Why Won’t Apple Sell 10-million iPhones In 2008?

Lance Davis of The Register says Apple won’t sell 10 million iPhones in 2008. They won’t but that wasn’t the target anyway.

Apple’s iPhone is creating a different category that could disappoint everyone—especially tech media prognosticators, but not Mac and PC users.

When introducing iPhone at Macworld 2007 in January, Apple CEO Steve Jobs said the target was to sell 10-million iPhones by the end of 2008. That’s roughly 18 months from now.

Even doing well, Apple could struggle to sell 10-million iPhones in 18 months because the company’s much hyped combo phone, iPod, handheld wireless computer is creating a new category of product.

Yes, there are cell phones that play music, take pictures, surf the web—but none with the ease of use expected in the iPhone. $500 is a chunk of change to pay for a bleeding edge device. Or, is it?

Wasn’t the original 5 gigabyte iPod a $400 device? Those sold like hotcakes and continue to sell well as Apple has added new features and capabilities and lowered the price.

The iPod was not the first portable music player with a hard drive or a flash drive. It was merely the first that did everything very well—manage music, synchronize, playback, ease of use.

The iPhone is not a smart phone, though many tech media prognosticators are putting it into that more expensive, and much smaller market segment.

Poor Lance Davis of The Register does a Jekyll and Hyde rip job on Why Apple won’t sell 10 million iPhones in 2008, but doesn’t give any logical or reasonable response as to why.

First, he misses the original target. Yes, 10-million iPhones is about 1-percent of the whole annual cell phone market, but, as Lance says, it’s not a useful benchmark. It’s not.

However, Lance compares that lofty goal with Symbian which has sold 100-million so-called smart phones in 10 years. Even BlackBerry hasn’t done 10-million.

Second, he doesn’t seem to understand where the iPhone fits. Is it a widescreen, full motion video iPod? Yes. What’s that worth? Is it a cell phone with ultra ease of use (camera, touch screen, etc.)? Yes again. What’s that worth?

iPhone is also a wireless handheld computer but without all the nifty tools, utilities, and applications that are sure to come over the next 18 months. What’s that worth?

Finally, without much supporting evidence to match the premise, poor Lance settles on his reason why Apple won’t sell 10-million iPhones next year.

He says expectations are too high. He says the iPhone will be late. He says the iPhone will need to undergo cell phone network testing. He says it needs downloadable music for the iPod component.

See? A premise without supporting evidence. Interestingly, Lance says iPhone sales volumes will disappoint everyone, but the iPhone itself will not disappoint users.

That will prove to be a true statement, though the iPhone will need software upgrades in the first couple of years.

iChat over WiFi is just one example of a need without a solution.

The need for downloadable music for iPhone users, even over WiFi, is laughable. That feature already exists via iTunes, which will sync automatically with the iPhone. It’s not like other cell phones have a big business downloading music, ringtones notwithstanding.

Will Apple sell 10-million iPhones in the next 18 months? Here’s what they have to do. Sell over 555,000 iPhones each month. That number is divided by the 2,000 or so AT&T retail stores, and by the nearly 200 Apple Stores, or 250 iPhones per store per month, or less than 9 iPhones per day, per store.

In 2007, Apple plans to sell about 60-million iPods. That’s 5-million a month, 166-thousand a day, with sales through many thousands of retail and online stores. If that’s obviously an achievable target, why not 10-million iPhones between now and the end of 2008?

Back to the price tag. $500 or $600 for an iPhone. Is that too expensive? Will it hamper sales? Apple’s hottest iPod is the $200 iPod nano with 4 gigabytes. The low end iPhone does all the iPod does and more. How much more is that wide touch screen worth? $50.

That alone makes up half the price of the basic iPhone. What is a smart phone worth? The original Motorola RAZR, not as capable or sexy as the iPhone with touch screen, was about $400.  Should the iPhone be worth, at retail, a similar amount?

Remember, the iPhone is also an iPod and a WiFi device (which would be made more valuable with iChat capability).

I’ve seen the Nokia N800 WiFi widescreen tablet selling for $400 (sometimes less). Roll all those devices into one that’s more cleverly usable and is the $500 price tag still too high?

10-million iPhones by the end of 2008 is an ambitious objective, even for a company as daring as Apple, but selling an average of 10 iPhones per day, per retail store doesn’t look impossible.

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