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Apple forfeits ‘iPhone premium’ as concerns mount over device – MarketWatch

I think this is a very ill thought out piece by MarketWatch. Let me explain. First they admit that the iPhone margins could be as high as 60%, which is a very good thing. If 60% isn’t a “premium” I don’t know what is. Now, let’s talk about this on a deeper level. I want to discuss this in three parts. 1. AT&T exclusivity 2. Limited market access 3. It is all about the upgrade

The exclusive contract with AT&T is great for Apple. It is great for AT&T. It is great for Apple in the short term because it creates this allure for the iPhone. Most people, like me, are locked into a contract, and regardless of how cool the iPhone is, it is not cool enough for me to pay $250 to get out of my contract. Add the $399/$499 for the iPhone, and that is one hell of a dent in the purse for a cell phone. So it is there, in the back of my mind, and everytime I see someone with an iPhone, it might reinforce to me, that hey, when my contract is over, I  might pick up an iPhone.  It is also great for the customer due to the nature of Apple’s relationship with AT&T. Visual voicemail is great, and worth every penny just to avoid “You have…….3…..new messages. TO listen to your messages press 1…… You get the message. This likely can only happen for carrier exclusivity. Some parts of the US don’t have an option to have AT&T as a carrier, go figure? So in this case, is not a sale without the revenue sharing better than no share at all? (Remember 55-60% margins) Maybe AT&T has no intention ever to provide operations in northern Maine. Revenue sharing is great, but a sale is a sale is a buck in Apple’s pocket. Which leads me to worldwide market access.

Are mobile phones a worldwide phenomenon, hell yes. In the US, we don’t know the half of it. Apple currently has deals with UK · O2 , Germany · T-Mobile, France · Orange, Austria · T-Mobile. What about Switzerland, Canada, Spain, Italy, Belgium, and Japan and Korea? The latter two are huge, given the mobile markets there. Should they wait for  a deal with a carrier there? I say not. Let them buy a a phone now, and when an update inevitability happens and/or a carrier deal is struck in their local, they will buy again. It is no doubt a win/win proposition for Apple. Add that to the fact that Apple provides no support for these unlocked iPhones and it is as good as free money.

Which brings me to my third point. It is all about the upgrade. What doesn’t the iPhone have now? 3G, more storage space? Why is that important. Firsts realize for all intent and purposes that the US is a veritable backwater of cell phone technology, especially compared to the Asian countries. Next digest this chart:

On top of that graph, Telephia also notes that:

Twenty-seven percent of European mobile users replace their cell phones every year, according to Telephia, the leading provider of performance measurement information to the mobile industry.

That is certainly a faster pace than PC, which in business is currently 4-5 years. Now with iPods, who knows? It is safe to say 27% of iPod and PC users are not replacing their respecitive products every year. Which is also important to Apple, and I am sure they looked into this, is the European mentality in cell phone buying. There, it is not a big deal to drop $300, $400 on a new phone, whereas prior to teh iPhone in the US, it was unheard of. So much so, that Ball many people predicted the iPhone would never sell becuase of the high price tag. By the way SB you may have heard that the iPhone represents about 27% of the Smartphone market, and that it is already surpasses Windows Mobile in a little less than one year.

From where I stand, Apple is doing o.k.. That said, am I happy that I got out at $199.01? YES! Do I plan on buying again, and soon? YES! The run up on AAPL has been tremendous, the tech sector has been hammered since mid-December and yet AAPL is still up almost 50%. I guess there is just some schadenfreude in seeing them fall. Or sometimes I wonder if one can either justify their position as a sell, or, even better, try to drive the price down lower and make more on the way back up. Now that makes sense, MarketWatch!

EDIT: I see now that the CNN Money has picked up this lovely story.

UPDATE: More iPhone Concerns Likely To Weigh On Apple

Also gotta love the logic here:

Report: Smuggled iPhones cost Apple millions in lost revenue

You know what costs even more revenue to be lost? PEOPLE NOT BUYING THEM AT ALL.

Let me know what you think?