I consider iPhones, iPod touches, and iPads computers because of the
applications they can run. The iPhone OS, which they all run, is based
on Mac OS X, making them OS X devices.
Macintosh Sales Growth
Mac sales have grown faster than the market for 20 out of the last
21 quarters, and the total of 3.36 million units sold in the December
quarter was a new record - up 33% Year on Year (YOY). However, even if
growth increases to 40% YOY - as it was before the recession started -
Mac sales this calendar year will be around 15.7 million units. Unless
there is no cannibalization from the iPad, 14 to 15 million looks more likely. While
inventory was low, with three to four weeks instead of the targeted
four to five weeks at the end of 2009, this will only add around
250,000.
All the market growth last quarter came from the new iMacs, and Apple is still not
meeting demand for the 27" iMac. This could be because of reported
screen problems delaying production, but Apple is claiming strong
demand. With the aggressive pricing for that quality, size of screen,
and resolution, I would expect high demand, but any problems will need
to be sorted for that to continue.
Sales of MacBooks, however, were very much in line with overall
market growth - but with the amount of iPad speculation, at least some
buyers would have waited to see what was coming in January.
With the iPad priced to compete with cheap laptops, it looks as
though MacBooks will keep the same prices, and Apple will continue the
strategy of every year adding more value at the same price point.
Possibilities for this year are adding screens with the same IPS
technology as iMacs so buyers can see the difference, more use of
cheap SSDs leveraging Apple's long-term contracts in the flash memory
market, extending the AT&T iPad network deal so that MacBook buyers
know they can get online at reasonable cost on the road, and more
Windows XP users deciding that OS X is a better upgrade than
Windows 7, with Parallels or Fusion to let them run their old
programs.
iPhone Sales Growth
Of the 100 million OS X units projected for 2010, 40% to 50% is
likely to come from iPhones. Looking at the iPhone sales table (below),
all quarters show Year over Year increases. Sales for the launch
quarter of the 3G plus the two following quarters were 8,218 million,
and sales for the three quarters since the introduction of the 3GS were
21,312 million - up 159%. 13.7 million were sold in 2008, and 25.1
million iPhones in 2009, up over 80%.
iPhone sales are growing at rates which suggest 40 to 50 million in
2010, if the iPhone OS 4.0 is A+, as Steve Jobs said.
iPhone Sales by Quarter, 2007 to Present
| FY |
Q1 |
YOY |
Q2 |
YOY |
Q3 |
YOY |
Q4 |
YOY |
| 2007 |
|
|
|
|
270 |
|
1,119 |
|
| 2008 |
2,319 |
|
1,703 |
|
717 |
+166% |
6,892* |
+516% |
| 2009 |
4,363 |
+88% |
3,793 |
+123% |
5,208** |
+626% |
7,367 |
+7% |
| 2010 |
8,737 |
+100% |
|
|
|
|
|
|
Where will Apple sell another 15 to 25 million iPhones on top of the
25 million it sold last year? IDC estimates 174.2 million smartphones
(15% growth) were sold in 2009. Just the same growth rate would lead to
200 million sales in 2010, and this is likely to be an underestimate,
as markets like China and South Korea are opening up, another group of
two-year contracts are up for renewal, and smartphones are getting more
attractive and cheaper year by year.
If it continues to follow the iPod marketing model in the annual
refresh, Apple will upgrade the introductory 8 GB iPhone model -
probably with a 3GS chip - and offer it to carriers at a cost which
allows them to offer cheaper 18- or 24-month contracts with no money up
front. This will squeeze all the other manufacturers' margins, and the
weakest, like Palm, will probably go to the wall.
Windows Mobile, even with a massive upgrade, will look unattractive
to most corporates compared to RIM and iPhone. It doesn't have the
ecosystem or the base of enthusiastic users to compete. The expected
heavy drop in licenses to around 10 million for the fiscal year will
persuade many to look elsewhere, and only companies with a strong
commitment to Windows Mobile will be likely to stick with it. Licenses
could easily fall to 5 million in the 2010 fiscal year, leaving another
5 million handsets up for grabs.
The International iPhone
Most countries didn't get the iPhone until at least mid-2008. For
them, the network effects from seeing it, playing with apps, and trying
out a friend's didn't start for at least a year after the AT&T
launch. These sales have been building out for at most 18 to 20 months.
As in the US, major markets like Germany (T-Mobile) and Spain
(Telefonica) are still with one carrier, and if these were two-year
exclusives like in the UK, Apple can add new carriers in the
summer.
Competition in France led to the iPhone taking 40% of the smartphone
market within 6 months and in the UK, Vodaphone sold 100,000 in their
launch week despite being the third major carrier to offer iPhones.
Technology Updates
What else could drive iPhone sales in 2010? A version of the A4 chip
used in the iPad to increase the speed and battery life in the high-end
models with the usual memory upgrades - this time to 64 G and 32 GB -
would certainly help, especially combined with the better screens used
in the iPad. The wildcard is a larger iPhone, big enough to see the
difference, but still small enough be carried in a large pocket. For
me, this would have a 5.25" screen (50% larger) with 720 x 540
resolution. (See High Def
iPhone and iPod touch Could Make OS X the Mobile OS to Rule Them
All.)
iPod touch Sales Growth
iPod touch sales were up 55% in the December quarter, and around 15
million were sold over the 10 months from the end of March 2009. From
this, 20 to 30 million certainly looks possible for 2010. How much will
the numbers be affected by the iPad launch? Current pricing is at $199,
$299, and $399, so it is and will remain the cheaper, pocket-sized
iPad.
In the annual refresh, if Apple keeps the entry model at 8 GB, the
price could drop to $169 - the same as Nintendo's DSi - or even $149.
With the speed boost from the 3GS chip, Sony's PSP range would look
like a poor value - less screen resolution, not as fast, more expensive
to buy, and much more expensive games. With Apple now selling as many
iPhones and iPod touches in one year as the entire PSP installed base,
third party games developers will look on the PSP as their third choice
- something only worth supporting if the port is easy.
iPod touch Replacing iPod classic
It also looks like time to retire the iPod classic and replace it
with a 128 GB iPod touch. The high-end range could then be 128 GB, and
the current 32 GB and 64 GB models, adopting an Apple A4 processor for
the annual speed increase. Even if Apple doesn't move the iPod touch
into new areas like hearing
aids, driving it into Nano price points and taking over from the
Classic should boost sales to around half of the 50 million annual iPod
sales.
Apple could keep the average selling price low and profits up by
offering the next two OS upgrades for $15 when you buy a new iPod
touch.
The iPad Forecast
Sales of 8 to 10 million iPads looks reasonable, even if this is
much more than most analysts estimate.
Over 75 million iPhones plus iPod touches have been sold to date -
more than 38 million in the last 10 months. The total will be over 80
million iPhone OS devices when the iPad launches and over 120 million
by the end of the year.
All Apple needs is for 8% to 10% of the owners who "like to touch"
more than use a keyboard/mouse.
Nobody knows how many people dislike the PC way or would prefer a
different way, because there hasn't been a good alternative. All they
need to decide is that they prefer using their iPhone or iPod touch to
their PC and that they want a larger screen. Then those who like to
touch will march with their wallets and pocketbooks to the closest iPad
supplier, since nothing from Google or Microsoft is yet an
alternative.
It's here that the agreement with AT&T will drive adoption.
There's no two-year contract to get out of, just a simple start and
cancel when you want. With Apple's 14 day no questions asked return
policy, all anyone has to do is pay for the iPad on a credit card and a
$15 contract for 256 MB download. If it works for them, great; if not,
the total cost is $15 plus any restocking fee.
Apple Has Become the Consumer Choice
Whether Apple sells 80 million or 100 million OS X computers
this year, it is rapidly becoming the consumer system of choice and
moving towards Windows numbers. Developers are moving
more and more to Apple's mobile systems, and in a world where
operating systems and platforms need "Developers, Developers,
Developers" (Steve Ballmer), Microsoft needs to find a better way
forward.
As it is, Apple will probably pass Microsoft in revenue
in the next two quarters, as the gap has been narrowing for over a
year. If Apple's gross margin stays close to December's 40.9%,
exceeding Microsoft's market capitalization is just a matter of
time.
What effect this has on Microsoft and its customers is yet to be
seen. How will Microsoft respond to being overtaken by a longtime rival
it thought it had left in the dust?
