phone’s dizzying price point and hamstrung feature set. Certainly, T-Mobile doesn’t seem too worried. “We have no doubt that the success story of the iPhone from Apple in Germany and T-Mobile will be updated,” T-Mobile Managing Director Philipp Humm said in a poorly translated press release. “The distribution model is correct, only because our customers will benefit from exclusive features and custom tariffs. The proper function of the iPhone in our network was tested for months, only T-Mobile offers data transmission standard EDGE nationwide, which the iPhone for fast Internet communications. No other mobile operator offers more WLAN-HotSpots as T-Mobile. I would like to assure our customers that T-Mobile as exclusive distribution partner of the iPhone continue to be the best package of network quality, service and competitive prices.”