Ronnie05's Blog

Apple and the power of a cult brand

Posted in Mobile Devices and Company Updates by Manas Ganguly on September 18, 2012

Apple demonstrated the power of a cult brand with the launch of iPhone5. While the Androids (HTC One, Samsung Galaxy SIII, Samsung Galaxy SIV) are already at par with the iPhone5 as a device, which led a luke warm reaction to an otherwise hyped launch of iPhone5. However, if the demand/pre-orders are any indication – iPhone5 is a blockbuster already.

The Queue of early buyers outside the Apple store at Fifth Avenue

Consider this-

1. iPhone5 sold of 2 million units in 24 hours of the phone going on sale

2. It is expected that iPhone5 will sell 58 million units before the year closes (Bloomberg). Contrast that to Samsung Galaxy SIII which will have sold 30 million units in 8 months. iPhone5 would have sold double of the SIII numbers in half the time. Thus the sell thru rate is 4X of the Samsung Galaxy SIII.

3. iPhone5 will generate $36.2 bln. More importantly Apple’s early release and carrier/channel commitments would mean that it would have effectively blocked volume build up on Nokia Lumia series from channels and carriers. Apple has already taken 73% of operating profits in smartphone space. TheIphone5 frenzy could end up furthering that number such that there is not such space left for competition.

4. FBR Capital Markets predicts Apple will 250 million iPhone 5 units over the device’s lifetime. That amounts to $144 billion in revenues, or roughly three times all the revenues that Apple has made from the iPhone in its five-year history.

5. The Apple share price topped $700 basis the pre-bookings that have been received by Apple. There’s still the 7” iPad thats left to rock the Android Tablets boat and taking the unassailable lead on the Amazon tablets.

6. The demand appears to be fueled by iPhone customers who are looking to upgrade. A survey in UK by Usurv indicates that 44% of existing iPhone users want the Apple iPhone 5, while 20% of all smartphone users want to upgrade to the new iPhone without needing any further information about it.

7. Meanwhile, the price for the iPhone 4S will drop to $99 for new contract signers, and the iPhone 4 will be free on contract. That again is a huge fillip to the consumers who intend to buy Apple.

8. Add to this, the fact that there are new customers in China which is untapped by Apple yardstick

Valuation of technology companies (source: finance.yahoo.com as of 17th September 2012)

Interestingly, if you look at the Market capitalization of Apple – not only is the most valuable company in the world – it is more than the combined m-cap of the Rank 2 (Microsoft) and Rank 3 (IBM) technology companies in the world.

It is more than the combined valuations of Rank 3 (IBM) , Rank 4 (Google), Rank 5 (Oracle) top m-cap companies in the technology space.

Dig deep and Apple ends up more valuable than the combined valuations of Rank 4 (Google), Rank 5 (Oracle), Rank 6 (Amazon) and Rank 7 (Intel).

On the final count Apple is a shade behind the combined valuations of Rank 5 to Rank 10 which includes Oracle, Amazon, Intel, Qualcomm, CISCO, EMC put together.

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