Pac Crest: iPhone 3G is short-term gain
updated 03:15 pm EDT, Mon June 23, 2008
Pac Crest on iPhone 3G
The iPhone 3G should be profitable for Apple, but not to the degree it could otherwise have been, writes Andy Hargreaves of Pacific Crest. The analyst is raising his price target for Apple from $225 to $235, and his projected FY09 EPS from $6.20 to $6.55; this is due to expected to the expected volume of 3G sales, which will be aided by availability in 70 or more countries by the end of 2008. The phone is also being subsidized in the case of most shoppers.
The subsidy is at the root of the problem, says Hargreaves. While it should increase the number of unit sales, helping short-term cash flow, it will only offset the loss of revenue sharing collected from carriers and first-generation iPhone owners. The carriers, in fact, may suffer a fair amount in the short-term, as their subsidy per phone may be as high as $350, $25 more than estimated by Oppenheimer's Yair Reiner.
Hargreaves is projecting FY09 iPhone shipments of 15.5 million, with a potential of "significant upside."
Senior User
Joined: Jan 2001
subsidy
At the end of the day, for Apple to become more than bit player in the market they need carrier subsidies - if that means slightly less potential profit in the short term then that is what they need to accept. Most people will not buy an iPhone without a carrier discount, esp. if signing onto an expensive monthly contract - a free phone is the expected benefit of a contract.