Apple
“It all comes down to the apps,” said Krikorian, co- founder of Sling Media Inc., part of EchoStar Corp. Krikorian also missed listening to San Francisco Giants games with the iPhones Major League Baseball application. “Every day, the gap with Apple gets wider and wider.”
Apples App Store has opened up a new front in mobile-phone competition. Rather than just comparing a devices features and service plans, customers are choosing phones based on the applications available. Apple is counting on the iPhone, including the 3GS model released last month, to bolster third- quarter results after a 79 percent jump in the stock this year.
“The App Store makes their product competitively better than others because you have people locked into your platform,” said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon. He predicts Apple shares will outperform their peers and doesnt own any. The iPhone is Apples most profitable product, he said.
Apple may report today that sales in the three months ended in June rose 9.9 percent to $8.21 billion, with profit of $1.17 a share. The Cupertino, California-based company probably sold about 5 million handsets in the period, up from about 720,000 a year earlier, estimates Gene Munster, an analyst at Piper Jaffray & Co. in Minneapolis. Sales from the iPhone and wireless-service fees probably jumped fourfold to $1.65 billion, accounting for 21 percent of Apples sales, Munster said.
Margin Pressure
Apple rose $1.16 to $152.91 yesterday in Nasdaq Stock Market trading.
Apple is relying on the iPhone at a time when the companys margins may come under pressure from price cuts on MacBook notebooks and higher component costs, Toni Sacconaghi, an analyst with Sanford C. Bernstein in New York, said in a report last week. Apple typically gives a forecast that misses analysts estimates and the companys outlook will likely be “conservative” this time, he said.
The App Store offers more than 65,000 programs and customers have downloaded 1.5 billion applications since the service started in July 2008, the company said July 14. Research In Motion Ltd., the maker of the BlackBerry, has about 2,000 programs on its App World store, which opened April 1. The Waterloo, Ontario-based company doesnt provide download figures. Palm, which offers about 30 applications for the Palm Pre, said last week that more than 1.8 million programs have been downloaded from its online store.
Jobss Return
“It is going to be very hard for others to catch up,” Apple Chief Executive Officer Steve Jobs said in a statement last week.
Investors are unlikely to hear today from Jobs, who has participated on Apples earnings calls once in the past eight years. Jobs, 54, has yet to appear at a public event for Apple since returning from medical leave June 29, after having a liver transplant. Apple said last month that Jobs is in the office a few days a week and working the rest of the time from home.
Zippo Program
Apple introduced the App Store a year after the original iPhone went on sale, providing a forum for outside developers to sell programs for the iPhone and iPod Touch media player. Applications range from the useful — programs that track weather, flights and calories — to the not so useful. There are programs that simulate a Zippo lighter and deliver tasteless jokes, and one that just shows a blank screen.
“Its okay if there are a lot of meaningless apps alongside useful ones — as long as they do a good job of helping you sort through the applications and find the ones that are helpful,” Hargreaves said.
Apple takes a 30 percent cut of each application sold and distributes free programs at no cost. Munster estimates that the App Store had sales of $104 million last year, netting about $30 million for Apple. Revenue may climb to $617.8 million this year, with $185.4 million going to the company, Munster said.
“My friends say they bought their iPhone just for the apps,” said Rammanohar Arumugam, founder of Cascade Software Corp., a Seattle-based company that makes iPhone software. While he says his iPhone is prone to dropped calls, as a device for applications, “its really terrific.”
Quality, Not Quantity
Jeff McDowell, vice president of global alliances at Research In Motion, said this month the company is “very happy” with how many applications have been downloaded for the BlackBerry. He also said theres enough variety of programs.