Monday, April 27, 2009

iPhone Claims 1.5% of Global Cell Phone Market

After achieving its seemingly modest goal of achieving 1% of the global cell phone market -- a market that includes numerous inexpensive only-a-phone models in use worldwide -- Apple's iPhone approaches the home stretch toward its 's second birthday with 1.5% of the global market share for all cell phones. This is supported in part by the fact that smartphones are increasing their share of the global device market, and Apple's share of the smartphone market has been strong from the outset and remains in the double-digits. The possibility that Apple will achieve significant share in major markets in which it lacks significant presence creates a certain optimism that Apple is on a path with a significant future growth.

The fact that Apple also profits from all the applications sold on this increasingly relevant mobile platform means that Apple's future revenues from the devices may -- down the road, when embedded computational power and energy consumption and parts costs have changed significantly -- ultimately reflect characteristics presently difficult to imagine or model. Instead of simply selling OS upgrades and original OS licenses with new devices, and making a few bucks on applications Apple may be able to persuade users to buy from Apple -- the model that worked so well for Microsoft for so long -- Apple is also able to make money every time anyone makes money selling software to iPhone users. The value of the iPhone as a platform may be significantly greater to Apple than anyone else's platform is to its vendor. (Compare XBox, which has spent most of its life as a loss-leader, and first appeared profitable only because its vendor accelerated into a prior quarter the warranty expenses that plagued the devices. Or compare Android, which presumably yields no revenue beyond what Google might obtain as users access Google's online content.)

Apple's increasing cash and its advantageous competitive position suggest that Apple remains attractive to accumulate. Indeed, I've already begun writing naked puts again -- to collect the premiums, or to collect shares below current prices.

UPDATE: With increasing unit sales, the economics on vertical integration of key components improves. Apple's movement toward in-house iPhone CPU/GPU design advanced another step with the hiring of an ATi designer from AMD, whose personal history includes work with Pixar.

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