Brainstorm Tech: Technology blogs, news and analysis from Fortune Magazine » Apple 2.0

IDC: 300,000 iPhone apps before 2011

2009-12-03T11:32:33Z

A research firm looks into the near future and sees … an Apple "iPad" next year

Apple (AAPL) figures prominently in IDC's top 10 predictions for the coming year, released Thursday and available here (registration required). The relevant bullet points:

The "iPad" will finally arrive. Last year, we predicted that we would not see the then-rumored Apple tablet in 2009. This year, however, we predict that Apple will finally introduce this new device family, which is more of an oversized (8in., 10in.) iPod Touch than a downsized Mac — and if you look at the developer energy around the iPhone/Touch platform, this should be no surprise at all. This prediction is a no-brainer: there's enormous appeal in sizing up the iPhone/Touch for a variety of applications and activities that people already use those devices for but would jump at the chance to have a larger screen — watching videos/movies, reading books/magazines/newspapers (it would take a big bite from the Kindle), surfing the Web, videophone, and online gaming. Look for Apple's "iPad" by year-end 2010. Oh, and don't be surprised to see Microsoft also announce its own device in this space. … One big question for 2010 is which way Apple will go with 3G connectivity for the iPad — private labeling a wireless carrier's network as "AppleNet" or simply merchandising carriers' wireless subscriptions through the iTunes store.

Over 1 billion mobile devices will access the Internet in 2010. IDC predicts that, for the first time, there will be over 1 billion mobile devices accessing the Internet by year-end, gaining quickly on the 1.3 billion PCs accessing the Internet (the former are growing at 2.5 times the rate of the latter). The most strategic portion of these mobile devices are converged mobile devices (aka smartphones), including Apple's iPhone, RIM's BlackBerry, and Nokia's smartphone lineup, as well as the growing number of phones running Microsoft's Windows Mobile, Google's Android, and Symbian^1 (notably Nokia). Over 200 million of these devices — which are distinguished by their ability to run third-party applications — will ship in 2010, representing 16% of the market; we predict that by 2013, they will account for over 20%. Of course, it wouldn't be the IT industry if price points didn't keep coming down: look for more sub-$150 smartphones to come on the scene in 2010, accelerating the market.
Developer — and application — momentum will continue to shift dramatically to mobile devices. At least as important as the number of mobile devices are the frenzied developer energy and application volume building around mobile platforms — most obviously, but by no means exclusively, around the iPhone. There are now over 100,000 iPhone apps listed on Apple's iTunes store, up from 10,000 a year ago — that's an annual growth rate of 900%. As a point of comparison, there are on the order of 10,000 Windows PC applications listed on Microsoft's Windows 7 compatibility Web site. We predict at least 300,000 iPhone applications by the end of 2010, many of the new apps coming from well-known Global 2000 business and consumer brands — and attracting more consumers and businesspeople to these platforms as their most commonly and heavily used clients.

For a summary of the rest of the document, and quotes from an interview with IDC chief analyst Frank Gens, see Steve Lohr's piece in today's New York Times.

Below: An IDC-produced video of Gens describing the highlights of his findings.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Why did AAPL tank on Tuesday?

2009-12-02T22:26:53Z

Apple fell 2.6% on Dec. 1 in an ugly close that left investors deeply suspicious

Apple had already dropped sharply twice on Tuesday — once at 10 a.m. and again at 3:25 p.m. — when, 12 minutes before the close, the volume of trading suddenly spiked and the stock went into freefall.

More than 3.5 million shares changed hands in a fury of last-minute trading, and when the dust cleared, Apple had fallen 5.27 points (2.6%) for the day to close at $196.97. Nearly 3 of those points were lost in the final 12 minutes, when $2.66 billion of the company's market capitalization evaporated in less time than it takes to drink a latte.

What happened? That's for the SEC to determine, assuming they care. But investors were deeply suspicious. In a day when the Dow climbed more than 126 points, there was no news bad enough to trigger a raid on Apple, no downgrades or negative analyst reports.

There was, however, some interesting back-channel chatter on the finance boards and among hedge fund managers. A partial timeline:

3:24 p.m. A message posted on Yahoo Finance's AAPL board mentions a "potential UBS downgrade"
3:26 p.m. Another Yahoo rumor, this one that Piper Jaffray's Gene Munster, a long-time Apple bull, is set to downgrade the stock this week.
3:28 p.m. TheStreet carries a brief note from hedge fund Manager Timothy Collins that reads in full: "Call me crazy, but I think Apple (AAPL) actually tests $195 (give or take a few cents). I will be a buyer on any bounce off that level, but I am holding off buying here. Just food for thought."
3:48 p.m. Yet another Yahoo Finance post, since deleted by Yahoo, claims that Apple is recalling large numbers of iPhones due to battery problems.

There's plenty more where that came from, including rumors that Steve Jobs needs another organ and that Apple's Cyber Monday sales were terrible. (In fact, traffic at its online store was up 39% year over year on Black Friday and 71% on Cyber Monday; see here.)

Yahoo Finance's chat rooms, of course, are notorious breeding grounds for disinformation, a place where day traders toss around rumors and insults in cryptic messages that are impossible to trace. It's unlikely, however, that any of the participants in this game have holdings deep enough to move a few million shares.

Timothy Collins, however, is in a different league. He's a hedge fund manager who writes for a website started by Mad Money's Jim Cramer, a man with a long history with Apple (see here and here). Reached on Wednesday morning, Collins denied having a hand in triggering a run on Apple.

"Though I am flattered that Apple investors think I have that much influence," he wrote, "it does give me a chuckle. I think the reason for the stock drop had more to do with a piece at 2.50pm EST. [Here he inserts a link to an AppleInsider story about speculation that the iPhone is going next to T-Mobile, not Verizon.]"

Piper Jaffray's Munster, for his part, dismisses the possibility that this or any other Apple story was the catalyst for the raid. "In my opinion investors were stretching for reasons," he told the Wall Street Journal's Matt Phillips. "My take, there was a big seller for who knows what reason. People got worried they were missing something, and the stock tumbled."

One more note: Bloomberg reported Monday that since August, hedge funds have been "shoveling money into stocks as individuals exit at the fastest rate in a year." The funds' most popular stocks, according to Goldman Sachs’s survey of regulatory filings: Pfizer (PFE), Bank of America (BAC) and Apple.

"Yes, hedge funds are buying stocks," Morgan Creek Capital Management's Mark Yusko told Bloomberg. "But they’re also shorting stocks in record numbers and buying put options in record levels."

Apple shares bounced back in after-hours trading Tuesday and opened higher on Wednesday. By midmorning, shares were going for $201.23, up 4.26 points (2.1%) from Tuesday's close. By the end of the day, however, Apple was back down to $196.23.

It also ended the day in the No. 1 spot on the Wall Street Journal's "Buy on Weakness" list. See here.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Charlie Wolf: How the Mac roared back

2009-12-01T16:08:45Z

Needham & Co.'s senior analyst explains how Apple outgrew the PC market seven fold

Click to enlarge.

Needham's Charlie Wolf was as surprised as anyone when Apple (AAPL) reported that it had sold a record 3.05 million Macintosh computers in its fiscal fourth quarter — a 16.4% increase compared with just 2.3% growth in the PC market.

The estimate Wolf had filed — 2.63 million units for the quarter — was one of Wall Street's lowest. (See here.)

So he took a close look at how Apple did it, and on Tuesday in a detailed report to clients he offered his answer: the home market.

"The twin drivers of the Mac’s rebound," he writes in his executive summary, "were the home market’s continued share gains in the PC market and the Mac’s share gains in the home market itself. Shipments in the worldwide home market increased 18.1% compared to an 11.5% decline in all other PC segments, while Mac shipments in the home market increased 28.8%. In the Western European home market, shipments rose an impressive 58.9%.

Wolf's findings are driven home by a series of charts and graphs. The first, reproduced above, shows that the home market, which represented 64% of all Mac shipments, was the only segment of the PC market to show any growth in the September quarter.

The second, below, shows that the Mac outgrew the home market itself (28.8% vs. 18.1%), while holding its own in the business market (-12.4% vs. – 13.7%).

Another spreadsheet shows that the Mac grew faster than the PC market in all regions of the world — most impressively in Western Europe, where the Mac outgrew the market by 38 percentage points.

In the remainder of his long report, Wolf makes the case that there's an iPhone "halo effect" that's even stronger than the original iPod halo, especially in Europe. And he applauds Apple's management for ignoring the advice of the many pundits who warned that it would lose share if it didn't abandon its premium pricing structure.

Apple stuck to its guns, and it paid off. Its dollar share of the home market is growing even faster than its unit share. Today, Apple gets one out every ten dollars spent on home computers worldwide. (See below.) In the U.S., its dollar share is more than one in five.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

The great iPhone death watch

2009-12-01T13:22:31Z

What critics were saying about Steve Jobs' smartphone in the months before it launched

Microsoft's Steve Ballmer. Click to play.

Three years ago, when it became clear that Apple (AAPL) was about to unveil some kind of mobile phone, critics began to weigh in on its chances of success. AAPLinvestors' Terry Gregory, building on a list of skeptical quotes begun by MacDailyNews, has put together what may be the definitive collection.

A sample:

“We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”
Palm CEO Ed Colligan, commenting on then-rumored Apple iPhone, 16 Nov 2006

“Apple is slated to come out with a new phone… And it will largely fail."
Michael Kanellos, CNET, 7 December 2006

"The only question remaining is if, when the iPod phone fails, it will take the iPod with it.”
Bill Ray, The Register, 26 December 2006

"Apple will likely have a tough time convincing application vendors to build specialized clients for the iPhone until the volumes are there, and the volumes could be limited by the lack of third-party applications – a Catch 22.”
Jack Gold, J. Gold Associates, 10 January 2007

“The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks."
Matthew Lynn, Bloomberg, 15 January 2007

"Five hundred dollars? Fully subsidized, with a plan? It is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard which makes it not a very good email machine… So, I, I kinda look at that and I say, well, I like our strategy. I like it a lot.”
Steve Ballmer, Microsoft CEO, 17 January 2007

I am not sure how it will stand against Sprint’s Wimax (when it successfully launches) and its phones, which I am looking forward much more than over-hyped Apple iPhone.”
Bhaskar Chitraju, Indews Broadcast, 18 January 2007

"iPhone may well become Apple’s next Newton.”
David Haskin, Computerworld, 26 February 2007

“Apple should pull the plug on the iPhone… What Apple risks here is its reputation as a hot company that can do no wrong. If it’s smart it will call the iPhone a ‘reference design’ and pass it to some suckers to build with someone else’s marketing budget. Then it can wash its hands of any marketplace failures… Otherwise I’d advise people to cover their eyes. You are not going to like what you’ll see.”
John C. Dvorak, 28 March 2007

“There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.”
Steve Ballmer, Microsoft CEO, 30 April 2007

“How do they deal with us?”
Ed Zander, Motorola CEO/Chairman 10 May 2007

“Apple begins selling its revolutionary iPhone this summer and it will mark the end of the string of hits for the company.”
Todd Sullivan, Seeking Alpha, 15 May 2007

"What does the iPhone offer that other cell phones do not already offer, or will offer soon? The answer is not very much… Apple’s stated goal of selling 10 million iPhones by the end of 2008 seems ambitious.”
Laura Goldman, LSG Capital, 21 May 2007

“We Predict the iPhone will bomb. Which means that when the iPhone comes, Digg will likely be full of horror stories from the poor saps who camped out at their local AT&T store, only to find their purchase was buggier than a camp cabin.”
Seth Porges, The Futurist, 7 June 2007

“The forthcoming (June 29) release of the Apple iPhone is going to be a bigger marketing flop than Ishtar and Waterworld combined. Because its designers forgot Platt’s First, Last, and Only Law of User Experience Design (“Know Thy User, for He Is Not Thee”), that product is going to crash in flames. Sell your Apple stock now, while the hype’s still hot. You heard it here first.”
David S. Platt, Suckbusters!, 21 June 2007

“God himself could not design a device that could live up to all the hype that the iPhone has gotten.”
Harvard computer science professor David Platt, 25 June 2007

More than 33 million iPhones, 100,000 apps and 2 billion downloads later, the death watch continues. To see AAPLinvestors' full collection — including comparisons to such "iPhone killers" as the Palm (PALM) Pre, Research in Motion's (RIMM) BlackBerry Storm and Motorola's (MOT) Droid — click here.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

The Mac's cyber Black Friday

2009-12-01T00:39:09Z

Apple's in-store sales fell sharply from 2008, but its online store traffic soared

Apple's busy Fifth Ave. store. Photo: ped

A pair of reports from Piper Jaffray's Gene Munster tell the story.

The first, issued early Monday morning, gave the results of a headcount performed at three Apple (AAPL) retail stores on Black Friday, the traditional start of the holiday selling season. Although the stores were busy, his team counted an average of 8.3 Mac sales per hour, down 36% from the 13 Macs per hour they observed on the same day last year.

Munster's second note, sent nearly seven hours later, reported on comScore data indicating that sales at traffic on Apple's online store Friday was up 39% year over year.

"Apple's online store had a big day on Black Friday," Munster concludes, "offsetting the y/y decline in our retail store checks."

Based on NPD data that showed U.S. Mac sales up 7% year over year in October, Munster had previously estimated that Apple would sell 2.856 million Macs in the quarter that ends Dec. 26. That's up from 2.524 million Macs in the same quarter last year, but down from the record 3.053 million Apple sold last quarter.

UPDATE: More field checks and estimates below the fold from Kaufman Bros.' Shaw Wu, Thomas Weisel's Doug Reid and Deutsche Bank's Chris Whitmore.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

These just in:

Wu writes: "Our field checks indicate strong foot traffic at Apple stores and that Macs, iPhones and iPods saw strong uptake … We believe our forecast looking for 2.9 million Macs is likely conservative. Currently, consensus estimates look for 2.85 million Macs."
Reid's team did store checks at 41 authorized retail locations in the U.S., Canada and the U.K. and came away with "increased confidence" in his estimate of 3.06 million Mac sales this quarter, up 21% year over year.
Whitmore's team got the shoe-leather prize, conducting store checks over Black Friday weekend at more than 120 Apple retail stores and 25-plus AT&T outlets. He concludes that both Macs and iPhones are tracking "in-line to above" his unit estimates (8.5 million iPhones and 3 million Macs) while iPods are tracking "roughly in-line" with his estimate of 23 million.

CORRECTION: Several news sites — including this one — repeated Munster's assertion that Apple's online sales on Black Friday increased 39% year over year. But comScore's report clearly states that it was measuring Apple.com's unique visitors, not its online sales. See here.

Stolen iPhones turn up in Russia

2009-11-30T11:58:52Z

Smartphones linked to a big Belgian heist are being unloaded in batches of 100

Russian bloggers report that Apple (AAPL) iPhones in mint condition are being offered in batches of 100 at "knockdown" prices to wholesalers in Moscow's notorious Gorbushka electronics marketplace.

Because the phones are unlocked and have Belgian model numbers they are believed to be swag from the largest iPhone heist to date — an industrial-scale B&E in which thieves cut a hole in the roof of a warehouse in Antwerp province and hauled off 3,000 to 4,000 iPhones.

Belgium is one of only three countries in Europe that sells iPhones without a SIM-lock, which makes the stolen phones easier to fence — at least in theory.

The owner of a shop at Gorbushka, speaking on condition of anonymity, told iPhone.ru last week that the "Europeans" — as the hot iPhones have been dubbed — have already started to appear in the market's shop windows.

But many shopkeepers won't touch the things, writes iPhone.ru's Arthur Malosiev, because they've heard that Interpol has the iPhones' IMEI numbers. The dealers are afraid the police will confiscate their goods if buyers start complaining that their new phones have stopped working with local SIM cards.

"But those wholesalers who are not aware of news," writes Malisiev, "enjoy and spread coin." (Google translation.)

Malisiev advises potential customers to check the 7-character model number (under Settings/General/Model) before they buy. If the last two letters are NF, he writes, "Ask him to be replaced by another, so as not to sit in the New Year off with a pipe."

Via Cult of Mac.

Macs are Amazon's 'Most Wished For'

2009-11-29T11:59:48Z

But some people may not be getting the computers they hoped for this holiday season

Image: Amazon.com

On the eve of Cyber Monday, Apple (AAPL) Macs held the top three spots on Amazon's (AMZN) "Most Wished For" laptop list, as well as the top four spots on the desktop computer wish list.

But wishes are not horses — or premium-priced Macs — and judging from Amazon's "Most Gifted" lists, some of those Christmas wishes might be filled by more affordable Microsoft (MSFT) Windows machines.

On the laptop "Most Gifted" list, the top two spots Sunday morning went to a $549.99 Toshiba Satellite and $418.98 Acer Aspire, respectively. The $1,199 MacBook Pro had been pushed to No. 3.

On the desktop computer "Most Gifted" list, three of the top four were still Macs, but a Hewlett Packard (HPQ) Compaq had moved into the No. 2 spot.

On Amazon's "Bestseller" lists — a broader measure of what's being purchased on America's largest online retail store — no Macs topped either list Sunday morning. But four Macs were among the top 10 bestsellers for both laptops and desktops.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

The iPhone's got Seoul

2009-11-28T23:37:09Z

Apple's smartphone lands with a bang in Korea as pre-orders approach 65,000

Seoul iPhone launch. Photo: news.naver.com

After China's muted reception, Koreans greeted the launch of the iPhone Saturday in the style to which Apple (AAPL) has become accustomed. Hundreds of customers lined up, some as long as 26 hours in advance, to pick up the country's first batch of 1,000 iPhones amid helium-filled balloons, flashing strobe lights and a blaring rockabilly band.

According to the AP, KT Corp. (KTC), the country's second-largest carrier, had received an estimated 65,000 pre-orders — a number likely to loosen Samsung and LG Electronics' tight grip on the local mobile phone market. Between them, the two manufacturers (the world's No. 2 and No. 3 cellphone makers after Nokia), had sold some 400,000 smartphones in Korea at prices considerably higher than they charge in other countries.

In this market, the 32 GB iPhone 3GS — which KT is selling for $317 on a $38 per month two-year contract and giving away free with a $112/mos. contract — is a relative bargain. The Korea Times reports that Samsung has already lowered prices on some models in what looks like the start of a smartphone price war.

Korea, writes iPhonAsia's Dan Butterfield, "has a sophisticated group of consumers who are eager to take full advantage of iPhone’s superior user interface and application offerings."

And Apple was quick to show Koreans the flashy features only the iPhone can offer. Below: An iPhone ad already airing on local TV.

For video footage of the crowds and the countdown, see here.

Video: Mr. iFart appeals to Steve Jobs

2009-11-27T09:25:04Z

The developer of the iPhone's No. 1 flatulence app says Apple's policies stink

Joel Comm

Another voice has been added to the chorus of iPhone developers complaining about Apple's (AAPL) App Store approval process.

The latest is that of author and Internet entrepreneur Joel Comm, whose iFart Mobile app is one of the iPhone's all-time best sellers (No. 1 last Christmas and still No. 16 on AppShopper's Entertainment list).

Comm has sent Steve Jobs an open appeal and the "Dear Steve" video posted below the fold. His complaint: his latest app, a simple green button that makes the cash register's "ka-ching" sound, has been rejected twice by App Store reviewers for containing "minimal user functionality."

The reviewers may be right. However Apple, as Comm demonstrates, has approved plenty of equally brainless apps, including some of his own creations.

Still, Comm makes a good point:

"On behalf of developers everywhere, we're looking for consistency in the app reviewal process," he says. "It's not asking much that the process be fair and more transparent so that we know what's going on. Remember, we're investing our time, money and resources into helping build your platform."

The video is clever, cleverer than Comm's latest app. And we hope Steve Jobs — or at least Phil Schiller, the senior VP who supervises the App Store approval process — gets to see it.

It may very well be that having reached 100,000 apps, Apple has decided to tighten its standards. But if that's the case, the company owes it to the developers working on the platform to let them know.

Chart: iPod vs. iPhone

2009-11-25T18:25:13Z

It took the iPod 17 quarters to reach 30 million units. The iPhone did it in 10.

iPod quarters date from fiscal Q1 2002; iPhone from Q3 2007. Source: Company reports

Thanks to AAPLinvestors' Terry Gregory for gathering the data from Apple's (AAPL) quarterly reports. You can see his spreadsheet here.

Below the fold: A version of the chart that extends the iPod numbers to the end of fiscal 2009.

UPDATE: Also, per reader request, a chart showing sales per quarter for the first 20 quarters.

Source: Company reports

[Follow Philip Elmer-DeWitt on Twitter @philiped]