iPhones Could Drive a Third of Apple's Revenue Next Year

Henry Blodget | June 18, 2008 5:46 AM

3giPhone.jpgFrom Clusterstock: Good news for Apple (AAPL) fans. In 2009, iPhone sales should start to become material to the company's overall financial performance -- possibly very material.

Morgan Stanley expects iPhone sales to at least double in 2009, to 27 million units. At $200 a phone, that's $5 billion of revenue. Despite the recent price cuts, Morgan Stanley uses an average unit price of $550 per phone. This seems far too high to us, but 27 million units at this price would yield almost $15 billion of revenue.

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17 Comments

Neek said:
With Apple's cool and the price drop being the final nails in the coffin for the resistance to widespread acceptance, there's no denying Morgan Stanley's predictions are more than realistic. It won't be a surprise if they'd even sound pessimistic come the end of 2009.

The part I'm not comfortable with is Morgan Stanley's $550 unit assumption. Given that the phones will retail for $199, it seems a stretch (I realize there's a subsidy and some higher-priced units, but still...)
curious said:
What about the impact of a $199 iPhone on iPod sales?
Tom (URL) said:
The line "despite the price cuts..." is misleading, because the cuts do not affect Apple's revenue per phone. they are still getting the full price per phone sold (they gave up the subscription revenue though). That said, I'm not sure how he gets $550 either, because at full retail, the most expensive price is $499.

Maybe they're assuming someone walking into an Apple store will spend more than $199 by the time they walk out, with add-ons, Apple Care and the like.
Anon (URL) said:
The really interesting thing to me is the interest in Japan -- 3G Nirvana (from what I hear/read). See the chart from Google Trends for relative query frequency for iPhone and Blackberry in Japan http://www.google.com/trends?q=iphone%2Cblackberry&ctab=0&geo=JP&geor=all&date=all&sort=0
hehateme said:
WILL THE IPHONE BE A BIG BUSINESS FOR APPLE? LIKE DUH!!!!! THE REAL BIG QUESTION IS WILL THE IPHONE STILL PALE IN COMPARISONS TO NOKIAS TOTAL SMARTPHONE SALES?
mark said:
Tom is correct that Apple is getting a $200 to $300 subsidy from the carriers, so iPhone revenue will be around $400 to $600 per iPhone. BTW, I've seen all sorts of ranges for this subsidy, all the way up to $400!; does anybody have real data?

Plus, a quick glance at the Morgan Stanley note indicated that they're including a MobileMe subscription at $99/yr, and the purchase of one application per year with Apple getting a 30% cut. The latter item was for 50% of owners; it's unclear to me if the former was projected for all owners, or just some percentage.
mark said:
One more point: I believe Apple still intends to use it's 24-month revenue deferral accounting method for iPhone despite the switch to upfront carrier subsidy; so much of this revenue will show up in cash flow and on the deferred revenue table, but not in the revenue or profit line in 09. And that's why I don't see iPhone being a third of Apple's reported revenue per quarter in 09.
Mark Sigal (URL) said:
The model assumes that only 8.5% upgrade to Mobile Me and that 50% purchase one application download per year from AppStore, which I think is very conservative.

Most people don't grok how compelling the impulse buy factor will be when you can search, buy and download over the air -- especially since a lot of developers will roll out trial versions to bait the hook.

Those who have bought music at the Wi-Fi iTunes store know what I am talking about.

Here's a more detailed post on the iPhone opportunity post WWDC Keynote:

iPhone 2.0: Swinging for the Global Fences
http://thenetworkgarden.com/weblog/2008/06/iphone-20-swing.html

Check it out if interested.

Mark
Ballbag said:
I would imagine that they get the $550.00 per unit by taking the $200.00 sales price plus the increased $30.00 monthly data plan with AT&T for the 2 year agreement (minus the amt that at&t keeps for the service).
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