The VAR Guy

March 27, 2007

2 Min Read
iPhone Sales Predictions

The VAR Guy loves crunching numbers. So he spent some time today looking at the iPod’s installed base and the cell phone market — trying to determine how many of those customers would purchase an Apple iPhone … and how soon.

First, The VAR Guy examined Apple’s latest 10Q filing with the SEC. In it, Apple reveals that the company sold 8.1 million iPods in its quarter ended July 1. Now, let’s be wildly conservative and assume that iPod sales don’t grow and generate 12-month sales of 32.4 million units. If 10 percent of iPod buyers instead opt for the iPhone, that’s 3.2 million units annually.

So how much additional revenue is that to Apple? The typical iPod sale is $185, according to the SEC filing. Now, let’s also assume that Apple grosses $499 per iPhone (another low estimate). That means each pending iPod customer who instead chooses an iPhone generates $314 in additional revenue for Apple. So, $314 x 3.2 million units = $1 billion in new, first-year iPhone revenue for Apple–just from the target iPod customer base.

What about all of those cell phone users out there? There will be 1 billion cell phone handsets in use by 2009, predicts Gartner. If Apple gets only one tenth of one percent of that installed base, the iPhone will sell 9 million units, generating $4.49 billion in revenue.

Of course, instead of wasting all this time crunching numbers, The VAR Guy could have checked the Web for preliminary iPhone sales projections. Bernstein Research predicts Apple will sell 7 million iPhones in 2007 and 15 million in 2008. At a minimum of $499 each, that’s $3.4 billion to $7.5 billion in annual iPhone revenue for Apple.

What does all this mean for VARs? Sure, the iPhone is mainly a consumer device. And if it doesn’t work as advertised, the iPhone could bomb. But there’s a B2B play here folks. Existing Apple VARs should feel vindicated. The iPhone runs Mac OS X and sets the stage for full-blown mobile applications that ride across public broadband networks. And since the iPhone has a mainstream Web browser built in, application service providers and other online services can tune their systems to support iPhone customers.

Well, The VAR Guy has already broken his promise not to hype the iPhone. Sorry about that. The numbers got the best of him.


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