Analysts worry that the online auctioneer is moving too slowly on its multibillion-dollar investment. Will more content allay their concerns?
When eBay Chief Executive Meg Whitman acquired Skype in fall 2005, she said, "by combining the two leading e-commerce franchises, eBay and PayPal, with [Skype], we will create an extraordinarily powerful environment for business on the Net." The deal, valued at $2.6 billion in cash and stock, plus an extra $1.5 billion in additional payments through 2009 if certain performance targets are met, set Wall Street tongues wagging.
Among the hoped-for gains: added business lines, new buyers and sellers to the auction site, and a jump-start for growth. But more than a year after the deal was struck, many analysts question whether eBay (EBAY) has done all it can to harness Skype and its technology. Some investors concur, as evidenced by the 20% decline in eBay's share price since September, 2005.
Some of the slump is due to concerns that eBay's core auctions business, accounting for 66% of sales, is slowing as e-commerce and online search competitors muscle their way onto eBay turf. Still, "strategic questions remain about Skype," says Laura Martin, an analyst with Soleil—Media Metrics. "It's still unclear how it benefits the core eBay platform. And monetization [on eBay's investment] has been slower to occur than we had hoped."
Slow Mover
Analysts including Paul Keung, who covers eBay for CIBC World Markets, speculate that Skype didn't reach its first set of performance-based goals, resulting in missed payments, or so-called earn-outs. A recent management shuffle sent Skype President Alex Kazim back to an executive post at eBay after only six months. Skype declined to comment on earn-outs and claims Kazim left because his new responsibilities made for a long commute.
Sure, there's been movement in the right direction. The Web-calling outfit is expected to book $195 million in sales in 2006, three times the 2005 figure; in December, Skype introduced a subscription-based calling plan, and it's expected to announce other service fees and more paid service plans later this month.
The problem, say many on Wall Street, is the lack of a broader vision for Skype. "This is probably enough to offset regulation fees," Michael Arden, an analyst with consultancy ABI Research, says of the new fees. What's lacking is greater and speedier integration with other eBay properties and a grand, sweeping plan hinted at by Whitman and others at eBay back in 2005.
Skype's Potential
The company says big changes are on the way and that more of that vision will come to the fore. "We are working on developing new e-commerce- and content-oriented, and advertising-related revenue streams," says Don Albert, vice-president and general manager of Skype North America. For now, most of the company's sales derive from telecom services like SkypeOut, which allows for calls from PCs to phones. "Over time, we see these [other revenue streams] accounting for the larger share of Skype's revenues," Albert says.
Consider the potential in online search ad revenues. Since last August, Skype has been working with search heavyweight Google (GOOG) to enable so-called click-to-call ads, which let the user place a call to a desired number directly from a list of ads that appear next to search results. The new feature, due to be in place in late 2007, could let eBay offer a completely new category of listings—and maybe even to share in online advertising dollars collected by Google.
The company is also toying with the idea of offering contextual advertising as part of its new text chat and Skypecast feature, allowing dozens of users to join regular live conversations on various topics, or even virtual concerts, where members sing and play music instruments for each other. It's easy to imagine how a weekly chat on gadgets might feature ads for the latest phones from the likes of Motorola (MOT) or Nokia (NOK), which announced on Jan. 8 that it will integrate Skype into its new tablet PC. For now, Skypecast use is still limited.
eBay's Offerings
More promising are the possibilities of integrating Skype with other eBay properties. The auction site is expanding use of Skype Me! buttons in various auction categories. Limited data seems to show the feature helps clinch sales. Yet, sellers using Skype Me! buttons are "few and far between," because many sellers aren't interested in fielding phone calls, says Keung, who doesn't expect that attitude to change any time soon.
There's also wide latitude for integrating Skype with eBay's online payment service, PayPal. This year, PayPal will become the preferred payment method used on Skype worldwide. And, some time in 2007, Skype will enable users to send money to each other via PayPal, Albert says. That could increase eBay's share of the personal remittances business. Considering the size of Skype's user base (136 million users at the end of the third quarter), this move could hit money-transfer agents and banks hard and result in extra business for eBay.
All in all, though, telecommunications remains Skype's main focus. "We think there's a tremendous opportunity of capturing our consumers' telecom spending," Albert says. Indeed, while small today, the Web-calling business is expected to grow: Worldwide revenues from Voice over Internet Protocol (VoIP)—a fancy name for Web calling—will rise from $1.65 billion in 2006 to $19.1 billion in 2012, according to ABI Research. If Skype keeps its current 12% share of that money, its sales will reach nearly $2.3 billion by 2012. That would certainly be material for eBay, which booked $1.45 billion in the third quarter of 2006.
New Leader Needed?
All of which leaves some analysts wondering: What is taking you so long? "They need to do something soon," says Arden. "If [some big move] is not announced, Skype is going to be seen as a bad investment." Some wonder why eBay hasn't moved to combine its properties, including Skype, to, say, start an online brokerage firm, a social-networking site competing with News Corp.'s (NWS) MySpace, or a video-sharing site like YouTube. Others say eBay could have begun selling its Skype application to more large companies.
Some query whether Skype might do better under a visionary like News Corp.'s Rupert Murdoch, or under Virgin's Richard Branson, says Web-calling expert Jeff Pulver. "If they are not getting all they can out of it, the property is still valuable, they've grown it a lot," says David Prokupek, the founder of Geronimo Financial, which invested in eBay stock as the auction powerhouse's valuation slid. "We suspect Skype is more valuable today than when they purchased it. In this [mergers and acquisitions] market, maybe someone else could do more with it." A spokesperson says eBay has no plans to sell or spin off Skype.
Whatever it does, eBay needs to move soon. A slew of competitors are pushing into its market. Take, for instance, an outfit called Jajah, backed by powerful venture capital firm Sequoia Capital. The company allows for free calling between cell phones—a service that Skype users need to download additional software and to pay SkypeOut charges for (see BusinessWeek.com, 09/26/06, "Jajah's Mobile Ambitions"). It's just the kind of service eBay could make work. "They are pretty creative people," says Donald Yacktman, portfolio manager for the Yacktman Funds, which purchased eBay shares on price weakness last summer. It may just be a matter of putting that creative energy to work.
BusinessWeek.com
Friday, January 19, 2007
The Real Genius of Apple's iPhone
Word is the newly announced phone from Steve Jobs will transcend superficial design and deliver user-friendly function and limitless adaptability
Apple's (AAPL) introduction of the iPhone on Tuesday underscores the lesson Motorola learned with the Razr: A sleek, sexy design can create lots of buzz and drive sales, but without smart, usable interface design, consumers will end up angry and disinclined to buy your next "hot" mobile-phone offering.
Design has nominally been a priority of cell-phone makers for a while now, at least since Nokia took the No. 1 spot in the market, thanks, in part, to its focus on color and style. Samsung played the design card in its rise. Then came LG, with its "Chocolate." But design, as these companies have embraced it, is little more than styling. It is design in the service of product lust, rather than user experience.
In truth, the handset makers aren't entirely to blame for the poor customer experience so typical of the mobile-phone industry. Not only do the carriers control the buying experience (something Nokia is trying to change), the services, the network that determines the speed and kind of services that can be delivered, and the customer service, they also flex their muscle when it comes to the handset. By the time the handset makers and the carriers have fought out the fine points of a design that will work with the network, and the services that will drive revenue, the user's needs have long been forgotten.
Ready for a Friendly Phone
Now Apple must join with one of those very carriers, and its choice, Cingular, has already proven somewhat controversial with customers unimpressed with its existing service. And while Apple undoubtedly retains the upper hand, the partnership requires Apple Chief Executive Officer Steve Jobs to loosen his famously tight grip. Apple won't have the end-to-end control it has with the iPod, and when the iPhone goes on sale in June, consumers will still have to contend with the typical cell-phone experience: the unappealing store, the confusing plan options, the two-year contract, the less-than-stellar customer service.
But intuitive UI (user interface) and consumer-focused design is something that Apple does know all about—and seems to have retained control over. The navigation system of its iPod was both radical and defiantly simple—and it is with this same philosophy in mind that Apple has mounted its charge on the cell-phone industry. For some, it hasn't come a moment too soon.
"Finally we have what appears to be a cell phone designed for ordinary human beings, not just for children with incredibly thin fingers, brains of scientists, and better than 20-20 vision," says London-based designer Malcolm Garrett, creative director at the Applied Information Group. "Able to build on its proven strengths, Apple has taken the route of adding mobility and connectivity to an established and thoroughly considered operating system to give us a phone, Web browser, and media player that works well for each function."
Mac Operating System
"The clever, context-based navigational system cuts out irrelevant choices and provides the intelligent and gratifying user experience we have come to expect from Apple," agrees Jakob Trollbäck, creative director of New York-based design agency Trollbäck + Co. "By eliminating intermediary input devices such as keyboard or stylus, control has become tactile again. My Blackberry Pearl has 29 keys and you need to use complicated sequences involving modifier keys to do just about anything. Getting rid of them all in one swipe, the iPhone has an interface that is digital in every sense of the word."
Incorporating the existing Mac OS X operating system into the unit is a major step forward, one which Adaptive Path President and usability expert Jesse James Garrett reckons will provide a major headache for competitors. "Apple has been able to work backwards from its own OS, making adjustments to work on a smaller screen," he says. "This is not functionality that you can tack onto the existing phone operating systems out there. That has to be very troubling to the competition because it's going to take them years to develop similar technical sophistication. Mobile-phone Web browsers are uniformly awful." The iPhone, of course, uses Apple's own Safari browser.
Fluid Function
While for now, the functionality is not as extensive as some of the existing smart phones or MP3 players on the market—a reflection of Apple's preference for simplicity—it's clear that the device has the potential to be developed in many ways.
"Its perfectly ambiguous form can take on just about any personal-sized functionality," says Pentagram partner and interaction design specialist Lisa Strausfeld. "It's a truly chameleon device that, in theory, can become something new years after you purchase it. On a more pragmatic and even environmental note, one can now purchase a new phone, camera, PDA, MP3 player, or fill-in-your-personal-size-device-here through a simple software download."
There are a lot of neat touches that will also likely be influential. Sensors in the handset detect when the phone is in use, freezing the screen and preventing an overactive ear lobe from ending a call. Other sensors can alter the landscape of the screen, to make long-form reading less strenuous. In fact, many of the more revolutionary design aspects of the iPhone are—in hindsight—quite simple, provoking the much sought after 'Why didn't I think of that?' envy so often prompted by a genuinely good idea.
Sign Language
One of the biggest challenges the designers faced was how to provide a suitably sized usable keyboard—something every PDA or smartphone maker has struggled with. Apple bypassed the need for a button-based keyboard by providing virtual, on-screen QWERTY keys instead—and incorporated various tricks to enhance the typing experience, such as predictive spelling and what MIT Media Lab professor John Maeda describes as the "hover-expand" behavior of the keys.
"Each key can remain small and within an orderly grid at first glance; then, by hovering your finger, the on-screen key is made bigger so that you can see it better," he explains. "It's a fairly simple idea and probably not brand new, but definitely a step forward in the awkward task of typing on a tiny virtual keyboard."
"The multitouch interface is a breakthrough," adds Jesse James Garrett. "We've seen interfaces like this done as research projects, in academia, but this is the first time that someone has brought it to a consumer product. In [Jobs'] demo, the functionality they showed only scratches the surface of what could be possible."
Opening the Field
"Scratch" is the operative word here, and concerns have already been raised about the practicality and durability of the iPhone's large, unprotected screen (and how to keep it clean). Questions also remain unanswered about the compatibility of a phone (for which battery life is paramount) and a music player (which is often used for hours at a time). Putting the two together could significantly limit a device's lifetime.
"With so much technology packed in and with all its sensors and multitouch screen, there's a lot that could go wrong," says James Tindall, a British Web site and software developer and designer. "But it's clearly a radical step forward. For me, the iPhone is a Phone 2.0. Like Web 2.0, it just does everything it should do, in the simplest, clearest, most intuitive way possible."
One thing is for sure: The gauntlet truly has been thrown down. No doubt between now and June, when the iPhone is released, competing cell-phone, smartphone, and PDA makers will be scrambling to come up with devices that have the look, feel, and functionality of Apple's offering. Let's just hope that the hardware makers and carriers alike grasp the power of user-driven design and great customer experience. Like the music industry before it, the cell-phone industry needs a shakeup.
BusinessWeek.com
Apple's (AAPL) introduction of the iPhone on Tuesday underscores the lesson Motorola learned with the Razr: A sleek, sexy design can create lots of buzz and drive sales, but without smart, usable interface design, consumers will end up angry and disinclined to buy your next "hot" mobile-phone offering.
Design has nominally been a priority of cell-phone makers for a while now, at least since Nokia took the No. 1 spot in the market, thanks, in part, to its focus on color and style. Samsung played the design card in its rise. Then came LG, with its "Chocolate." But design, as these companies have embraced it, is little more than styling. It is design in the service of product lust, rather than user experience.
In truth, the handset makers aren't entirely to blame for the poor customer experience so typical of the mobile-phone industry. Not only do the carriers control the buying experience (something Nokia is trying to change), the services, the network that determines the speed and kind of services that can be delivered, and the customer service, they also flex their muscle when it comes to the handset. By the time the handset makers and the carriers have fought out the fine points of a design that will work with the network, and the services that will drive revenue, the user's needs have long been forgotten.
Ready for a Friendly Phone
Now Apple must join with one of those very carriers, and its choice, Cingular, has already proven somewhat controversial with customers unimpressed with its existing service. And while Apple undoubtedly retains the upper hand, the partnership requires Apple Chief Executive Officer Steve Jobs to loosen his famously tight grip. Apple won't have the end-to-end control it has with the iPod, and when the iPhone goes on sale in June, consumers will still have to contend with the typical cell-phone experience: the unappealing store, the confusing plan options, the two-year contract, the less-than-stellar customer service.
But intuitive UI (user interface) and consumer-focused design is something that Apple does know all about—and seems to have retained control over. The navigation system of its iPod was both radical and defiantly simple—and it is with this same philosophy in mind that Apple has mounted its charge on the cell-phone industry. For some, it hasn't come a moment too soon.
"Finally we have what appears to be a cell phone designed for ordinary human beings, not just for children with incredibly thin fingers, brains of scientists, and better than 20-20 vision," says London-based designer Malcolm Garrett, creative director at the Applied Information Group. "Able to build on its proven strengths, Apple has taken the route of adding mobility and connectivity to an established and thoroughly considered operating system to give us a phone, Web browser, and media player that works well for each function."
Mac Operating System
"The clever, context-based navigational system cuts out irrelevant choices and provides the intelligent and gratifying user experience we have come to expect from Apple," agrees Jakob Trollbäck, creative director of New York-based design agency Trollbäck + Co. "By eliminating intermediary input devices such as keyboard or stylus, control has become tactile again. My Blackberry Pearl has 29 keys and you need to use complicated sequences involving modifier keys to do just about anything. Getting rid of them all in one swipe, the iPhone has an interface that is digital in every sense of the word."
Incorporating the existing Mac OS X operating system into the unit is a major step forward, one which Adaptive Path President and usability expert Jesse James Garrett reckons will provide a major headache for competitors. "Apple has been able to work backwards from its own OS, making adjustments to work on a smaller screen," he says. "This is not functionality that you can tack onto the existing phone operating systems out there. That has to be very troubling to the competition because it's going to take them years to develop similar technical sophistication. Mobile-phone Web browsers are uniformly awful." The iPhone, of course, uses Apple's own Safari browser.
Fluid Function
While for now, the functionality is not as extensive as some of the existing smart phones or MP3 players on the market—a reflection of Apple's preference for simplicity—it's clear that the device has the potential to be developed in many ways.
"Its perfectly ambiguous form can take on just about any personal-sized functionality," says Pentagram partner and interaction design specialist Lisa Strausfeld. "It's a truly chameleon device that, in theory, can become something new years after you purchase it. On a more pragmatic and even environmental note, one can now purchase a new phone, camera, PDA, MP3 player, or fill-in-your-personal-size-device-here through a simple software download."
There are a lot of neat touches that will also likely be influential. Sensors in the handset detect when the phone is in use, freezing the screen and preventing an overactive ear lobe from ending a call. Other sensors can alter the landscape of the screen, to make long-form reading less strenuous. In fact, many of the more revolutionary design aspects of the iPhone are—in hindsight—quite simple, provoking the much sought after 'Why didn't I think of that?' envy so often prompted by a genuinely good idea.
Sign Language
One of the biggest challenges the designers faced was how to provide a suitably sized usable keyboard—something every PDA or smartphone maker has struggled with. Apple bypassed the need for a button-based keyboard by providing virtual, on-screen QWERTY keys instead—and incorporated various tricks to enhance the typing experience, such as predictive spelling and what MIT Media Lab professor John Maeda describes as the "hover-expand" behavior of the keys.
"Each key can remain small and within an orderly grid at first glance; then, by hovering your finger, the on-screen key is made bigger so that you can see it better," he explains. "It's a fairly simple idea and probably not brand new, but definitely a step forward in the awkward task of typing on a tiny virtual keyboard."
"The multitouch interface is a breakthrough," adds Jesse James Garrett. "We've seen interfaces like this done as research projects, in academia, but this is the first time that someone has brought it to a consumer product. In [Jobs'] demo, the functionality they showed only scratches the surface of what could be possible."
Opening the Field
"Scratch" is the operative word here, and concerns have already been raised about the practicality and durability of the iPhone's large, unprotected screen (and how to keep it clean). Questions also remain unanswered about the compatibility of a phone (for which battery life is paramount) and a music player (which is often used for hours at a time). Putting the two together could significantly limit a device's lifetime.
"With so much technology packed in and with all its sensors and multitouch screen, there's a lot that could go wrong," says James Tindall, a British Web site and software developer and designer. "But it's clearly a radical step forward. For me, the iPhone is a Phone 2.0. Like Web 2.0, it just does everything it should do, in the simplest, clearest, most intuitive way possible."
One thing is for sure: The gauntlet truly has been thrown down. No doubt between now and June, when the iPhone is released, competing cell-phone, smartphone, and PDA makers will be scrambling to come up with devices that have the look, feel, and functionality of Apple's offering. Let's just hope that the hardware makers and carriers alike grasp the power of user-driven design and great customer experience. Like the music industry before it, the cell-phone industry needs a shakeup.
BusinessWeek.com
Connected Consumers Watch More Network Broadcasting
A recent comprehensive study by CBS Research, examining consumers' attitudes towards digital media, and the role television will play in the near future, found that as the public at large becomes more connected to digital media, the more engaged they become in primetime television programming.
And, as viewers become aware of the deadline for full digital transmissions, the likelihood of them investing in new digital TV sets increases substantially.
David Poltrack, Chief Research Officer for CBS Corporation and President of CBS Vision, concludes "... By offering (consumers) new ways to connect to their favorite shows, whether it's websites, podcasts, ringtones or other mobile features, we've been able to deepen the bond these fully connected viewers have with our programming."
Among the findings of the study:
And, as viewers become aware of the deadline for full digital transmissions, the likelihood of them investing in new digital TV sets increases substantially.
David Poltrack, Chief Research Officer for CBS Corporation and President of CBS Vision, concludes "... By offering (consumers) new ways to connect to their favorite shows, whether it's websites, podcasts, ringtones or other mobile features, we've been able to deepen the bond these fully connected viewers have with our programming."
Among the findings of the study:
The population is gradually moving up to higher levels of connectivity, This "fully connected" segment of the population, the segment with both a broadband internet and a digital television connection at home, has grown from 22% in the fall of 2005 to over 30% this fall. The "fully connected" segment of the population is the segment that is most likely to watch the top broadcast network programs.
Although less than 30% of the population is aware of the 2009 deadline for broadcasters to switch to full digital transmissions, approximately one-half of these people have already purchased a digital set and another 30% plan to before the changeover. Of those who are not aware, when told of the change, 40% stated that they would upgrade to a digital set before 2009.
56% of those surveyed were aware that you could watch network television programs by streaming them over the internet. Of those aware of this streaming option, 46% have already streamed at least one program. Of those not aware of this streaming option, when told which programs were available for streaming, 62% selected at least one of the thirty-three available programs that they probably would watch via streaming over the internet in the future.
MediaPost
Fashion Phone From LG, Prada Features Touch Screen
SOUTH KOREAN ELECTRONICS CONGLOMERATE LG and Italian luxury goods and fashion brand Prada have partnered to create what they are calling the world's first completely touch screen mobile phone.
The ultrathin Prada Phone by LG (KE850) has an extra-wide LCD screen which "eliminates the conventional keypad making the overall usage experience a highly tactile one," the companies said in a release announcing the phone, which will be available in Europe in February and in Asia in March. It is priced at 600 Euros ($776).
The "tactile" element of the large-screen phone face is reminiscent of Apple CEO Steve Jobs' proclamation upon introducing the iPhone that the best stylus for navigating anything are one's 10 fingers.
The iPhone will be available in the U.S. in June, but won't be on sale in Europe until the end of the year and won't be in Asia until 2008.
Both phones also function as MP3 and video players and have a 2-megapixel camera, although the Prada phone lacks the iPhone's fully enabled Web browser.
The new product announcement appears to eclipse one of the iPhone's claims to novelty. Cisco Systems Inc., meanwhile, has sued Apple over the use of the name iPhone, which it owns and actively uses.
Marketing Daily
The ultrathin Prada Phone by LG (KE850) has an extra-wide LCD screen which "eliminates the conventional keypad making the overall usage experience a highly tactile one," the companies said in a release announcing the phone, which will be available in Europe in February and in Asia in March. It is priced at 600 Euros ($776).
The "tactile" element of the large-screen phone face is reminiscent of Apple CEO Steve Jobs' proclamation upon introducing the iPhone that the best stylus for navigating anything are one's 10 fingers.
The iPhone will be available in the U.S. in June, but won't be on sale in Europe until the end of the year and won't be in Asia until 2008.
Both phones also function as MP3 and video players and have a 2-megapixel camera, although the Prada phone lacks the iPhone's fully enabled Web browser.
The new product announcement appears to eclipse one of the iPhone's claims to novelty. Cisco Systems Inc., meanwhile, has sued Apple over the use of the name iPhone, which it owns and actively uses.
Marketing Daily
Apple iPod Sales Hit Record; Zune Grabs 10% Share
APPLE INC. SOLD A RECORD 21 million iPods for the holiday quarter, which helped boost the company's revenues by 50% and accounted for sales of $3.43 billion--half of Apple's total sales for the quarter, the company reported this week.
Stellar sales have earned the iPod a 72% share of the portable music player market, although Microsoft's Zune is making progress. Retail research firm NPD Group report that for December, Zune represented 10.2% of all units sold.
That growth is in line with Microsoft's expectations of exceeding 1 million units in sales by June 30. The company set a three-year plan to carve out a significant market share and build the Zune brand.
Microsoft has announced that it is working on a robust line of accessories with established and emerging manufacturers such as Harmon Kardon, JBL, Griffin, VAF and Belkin, most of who already make accessories for the iPod.
The growth of an accessories market is necessary for Zune to gain any significant mileage.
Microsoft has also said it is "getting traction with some of the top automotive brands like Ford and others to deliver integrated solutions for Zune while on the road," following in the tracks of Apple's relationships.
MediaPost
Stellar sales have earned the iPod a 72% share of the portable music player market, although Microsoft's Zune is making progress. Retail research firm NPD Group report that for December, Zune represented 10.2% of all units sold.
That growth is in line with Microsoft's expectations of exceeding 1 million units in sales by June 30. The company set a three-year plan to carve out a significant market share and build the Zune brand.
Microsoft has announced that it is working on a robust line of accessories with established and emerging manufacturers such as Harmon Kardon, JBL, Griffin, VAF and Belkin, most of who already make accessories for the iPod.
The growth of an accessories market is necessary for Zune to gain any significant mileage.
Microsoft has also said it is "getting traction with some of the top automotive brands like Ford and others to deliver integrated solutions for Zune while on the road," following in the tracks of Apple's relationships.
MediaPost
Analysts estimate 50% margins for Apple iPhone
Apple Inc. will have plenty of room to eventually reduce the retail price of its upcoming iPhone, according to preliminary gross margin estimates by a market research company.
The iPhone, the combination cell phone-iPod media player that Apple unveiled last week, will yield gross margins of more than 50% at the current set of retail prices, iSuppli Corp. said in an analysis of presumed component and manufacturing costs.
The 4-gigabyte version of the iPhone, with a retail price of $499, will cost Apple $245.83 to make, iSuppli estimated. The 8-gigabyte version, priced at $599, will cost Apple $280.83."With a 50% gross margin, Apple is setting itself up for aggressive price declines going forward," said Jagdish Rebello, a director and principal analyst with iSuppli.Apple did not immediately return a phone call seeking comment.
Since Apple will face stiff competition in the cell phone market, the company may need to cut into its margins to reduce pricing in the future, he said.
The Apple iPhone, which was announced by CEO Steve Jobs last week, will be available starting in June exclusively through AT&T's Cingular Wireless. Apple has said it hopes to sell 10 million units in 2008, or about 1% of the market.That goal "seems attainable," Rebello said.
Hollywood Reporter
The iPhone, the combination cell phone-iPod media player that Apple unveiled last week, will yield gross margins of more than 50% at the current set of retail prices, iSuppli Corp. said in an analysis of presumed component and manufacturing costs.
The 4-gigabyte version of the iPhone, with a retail price of $499, will cost Apple $245.83 to make, iSuppli estimated. The 8-gigabyte version, priced at $599, will cost Apple $280.83."With a 50% gross margin, Apple is setting itself up for aggressive price declines going forward," said Jagdish Rebello, a director and principal analyst with iSuppli.Apple did not immediately return a phone call seeking comment.
Since Apple will face stiff competition in the cell phone market, the company may need to cut into its margins to reduce pricing in the future, he said.
The Apple iPhone, which was announced by CEO Steve Jobs last week, will be available starting in June exclusively through AT&T's Cingular Wireless. Apple has said it hopes to sell 10 million units in 2008, or about 1% of the market.That goal "seems attainable," Rebello said.
Hollywood Reporter
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