Changewave Research: Apple Iphone Update

ChangeWave Research: Apple iPhone Update

ChangeWave Research Report:

Apple iPhone Set to Roil Telecom Industry

Our latest ChangeWave Consumer Telecom survey, conducted Jan 25-29, 2007, shows a huge potential impact for the soon-to-be-released Apple iPhone – one that could well change the playing field for cell phone service providers and manufacturers alike.

A total of 1,938 ChangeWave Alliance members participated in this survey. Here’s what was found:

(I) Apple iPhone – The Potential Consumer Impact

Apple recently announced it's iPhone, a combination of three products – a cell phone, an iPod and an internet browser – all using a touch-screen interface. The iPhone is expected to be available in June of 2007 and will cost around $500 for a 4GB model and $600 for 8GB – with a 2 year Cingular service contract.

How likely is it that you will buy an Apple iPhone for yourself when it becomes available? (n=1,938)

Very Likely / 3%
Somewhat Likely / 6%
Unlikely / 86%
Don't Know / 5%

Nearly one-in-ten Alliance respondents (9%) say they are likely to buy the new product when it becomes available – currently set for June of this year.

(FOR THOSE WHO ARE LIKELY TO BUY AN APPLE IPHONE) Would the iPhone likely replace your existing cell phone, or would it be in addition to your current cell phone?

iPhone would replace my existing cell phone / 80%
iPhone would be in addition to my existing cell phone / 10%
Don't Know/NA / 6%
Other / 4%

Four-in-five (80%) who plan to buy the iPhone say it would likely replace their existing cell phone. Another 10% say that it would be in addition to their current phone.

What is the most important reason why you are likely to buy an Apple iPhone for yourself when it becomes available? (Open-ended)

Integration of iPod, Phone, Camera and Email/Internet / 34%
Features / 18%
Design / 16%
Brand Recognition / 11%
Internet Capabilities / 8%
New to Market / 5%
Ease of Use / 3%
Other / 4%

By a wide margin, the most exciting selling point for likely buyers is the iPhone’s overall integration of iPod, Phone, Camera and Email/Internet capability (34%).

Respondent ROB43813 writes, “It’s an all in one device with a big screen and fairly small size, and Apple normally does a great job with new innovative products.“ RME39578 adds, “I already use an iPod and I’d like to be able to carry one device to browse the internet, as well as use the phone and hear music.“ And CWF83250 sums it up as, “Finally, one gadget that does about everything I want it to do.“

We also asked respondents who were not considering buying the iPhone why they were not interested:

For those not considering buying an Apple iPhone for yourself or someone else, what's the most important reason why not?

No Need - Current Cell Phone is Sufficient / 55%
Cost of iPhone is Too High / 28%
Don't Like Requirement to Use Cingular Service / 7%
Don't Like iPhone Features, Appearance and/or Touch Screen Interface / 2%
Technology is Too New / 2%
Other/NA / 7%

More than one-in-two (55%) say they don’t currently have a need for it, but the key finding appears to be “high price” (28%) – which is the most important reason why nearly three-in-ten consumers (28%) say they are currently not considering it.

How far would the price have to drop for those not considering the iPhone to turn into potential buyers?

We asked:

For those not considering buying an Apple iPhone, at what price point would you consider buying an iPhone?

Not Interested / $199 or Less / $200-$299 / $300-$399 / $400-$499 / $500-$599
4GB iPhone / 43% / 44% / 10% / 2% / 0% / 0%
8GB iPhone / 46% / 29% / 17% / 6% / 1% / 0%

Bottom Line. If and when the cost was to come down, these findings project a tsunami-like surge in consumer demand for the product.

To put these findings in context, in Apple’s latest earnings telephone conference, CFO Tim Cook said “The worldwide market for total cell phones is somewhere around 1 billion and our objective of getting 1% of it would yield 10 million units across the calendar year.”

The current survey findings provide strong evidence that 10 million units is an attainable sales goal for Apple in year one – if the iPhone performs up to consumer expectations. Indeed, total sales could well exceed 10 million if the iPhone can live up to its hype.

(II) Winners and Losers: iPhone Impact on Cellular Service Providers

Who is your cellular service provider?

Current
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06 / Previous
Survey
Dec ‘05
Verizon / 30% / 29% / 29% / 27% / 28%
Cingular / 26% / 27% / 26% / 26% / 26%
Sprint/Nextel / 13% / 13% / 14% / 15% / 14%
T-Mobile / 11% / 11% / 11% / 11% / 10%

The current cellular service provider market has not changed much since our previous survey in October 2006. Verizon (30%; up 1-pt) remains the market share leader among respondents, followed closely by Cingular (26%; down 1-pt).

But looking ahead, a far different picture emerges. A total of 15% of respondents said they’re likely to switch service providers in the next 6 months, and when we asked them who they plan to switch to we are able to clearly see the potential iPhone impact.

For those of you who are likely to change cellular service providers, which company are you most likely to switch to? (n=261)

Current
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06 / Previous
Survey
Dec ‘05
Verizon / 25% / 28% / 26% / 26% / 29%
Cingular / 22% / 14% / 17% / 16% / 11%
T-Mobile / 5% / 7% / 8% / 6% / 9%
Sprint/Nextel / 3% / 5% / 5% / 7% / 6%

Cingular (22%) – Apple’s exclusive service provider partner for the United States – surges 8-pts to its best showing ever among planned switchers in a ChangeWave survey. On the other hand, Verizon (25%) drops 3-pts to its lowest market share reading of the past 18 months. We note that every other major provider experienced a significant decline as well.

(III) iPhone Impact on the Cell Phone Manufacturers

We also looked at cell phone manufacturers:

For those of you who currently own a cell phone, which company manufactures it? (n=1,834)

Current
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06 / Previous
Survey
Dec ‘05
Motorola / 32% / 33% / 33% / 31% / 29%
Nokia / 16% / 17% / 16% / 18% / 18%
LG / 15% / 12% / 15% / 13% / 14%
Samsung / 13% / 13% / 13% / 14% / 15%
Palm (e.g., Treo) / 4% / 4% / 5% / 4% / 3%
Research in Motion
(e.g., BlackBerry) / 4% / 3% / 3% / 2% / 2%
Sony/Ericsson / 4% / 3% / 4% / 4% / 4%

Cell phone market share among consumers is little changed since October. Motorola (32%; down 1-pt) remains the industry leader, followed by Nokia (16%; down 1-pt), while LG (15%) has jumped 3-pts into third place.

But once again, going forward, a far different picture begins to emerge.

We asked the 26% of respondents planning to buy a new cell phone in the next 6 months which manufacturer they are likely to purchase it from:

For those of you who plan on purchasing/upgrading to a new cell phone, which company is the most likely manufacturer of the phone you'll eventually purchase?

Current
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06 / Previous
Survey
Dec ‘05 / Previous
Survey
Oct ‘05 / Previous
Survey
Jun ‘05
Motorola / 24% / 33% / 34% / 31% / 33% / 29% / 21%
Nokia / 11% / 11% / 12% / 12% / 14% / 11% / 16%
Samsung / 8% / 7% / 9% / 9% / 5% / 6% / 8%
Research in Motion (e.g. BlackBerry) / 7% / 6% / 5% / 4% / 3% / 6% / 6%
Apple* / 6% / NA / NA / NA / NA / NA / NA
LG / 4% / 6% / 3% / 2% / 5% / 5% / 4%
Palm (e.g., Treo) / 4% / 6% / 6% / 10% / 6% / 10% / 10%
Sony/Ericsson / 3% / 3% / 3% / 3% / 3% / 4% / 2%

*Note that Apple was cited by 6% of respondents as a write-in in the Other category.

Once again, we get a glimpse of the iPhone’s looming impact on cellular manufacturers. While a total of 6% cited Apple as the phone they are most likely to purchase, it looks like Motorola (24%) takes the biggest hit – falling a whopping 9-pts among planned purchasers to its lowest level of the past 18 months.

Bottom Line: It’s too early to project how much of Motorola’s decline in planned purchases is directly attributable to the upcoming debut of the Apple iPhone –it’s clear from these results that the iPhone is a potential monster that Motorola and the rest of the cellular manufacturers will have to reckon with from now on.

We will continue to track the iPhone phenomenon in future surveys and update you on these and other transformations within the cellular service provider and cell phone manufacturer markets.

II. ChangeWave Research Methodology

This report presents the findings of our latest ChangeWave Alliance consumer telecom survey. The survey was conducted January 25-29, 2007 and a total of 1,938 Alliance members participated in this survey.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master’s or Ph.D.) and 93% have at least a four-year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

III. About ChangeWave Research

ChangeWave Research, a subsidiary of Phillips Investment Resources, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 10,000-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave surveys its 10,000 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at www.ChangeWave.com.

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

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This information is from ChangeWave Research, LLC and contains confidential business information.