Can Apple Profit Off the iPhone?

11.25.06 - 02:01pm

Is the Apple iPhone a good move for Apple? The first immediate thought at such a question is yes - of course. However, even as Apple has placed an order for 12 million iPhones, anaylsts are noting that an iPhone could cannibalize iPod sales.

The business of cell phones for Apple is like putting together apples and oranges. Apple’s hardware sells for a premium because of the Mac maker’s attention to detail. In contrast the business of cell phones is littered with free phones and rebates. Cell phone makers are able to offer flashy phones with lots of bells and whistles largely because the hardware is subsidized by carrier contracts. These phones would compete against an iPhone. Pacific Growth Equities analyst Derrick Wood, speaking of Apple, said “They can’t compete against the subsidized phones.”

Still, a snazzy iPhone at Macworld could be just the thing for Apple to brush back rivals and it is simply the way the world is moving. “I think over the long term mobile music is going to be huge,” Mr. Wood said. “And that is playing and consuming music over your phone.” It would seem the only way for Apple to remain at the top of it’s game is for it to do exactly what it is doing - expand it’s iPod into it’s iPhone.

Category: iPhone, iPod | Tags: apple_iphone, iphones, iPod