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The iPhone's Five-Year Plan

By Richard Adhikari MacNewsWorld ECT News Network
Sep 23, 2009 4:00 AM PT

Demand in companies of all sizes will see the iPhone taking 35 percent of the business market, according to a prediction from Forrester Research. This will be fueled by increased demand for smartphones worldwide.

The iPhone's Five-Year Plan

Meanwhile, Apple will continue to innovate and stay ahead of the market, Barclays Capital Research said.

In light of these factors, Barclays has set US$208 as its price target for Apple shares. That's conservative when compared to other analysts' targets, perhaps, but it all boils down to one thing: Apple's stock is facing upward.

iPhone a Hot Corporate Tool?

Apple's attempt to penetrate the enterprise market has met some success, but it's really going to take the business world by storm over the next five years, Barclays Capital said in a report, "Investigating Corporate Smartphones," issued on Tuesday.

"We believe the iPhone should get its fair share of [the corporate wireless] market from consumers who want to use it for work as well as its industry-leading application marketplace and developer community that can create occupation-specific productivity tools," the report states.

That "fair share" Barclays expects is quite a chunk -- Barclays accepts Forrester analyst Ted Schadler's estimate that the iPhone will have 35 percent of the enterprise smartphone market in three years, according to the report.

"Yes, 35 percent is a huge number," Schadler told MacNewsWorld. "But mobile decision makers expect the number of devices in their companies to triple over the next three years, from 11 to 35 percent." These figures come from a Forrester survey of 906 mobile decision makers in the United States and Europe.

The survey found that 17 percent of American and European enterprises, and 23 percent of SMBs, support the iPhone, up from zero two years ago, Schadler said.

Consumers who want to use their iPhones at work will drive the demand. Increasingly, companies are decentralizing IT and device purchasing, reimbursing staff for buying their own equipment instead of buying the equipment themselves, Schadler said. This encourages the use of iPhones and Macs in the workforce.

It's a win-win situation for all concerned: The workers get to use the devices they like while the business lowers its costs. "The major implication for this trend is that ... vendors with higher consumer share/exposure will be in a much better position," Barclays said. This will benefit Mac and iPhone sales.

Another factor driving the increased adoption of iPhones in the enterprise is the growing usefulness of smartphones in the workplace. "We did another survey of 2,000 information workers in the U.S. and Europe and found that workers use smartphones everywhere -- at home, in the office -- and they make workers more productive," Schadler said. "There's a net benefit to the organization that goes all the way up to the CEO."

Overall Demand for Smartphones Growing

The demand for the iPhone remains strong in the United States and worldwide, Barclays said. Add the China market on top of that, and Apple's future looks rosy.

China Unicom, Apple's carrier in China, will probably sell about 1 million iPhones quickly, Barclays said. However, the market can likely handle far more. "We believe the market opportunity points toward multiple millions of units per year," Barclays said. It also pointed out that Apple's agreement with Unicom is not exclusive and that it might work with more carriers in China in the future.

Two other factors will help drive the iPhone's growth, Barclays said. One is that more customers will qualify for upgrade pricing to the iPhone 3GS later this year. The other is that Apple will launch the iPhone 3GS in more countries.

Barclays estimates Apple will sell 6.9 million iPhones in Q4, which ends in September. It pegs iPhone sales for Q1, 2010, which ends in December, at 7 million, but it adds that could be conservative. Barclays estimates iPhone sales will grow 26.5 percent to 25.6 million in 2010.

Staying Ahead of the Curve

Innovation is another critical factor for Apple, and Barclays expects Cupertino will continue to break new ground.

"Longer-term, we believe Apple is trying to stay ahead of the competition and is not sitting still with regard to iPhone design and features," Barclays said." We wouldn't be surprised if the iPhone eventually received a redesign eventually with more models."

Barclays said Apple can improve the iPhone in several areas, including battery life, product width, speakers and gaming controls.

"Even when it dominated the MP3 market, Apple recreated new product cycles with the iPod mini and iPod nano -- both very different from prior-generation products and, in the case of the nano, it made the iPod mini extinct," Barclays said.

Snow Leopard Sales Up

Sales of Snow Leopard, the latest version of Apple's OS X operating system, have skyrocketed, according to a report put out by the NPD Group.

During the first two weeks after Snow Leopard's release, its sales were more than two times higher than Leopard's initial release sales and almost four times higher than Tiger, NPD said. Leopard is the previous version of OS X; Tiger is now two generations old.

Apple's low price for the Snow Leopard upgrade -- $30 -- was a major factor. "We believe that a combination of aggressive pricing, strong marketing and the ease of upgrade all contributed to the strength of Snow Leopard's sales, but I certainly do believe that the aggressive pricing led to the fast start for this product," Stephen Baker, NPD's vice president of industry analysis, told MacNewsWorld.

"We attribute that to smart marketing and recognition that in this economic environment, and given that this was not considered to be as major a release as the prior two by most of the key product reviewers, pricing is something consumers would respond to," he added.

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