Survey Making This Call: iPhone Will Be 'Monster'

April 19, 2007

By Patrick Seitz
Investor's Business Daily

Apple's (AAPL) iPhone will be highly sought-after when it debuts in June, according to a new survey.

The combination mobile phone, Internet device and widescreen iPod media player has been the talk of the tech world since Apple Chief Executive Steve Jobs unveiled it in January.

A survey of tech-savvy professionals by ChangeWave Research to be released Friday indicates that demand will be high for the iPhone. About one in 10 respondents (9%) say they are likely to buy the iPhone once it becomes available. Another 7% say they are likely to buy the iPhone as a gift for someone else.

"That's huge," said ChangeWave founder Tobin Smith. "This is going to be a monster."

The survey results indicate a much faster adoption curve than is typical for a consumer electronics product, Smith says. If the iPhone's performance lives up to consumer expectations, sales should exceed Apple's sales goals, he says.

An executive with AT&T (T), which has an exclusive multiyear U.S. distribution agreement with Apple for the iPhone, said the device is set to hit store shelves by the end of June. AT&T Chief Operating Officer Randall Stephenson late Wednesday told Reuters the product is on schedule. Apple said April 12 that it was delaying its next Macintosh operating system release to focus its engineering resources on the iPhone. The Mac OS X release was pushed back to October from June. A million people have said they'd like an iPhone, Stephenson has estimated.

Analysts say the iPhone's high price is its main drawback. Apple plans to sell two versions of the product, one with 4 gigabytes of flash memory and one with 8GB, for $499 and $599 respectively. That's with a two-year service contract with Cingular, which is being rebranded as AT&T.

Early Adopters Ready

"It's a very expensive device for a consumer," said Kevin Burden, an analyst with research firm Telephia. It will appeal first to early adopters who want the latest stuff.

But to reach the mass market, Apple eventually must have a version priced at $200 or less, Burden says. That's the price threshold for smart phones, he says.

The ChangeWave study shows that the iPhone will see a surge in demand if and when the price significantly comes down. Among consumers not interested in buying an iPhone right away, 10% say they would consider buying a 4GB model and 20% an 8GB model if the price falls to the $200-$299 range.

In the survey, ChangeWave polled nearly 3,500 people April 4-10. Respondents were members of the ChangeWave Alliance, a group of 10,000 business, technology and medical professionals who work on the frontline of technological change, the pollster says.

The top selling point is iPhone's overall integration of iPod, cell phone, 2-megapixel digital camera and e-mail/Internet capability, likely buyers told ChangeWave.

Other respondents pointed to the innovative features, such as a 3.5-inch touch-screen display, and Apple's brand reputation as the main selling points.

Among likely buyers, 79% say they would dump their existing wireless carrier and switch to AT&T to use the new iPhone, ChangeWave says. About 9% said they would use the iPhone in addition to their current phone. The rest were unsure.

No Reason to Switch

Among those not likely to buy the iPhone, the main reason is satisfaction with their current cell phone. Some 55% of respondents see no need to switch because their existing cell phone is sufficient. Another 28% of respondents think the new device is too expensive.

The iPhone is likely to have a big impact on smart phone makers such as Nokia (NOK), Motorola (MOT) and Palm, (PALM) which will need to respond to the Apple phone's innovative design and features, Smith says.

The iPhone is pricey, but many consumers will realize that it's more than a cell phone, Smith says. The fact that it combines a smart phone with an iPod music and video player should price it higher than competing products, he says.

Analysts say price isn't the only big problem for the iPhone. It uses Cingular's Edge network, which is a 2.5-generation wireless network and not as fast as 3G networks. Battery life is another question mark for the device.

The second generation of Apple's iPhone will probably support the 3G networks for faster Web browsing and downloads, Smith says.

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For a summary of the "Apple iPhone Rocks Cell Phone Industry" report, simply click here.

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