iPod Touch could be big challenger for iPod
By Gareth Powell
The iPod Touch is here. Available in the stores. Go in and buy one today. Or, if you have the time, use eBay. And still we get reporters telling us, as does Toni Sacconaghi in yesterday’s Bernstein report, all about a new data-plan-free iPhone.
She writes: We believe a lower-end iPhone that does not require a data service plan could dramatically increase Apple’s addressable market in the mobile device space. We estimate a 50 percent+ probability that Apple will introduce such a device in 2009, and believe it could be a material catalyst for the stock.
No one would argue with that except for the 2009 time frame. She is a year and a bit out.
Toni continues:
The market today for smartphones (i.e., phones requiring a data plan) is estimated to be 225 million in 2009, representing just 17% of the total 1.35B-unit mobile handset market. In other words, Apple is effectively not participating in 83% of mobile handset market today. To more effectively address this part of the market, we believe Apple should offer an iPhone that does not require the user to sign up for a data plan.
So let us take that statement apart and see if Toni has it right. Plainly no one would argue with her that Apple is doing a daft thing tying it in to mobile phone companies with a data plan. It is something no right-minded user — we are not including corporates under that title — would do. As it happens in some countries, China is favorite, most iPhones are not tied to anything. In France that sort of nonsense has just been declared illegal.
There IS a market comparison to make and you COULD argue that iPod Touch eats seriously into the position of iPhones and is like to so more in the future as new additions are made to the Touch. It is slimmer, cheaper and it can be used for Skype calls. (Incidentally, that is where all the serious opposition will be. And note that Philip Elmer-DeWitt at Fortune came to much the same conclusion in The great iPod migration.)
In a sense comparisons between iPod Touch and iPhone are a bit daft because plainly Apple is moving mobile computing to a new level. Eventually it will make never no mind whether it is and iPhone or an iPod Touch. The important bits for iPod Touch will be Skype accessibility (Skype has just announced a two way deal with Android) and in the App Store we are finding more and more that Apple is moving towards total pocketability.
Getting the real figures of retail sales was never easy but flow-through — not the same as sales because they are what you have delivered to the market — Apple shipped 22.7 million iPods (note not iPod Touch) in the fourth calendar quarter and 4.36 million iPhones.
What was the number of iPod Touch models sold? Make a guess at two millions and up iPod Touch phones? That is the challenger.
Toni Sacconaghi reasons data fees hold back some sales. That is almost certainly true. From that she argues Apple should release a data-plan-free iPhone. Which actually exists if you are willing to accept the United States is not the whole of the known universe.
For most people in many emerging markets, the first data-capable Internet device is a cell phone or smartphone and not a computer. People buying iPhones get a pocket computer thatmakes phone calls as well. But they buy it, initially as a mobile phone. And it should be priced as such.
Toni Sacconaghi probabaly correctly states: ‘Apple’s more than 100 million iPod users give the company a huge opportunity to capture significant market share in the mobile device market, if it can successfully migrate these users to the iPhone.’ Unless you have an iPod Touch actually operating as a mobile phone to the extent that you want it to. Which is where the dangers of universal Skype — coming to you on the new Android phone — become apparent.
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