iPhone News Updated

How applications will push Apple iPhone users to 30 million

How applications will push Apple iPhone users to 30 million

One of the key factors behind the huge success of Apple Inc.’s iPhone is software. In March, the company unveiled the App Store, the only home for a wide range of third-party applications for the iPhone and iPod touch, which will be accessible through iTunes or wirelessly. It is expected to launch in late June along with iPhone software update 2.0.

These third-party applications will differentiate the iPhone from a growing number of its smartphone competitors, according to Goldman Sachs analyst David Bailey.

“We think that Apple’s use of Mac OS X on the iPhone, which is the same operating system used with Macs, combined with Apple’s software development toolkit (SDK) specifically designed for the iPhone, provides a more robust application development environment for developers,” he told clients.

While other mobile platforms offer scaled-down applications, Apple’s plans are expected to make the development process more efficient and promote richer functionality. One current example of this is the Safari Web browser for the iPhone, which offers a full Internet browsing experience as opposed to the limits with some other smartphones. Meanwhile, the App Store’s layout and distribution system should result in a better user experience and drive higher adoption rates than existing platforms, Mr. Bailey said.

He expects to see small “widget-like” applications offered for free or at costs ranging from 99¢ to $2.99, along with large and more sophisticated applications likely between $19.99 and $29.99. Apple retains 30% of this revenue, while developers get the other 70%.

While a quick ramp-up is expected in the second half of 2008 that will coincide with the launch of the 3G iPhone and more than 40 new international carriers and countries, the analyst expects the App Store will make a more meaningful contribution to Apple’s earnings in 2009, with roughly US$120-million in incremental net revenue and US10¢ in earnings per share. He expects these numbers will climb to around US$280-million and US20¢ in 2010.

“Apple’s expanding addressable market for iPhone applications, in turn, should attract software developers’ interest and development resources, leading to a broader selection of third-party applications available at the App Store,” Mr. Bailey said.

Goldman sees the active installed base for the iPhone climbing from around 2 million at the end of 2007 to roughly 9 million by the end of 2008, jumping to approximately 20 million and 30 million by the ends of 2009 and 2010, respectively.

[Thanks: http://network.nationalpost.com/]