RIMM: iPhone Putting the Freeze on Smartphone Buyers
Apple’s (AAPL) iPhone is without a doubt a game-changer for smartphones, whether it actually sells well itself or not. Smartphones have simply been to clumsy to use to be practical for a wide audience. That all changes with the iPhone, and it doesn’t even have to sell well - nay, doesn’t even have to actually be available - in order to harm the competition. According to USATODAY, Cellphone users set their sights on Apple’s iPhone:
Priya Sanghvi wants an Apple iPhone from AT&T’s Cingular Wireless when it comes out in June, and she is already strategizing how to get it.Now a Verizon Wireless customer, she’s exploring a range of options, including trying to wrestle with Verizon to let her out of her contract early, using one of the new online swap services to dump the remaining months of the contract, or even just paying the $175 early-termination fee.
“I just switched from a Dell to an Apple laptop and love the Mac lifestyle,” says Sanghvi, 22, a recent graduate of New York University. “I never go anywhere without my iPod and cellphone. Now, I’ll only have to bring one device with me.”
Cingular will be the exclusive U.S. carrier for the iPhone. The multifunction device is expected to ship in June and cost $499 or $599 with a two-year contract. Part-iPod, part-smartphone, it is already one of the most eagerly anticipated gizmos of 2007.
Like Sanghvi, Atlanta software customer service manager Nate Mansfield is ready to dump his Verizon service with a year remaining on his contract, even though he’s perfectly satisfied with it.
He’s got iPhone fever, though he’s never seen the phone in person. He says that from what he’s read about it, he expects it to be a more productive tool for his business.
With potential buyers scheming months in advance on how to get hold of an iPhone, it’s a safe bet they won’t be buying a BlackBerry, Treo (PALM), Nokia (NOK), Motorola (MOT - Annual Report), or whatever. And yes, we know there will be some people who prefer the traditional models and continue to buy them. But many of them will also wait to check out the iPhone, just in case.
Throw in a consumer slowdown and it’s fairly easy to see why we bought those Research in Motion (RIMM) put options.
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the ending portion of your post contradicts the beginning portion. $600 + 2 year contract + $175 termination fee is too steep for an average consumer in the market for a smart phone - if i were to throw in the ‘consumer slowdown’ later this year, iphone could see a reception like PS3. I could get the pearl or 8800 or any smart phone for free + 2 year contract in amazon.com - wouldnt a ‘consumer slowdown’ drive people towards RIMM or MOT phones than iphone?
I agree with what you are saying. Perhaps my post came across as bullish on iPhone as opposed to bearish on smartphones overall? The iPhone has the potential to freeze sales short-term and potentially steal share longer term. None of the models is likely to fare well if the consumer slows.
Does that make more sense?
Yes, makes sense - IMO, hype around iPhone is very similar to the hype around PS3. There were interviews in national newspaper with people telling that they are going to sacrifice eating food to afford PS3, camping in best buy 3 days in advance etc. Not making a point that iPhone would flop - but it better be good for the $600 price tag.
I think RIMM could report good numbers (they already announced subs adds above expectations) - there are too many shorts with this beaten around ‘iPhone kills every other smartphone’ thesis that a short squeeze after earnings looks imminent. The right time to short RIMM could be a month ahead of iphone launch.
[…] We have been saying for quite some time that the mobile phone market had peaked for the current cycle, and have been bearish on several of the associated stocks. For example, we recently said: With potential buyers scheming months in advance on how to get hold of an iPhone, it’s a safe bet they won’t be buying a BlackBerry (RIMM), Treo (PALM), Nokia (NOK), Motorola (MOT - Annual Report), or whatever. And yes, we know there will be some people who prefer the traditional models and continue to buy them. But many of them will also wait to check out the iPhone, just in case. […]
[…] It’s too bad they can’t make any money doing it. Because of the chronic oversupply we’ve talked about previously, all those extra units did next to nothing for sales and shrunk the bottom line. […]