Toni Sacconaghi, Bernstein Research: “The most important aspect of the new 3G iPhone is not its feature set, but Apple’s decision to change the iPhone’s business model,” abandoning carrier payments in exchange for more traditional upfront carrier subsidies. He thinks the switch likely reflects “widespread carrier unwillingness to move to Apple’s revenue share model.” He estimates Apple will sell the phone to carriers for between $350 to $700 depending on factors like carrier competition, exclusivity and ARPU. He notes that, in a move to prevent unlocking, the new phones will require in-store activation. Sacconaghi thinks the company can sell 10 million post-paid 3G iPhones in fiscal ‘09, but with profitability lower than the first generation device due to the business model switch. Sacconaghi also worries that in markets where they sell a pre-paid iPhone for $199, there could significant cannibalization of iPods.
…Richard Gardner, Citigroup: “We remain aggressive buyers of AAPL shares at current levels. Apple’s decision to move from a revenue share model to a traditional subsidy model for the 3G iPhone is a significant positive because Apple receives iPhone-related cash flow sooner. As a result, our free cash flow estimate increases by $2B for FY09 and our price target increases from $248 to $287.” His iPhone unit estimate for the second half of calendar 2008 goes to 12 million from 8 million. For calendar ‘09, he goes to 23 million from 16 million; for 2010 he goes to 28 million, from 20 million.
More speculation at Barron’s.
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