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From The Times

July 2, 2007

Hype, queues and handsets, but what now for = iPhone?

Once it was = the Cabbage=20 Patch Kids; now Apple's must-have gadget has taken America's stores by=20 storm

Tom Bawden and Rhys Blakeley =

Apple=E2=80=99s keenly awaited new iPhone flew off the shelves after = making its=20 United States retail debut on Friday night, selling an estimated 200,000 = handsets.

Most of the nearly 2,000 designated sales outlets sold out within = hours.

AT&T, the exclusive network operator for Apple=E2=80=99s mobile = phone, iPod and=20 web-browsing device had sold out of iPhones at most of its 1,800 stores = by=20 Saturday morning, although its staff continued to take orders over the = weekend=20 for the $499 (=C2=A3248) device.

Some buyers had problems activating the phones because the large = number=20 signing on to AT&T strained the network.

Apple would not say how many devices it had sold, but industry = analysts=20 suggested that Apple stores sold 128,000 and AT&T=E2=80=99s outlets = 72,000.

EBay, the online auctioneer, said that customers had sold 745 iPhones = within=20 24 hours of the launch, with one being offered for as much as $10,000. =

However, when the fanfare has died down, the real test will begin. =

Apple=E2=80=99s shares have jumped by nearly 50 per cent since the = first prototype=20 was unveiled in January, adding about $34 billion to its market value. =

The question that analysts are asking is whether the shares have = peaked or=20 whether the sky is the limit.

Roger Kay, president of Endpoint Technologies, an American = consultant, said:=20 =E2=80=9CThis is undoubtedly an inflection point, a very risky moment, = and things could=20 go either way.

"Expectations are high and will be extremely difficult to fulfil, = potentially=20 leading to considerable disappointment. But the phone could prove so = engaging=20 that it will not only sell tremendously well but also bring new people = to=20 Apple=E2=80=99s other products.=E2=80=9D

The zealous initial buyers of the iPhone, some of whom had queued for = days=20 before Friday=E2=80=99s 6pm launch in the United States, were =E2=80=94 = predictably =E2=80=94 delighted=20 with the device, but it remains to be seen to what extent the = phone=E2=80=99s undeniable=20 qualities, such as its beauty and versatility, outweigh pitfalls, such = as the=20 slow internet hook-up, the non-replaceable battery and the minimum $499 = price.=20

Meanwhile, the iPhone initially will operate only on the AT&T = network,=20 which means that people currently with rival operators will have to pay = hefty=20 fees to buy themselves out of their existing contracts.

In areas where AT&T=E2=80=99s coverage is poor, the absence of an = alternative=20 operator means that they will have no choice but to persevere.

Analysts expect a 3G version of the phone to be launched early next = year,=20 which would clear up the internet issue, and it may include a removable = battery,=20 but price is almost certain to remain an issue.

The cheaper $499 model is eight times the price of the average mobile = phone=20 and 2=C2=BD times the cost of a high-end one.

Analysts are divided as to how many iPhones Apple will sell. The most = bullish=20 suggest that it may shift as many as 45 million over the next two years; = the=20 bears say it may be as few as eight million, less than 1 per cent of = global=20 handset sales.

Kevin Hunt, an analyst for Thomas Weisel Partners, forecasts that = Apple will=20 sell about five million iPhones in its current financial year, to = September 30,=20 and about 18 million in the following financial year.

That would very roughly meet Apple=E2=80=99s own forecasts of selling = ten million=20 phones in the next 12 months, which would bring in $5.5 billion of = revenue,=20 assuming that an equal number of $499 and $599 phones were sold.

This would give a boost to the bottom line of Apple, which had sales = of $19.3=20 billion in its last financial year, to September 30, 2006, on sales of = products=20 such as computers and iPods and of music, through its iTunes music = website.

Have=20 your say

Isn't the revenue forecast = incorrect? Apple=20 have already stated that they are spreading iPhone revenue over 24 = months so 10=20 million only add about $1.5 to sales in a full 12 months.
And the = cost of a=20 comparable high-end phone in the US such as a Blackberry or Nokia N95 is = very=20 close, and if you take the full 2 year cost including service plan is = often=20 cheaper.
I know of no mobile phone sales model that can predict what = volumes=20 the iPhone will achieve - as no previous mobile has seen this much = interest by=20 the public.

Tony Crooks, Eastbourne, East Sussex

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