Friday, October 2, 2009
Morgan Stanley: iPhone Market Share Would Double Without Exclusivity
Add Morgan Stanley’s Kathryn Huberty to the list of analysts calling for Apple to broaden the iPhone’s distribution by ending carrier exclusivity deals. In a research note issued this morning, Huberty–noting that the iPhone’s market share grew 136 percent in France when Apple switched to multicarrier agreements there–said iPhone sales could more than double if the company took a similar tack in other countries.
“It’s clear that the quality of iPhone games is eclipsing its console counterparts, and that’s even more acute when you compare it against the prior generation.” That’s what ngmoco co-founder and Electronic Arts alum Neil Young said of Apple’s iconic handset at the Game Developers Conference in San Francisco earlier this year, and it’s worth reflecting on a bit in light of a new report from Bernstein Research analyst Toni Sacconaghi that claims the iPhone OS will soon create pricing and customer migration pressure for traditional gaming platforms.
Oracle’s pending acquisition of Sun will undoubtedly be the subject of much discussion this afternoon when the database behemoth reports fiscal first-quarter earnings after the market close. Indeed, there’s quite a bit of jawing about it already, particularly about Oracle’s continued commitment to the deal in light of the ugly decline in Sun’s revenues and profitability since it was announced in April.
AT&T’s iPhone exclusivity deal with Apple is set to expire as early as next year, but that doesn’t necessarily mean it won’t be renewed–despite complaints about the carrier’s network. That’s the word from iSuppli, which predicts Apple will extend its agreement with AT&T because it has no reason not to.
With the iPhone, Apple is doing to the handset industry what it has done to the PC industry with the Mac: Claiming an inordinate share of profits relative to revenue. Bernstein Research analyst Toni Sacconaghi estimates that Apple, though it is only the fifth-largest handset vendor, claimed nearly a third of handset industry profits in the first half of 2009. 
Bernstein Research analyst Toni Sacconaghi has a few ideas about what Dell should do with the nearly $11 billion in cash reserves it’s sitting on and they don’t include buying Palm. Sacconaghi believes that Dell isn’t interested in a “transformational” acquisition, though its interest in the handset market might suggest otherwise. Rather, the company is mulling the acquisition of small- to medium-sized enterprise-related companies.
Antipathy toward a Dell smartphone is building and the device hasn’t even exited the rumor stage yet. When last we discussed the Dellephone, wireless network operators had reportedly been unimpressed, criticizing it as dull compared with current and upcoming handsets. Now comes further criticism from Bernstein Research analyst Toni Sacconaghi Jr., who believes that Dell will announce a smartphone in the next six months but will most likely bungle it. 
What’s Sun going to do now? Shares in the company dropped more than 27 percent percent to $6.48 in premarket trading following reports that Sun’s board rejected a formal acquisition offer by IBM. After weeks of negotiations, the two companies were thought to be finalizing a deal for about $7 billion. But IBM lowered its offer over the weekend and then withdrew it after Sun balked at the price and terms of the sale.
Would an iPhone that doesn’t require a data plan spike Apple’s addressable market in the mobile devices space? In a research note to clients today, Bernstein analyst Toni Sacconaghi makes the case that it would. Arguing that the market for standalone portable media players is certain to decline as consumers upgrade to multimedia smartphones, Sacconaghi says it would behoove Apple to migrate its vast iPod user base to two new iPhones: the iPhone Nano and the iPhone Touch.
With Phil Schiller, Apple’s senior VP of worldwide product marketing, delivering the Macworld keynote today, analyst expectations for big product announcements are running very, very low.
Though Wal-Mart has made no official announcement regarding the reportedly imminent arrival of Apple’s iPhone on its shelves, it would seem that the big-box retailer will begin peddling the device before the year is out. If that’s the case, how many iPhones is Wal-Mart capable of selling?
With $25 billion in cash and short-term securities stored away on its balance sheet, Apple is in a uniquely comfortable position from which to weather the econaclypse. And perhaps a uniquely opportunistic one, as well. According to CEO Steve Jobs, anyway. To wit: Jobs’s comments Tuesday about Apple’s cash reserves what it might do with them.
If Apple CFO Peter Oppenheimer’s April forecast was correct, Apple will report earnings of $1 per share on revenue of $7.2 billion when it posts third-quarter earnings later this afternoon. Of course, the company is known for low-balling expectations and being conservative with its fiscal outlooks, so if its results surpass this forecast, no one will be much surprised.
