Media, Business & Politics

The bargain-hunting website TechBargains.com surveyed users about their likelihood of buying the new iPhone when it’s released. Their infographic is nice (seriously, check it out), but what I find more interesting is what those percentages look like in terms of real numbers, when combined with other data on American consumers.

Of those surveyed who don’t already own a smartphone, 32% said they are planning to buy the new iPhone. According to comScore, 234m (million) Americans age 13 and older use mobile devices (cell phones of all kinds), and of those, 114m owned smartphones. This leaves 120m American mobile device users who don’t own a smartphone. If the TechBargains survey is an accurate representation of the American public, 32% of those 114m Americans – a staggering 38m – will be buying the new iPhone when it’s released. To put that into perspective, in Apple’s blowout quarter at the end of 2011, after record sales of the 4S, they sold 15 million iPhones in the U.S., including the discounted iPhone 4 and free-with-contract 3GS. In that same quarter, Apple sold a total of 37m iPhones worldwide, whereas the 38m in sales is an estimate for U.S.-only sales.

While there’s no way to determine how many current iPhone users have any particular model, we do know that 64% of iPhone 4S, 74% of iPhone 4, and 71% of 3GS owners surveyed said they plan to upgrade to the new iPhone. Those aren’t far off from one another, so let’s just take the average: 70%. According to comScore, Apple had 33.4% of the total (114m) smartphone market, or about 38m; so at 70%, that comes to 26.6m current iPhone users who plan to buy the new iPhone.

Of Android users surveyed, 22% said they will buy the new iPhone when it is released. According to comScore, Android commands 52.2% of all (114m) U.S. smartphone users, which comes to 59.5m Android users. If 22% of those buy the new iPhone, that’s 13m new iPhone sales from Android switchers.

And finally, Blackberry: comScore has RIM at 9.5% of all Smartphones, or 10.8m. If 38% of them buy the new iPhone as the survey predicts, that’s an additional 4.1m iPhones.

Totals:
38m Non-smartphone owners
26.6m iPhone users
13m Android users
4.1m Blackberry users

For a total of 81.7 million U.S. consumers who plan to buy the new iPhone when it is released. That’s more than all current Android users combined.

According to the survey, 64% of iPhone 4S users plan to upgrade, with another 19% undecided. Considering the 4S came less than a year ago, and the vast majority of owners are still under a 2-year contract, either they’re not aware that they would need to pay full (unsubsidized) price, they’re planning to pay to break their contract, or they’re ok with just paying full price. Perhaps a number of those 4S owners are planning to sell their old iPhone back to Apple and use the money to partially fund the full-price new iPhone.

Not only did 22% of Android users say they WILL buy the new iPhone, another 27% said they’re undecided. That means a full half of all Android users surveyed are considering the new iPhone.

Taking into consideration those who said they are undecided, there is a large pool of respondents who are considering buying the new iPhone when it’s released. Using the same math as above, those come to 42m non-smartphone owners, 7.1m current iPhone owners, 16.1m Android owners, and 3.5m Blackberry owners, for a total of 68.7m U.S. consumers who are undecided as to whether or not they’ll buy the new iPhone when it is released.

Of course these numbers should be taken with a big grain of salt, and used only as a general guideline as to how many U.S. cell phone users may buy the new iPhone when it’s released.

Disclosure: I am a casual trader, and am long AAPL.

http://www.techbargains.com/infographics/iphone-predictions

http://www.comscore.com/Press_Events/Press_Releases/2012/9/comScore_Reports_July_2012_U.S._Mobile_Subscriber_Market_Share

http://www.theverge.com/2012/8/9/3232018/confidential-apple-samsung-sales-numbers-trial

http://arstechnica.com/apple/2012/08/apple-will-buy-back-and-recycle-your-iphone-4s

http://seekingalpha.com/article/855451-take-a-bite-out-of-apple

http://www.statista.com/statistics/12743/worldwide-apple-iphone-sales-since-3rd-quarter-2007/

http://www.pcmag.com/article2/0,2817,2405456,00.asp

Next month, Comcast will be announcing three exciting new services to join StreamPix: StreamJamz, StreamGamz and StreamPeeps. Like StreamPix, content downloaded or streamed from any of these new services will be exempt from the company’s monthly data caps.

StreamJamz is an unlimited streaming music service, similar to offerings from Spotify, Grooveshark and Sony.

StreamGamz is an unlimited video game download and multiplayer gaming platform, similar to offerings from Steam and EA’s Origin.

StreamPeeps is a VoIP 1080p HD video conferencing service, similar to offerings from Skype and Apple.

All 4 services are included with XFINITY HD Triple Play packages for no additional charge. You can add any of the streaming services to other packages for only $4.99 a month per service.

.
**********[ 3 months later ]***********
Comcast has announced the addition of an ‘Internet-Lite’ option for all of their XFINITY High Speed Internet plans. Any current plan can be converted to a ‘Lite’ plan, which will include a $20 discount off regular rates, and lower the monthly data cap to 10GB. This should come as great news for XFINITY Triple Play customers who already have unlimited access to XFINITY’s great SteamPix, StreamJamz, StreamGamz and StreamPeeps services for all of their streaming video, music, gaming and video-conferencing needs. One stop shop entertainment, no need to subscribe to multiple services.

.
***********[ 2 years later ]************
Comcast has announced that it will be raising rates on all of their XFINITY High Speed Internet plans by $25. This includes their 10GB capped ‘Lite’ plans, as well as their regular 250GB plans. At a recent stockholder meeting, a top Comcast executive was heard saying, “We believe the added value of our unlimited SteamPix, StreamJamz, StreamGamz and StreamPeeps services warrant the price increase, as they provide our customers with all of their streaming video, music, gaming and video-conferencing needs, without having to worry about silly data caps.

.
***************************************
And just like that, Comcast has managed to lower the data cap on their broadband plans to a measly 10GB, while actually raising the price, and putting Netflix, Hulu, Spotify, Grooveshark, Steam, Origin, Skype, Apple, all in a greatly disadvantaged competitive position. By not blocking any particular competing service, Comcast will have managed to sidestep Net-Neutrality restrictions, while severely limiting how much their customers can use any competing services. Yes, I made all of this up, but there’s nothing stopping Comcast from following this plan to the letter (including the stupid service plan names), if their new StreamPix service is allowed to proceed unchallenged by the FTC.

With nothing stopping them, Time Warner, Verizon, AT&T et al will surely follow suit. How long will Netflix, Hulu, Spotify, Grooveshark, Skype and the rest of the free-market competition last? How many new services, like the one Sony was considering, will never have been started? And most US customers don’t have many, if any options when choosing their ISP, so they can’t just go somewhere else if they don’t like Comcast’s (or whoever)’s offerings. The FTC needs to step in now, to stop ISP’s from dictating what their networks can be used for, and putting countless competitors out of business.

More at
ars technica, Engadget, Gizmodo

Another quarter, another blowout earnings report from Apple. The stock hit an all-time high shortly after the report, surging 8% in after hours trading. That may sound like a lot, and it is especially considering Apple’s already astronomical market cap; but considering Apple’s earnings were around 33% higher than even some of the loftiest expectations, 8% is a pretty conservative jump. This seems to be a trend in the past few years, as is evident in the chart below. Apple’s quarterly revenue and stock price are plotted out over the same 8-year time period.

From 2004-2008 Apple’s stock price followed a similar path as their quarterly earnings. The overall market turmoil is evident in 2008-2009, but by 2010 the stock was coming back in line with earnings; however by the end of 2010 and through 2011, as revenue skyrocketed, the stock made relatively small gains. Had the stock continued to follow earnings, it would be over $800 – almost double its current value.

You could say that Apple’s earnings have just gotten too big, and there’s no way the stock price could possibly keep up with it. You could say that, but it’s not like this is the first time Apple’s had revenue spike so fast. In From 2004-2008 – the height of the iPod’s success – Apple’s revenue chart looked almost identical to the chart from 2008-2012, just with much larger numbers.

More analysis of this trend in my previous post

In 2008, with Apple announcing close to the same kind of year-over-year gaines in revenue, not only was the stock keeping up with the earnings surge, it was beating it. So maybe it’s not so crazy to think the stock could be at $800 or more today. Obviously, it’s not. But hopefully (for shareholders) it’s an error the market will correct in the near future.

Apple posted another blowout quarter, with record profits and astonishing numbers on iPhone and iPad sales, well above even the loftiest of estimates. To visualize the numbers, I’ve plotted all of Apple’s product segments by revenue for each quarter since 1Q 2004, when iPod sales were just starting to rev up.

Honing in on just the most recent 4 years, the right half of the chart stretches out horizontally to look like this:

And honing in on the first 4 years being analyzed, the left half of the chart stretches vertically to look like this:

See any similarities? Here’s what they look like side-by-side; This is actually a continuous chart, with the exact same data as the first chart. The difference is, the left half is blown up 5x larger to show detail, and to compare *relative* growth from 2004-2008 with the same from 2008-2012

So while the numbers Apple posted are incredible, looking at their history shows us it’s not far from what they were doing exactly 4 years ago on the back of the iPod. But in 2008, revenue was approaching $10 billion a quarter; in 2012, it’s approaching 50! That’s an increase in revenue of 400% in 4 years, which most analyists will tell you is going to be impossible to sustain. But I say, not so fast!

How could Apple possibly sustain these kinds of numbers going forward?

The Proof is in the iPod

After 8 years, the iPod is now seeing decreasing revenue year-over-year, but that can fairly safely be attributed to cannibalization by iPhone sales. If it weren’t for the iPhone replacing iPods, we’d likely still be seeing increased revenue from the iPod as well. Without a similar product to cannibalize the iPhone, it’s not out of the question to think Apple could continue the trend the iPod was on before the iPhone was released, but the iPhone. In addition, iPods didn’t have the same kind of upgrade cycle that iPhones do. With users tied to 2-year contracts, many opt to upgrade to the latest phone every 2 years. The same can’t be said for iPods, where there wasn’t a definite upgrade cycle for most people.

iPhone 5, iPad 3

When the iPhone 4S was released, everyone in the media seemed to think it was a dud. Apparently, consumers weren’t listening. If Apple can post these kinds of record numbers with a moderately-upgraded iPhone, who knows what will happen when they unleash a full-on redesigned iPhone 5, which is almost guaranteed to have 4G, an even better camera than the 4S’s already impressive lens, and.. well, who knows what the next surprise will be. Nobody saw Siri coming until days before the 4S was released. There may be similar updates waiting for us in the 5. Also, iPad 3.

New Markets

Apple has only just begun to penetrate many foreign markets, where 3G coverage lags behind the United States. In China, the iPhone is only available on one carrier: China Unicom, with 192 million subscribers. That leaves China Mobile (638m subscribers) and China Telecom (120m) for Apple to expand to. (Indeed, according to Bloomberg, Apple recently received approval of specifications for a device that would run on China Telecom’s network). Of China’s 950 million subscribers, only 11.5% are on 3G networks. On the only carrier where the iPhone is available, China Unicom, there were only 33 million 3G subscribers; yet Apple sold 5.6 million iPhones during the first 9 months of 2011 – all before the 4S was available. Now consider Apple’s reach in the US, via Verizon, AT&T and Sprint, is to 238m subscribers (pdf), leaving about 60m on carriers that don’t offer the iPhone. Compare that to China, where there are 758 million subscribers on carriers where the iPhone isn’t offered. Even if you consider many of those people can’t afford the high-cost of the iPhone, you have to admit that’s a huge potential market; especially if Apple releases a cheaper iPhone in the future to address that market directly.

One More Thing?

With Steve Jobs gone, we may never hear “Oh, and there’s one more thing…” again, sadly; But that doesn’t mean Apple doesn’t have more tricks up their sleeve. There’s wild speculation the Apple TV box will soon be migrated into a full-featured flat-panel Apple TV set. Steve himself even let the cat out of the bag that they have *something* in the works for changing the way we watch TV. If Apple can shake up the broadcast/TV industry the way they’ve shaken up Music, mp3 players, Cell Phones, and now Tablets (well, to be fair, there wasn’t much to shake before the iPad), they could have an additional revenue stream to add to their quarterly reports to bost profits even more.

I’m not saying I think Apple will continue to post the kind of year-over-year increases in revenue that they posted yesterday every quarter; but I do think all those analysts who have said time & time again that Apple’s time has come and gone, you may be in for a few more surprises over the next few years – at least. While most of this is speculation, one thing is for certain: Apple’s going to be around for a while.