Can the iPhone crack Fortress Europe?

13 Sep 2007

The runaway success of the iPhone in the US which saw 1 million devices sold within 74 days is unlikely to be repeated in Europe where Apple will face a richer portfolio of competing devices, the competitive Christmas sales season and a gradual slowdown in iPhone hype.

“Seventy four days to sell one million devices through an exclusive deal with AT&T is impressive for the new entrant to the telecom industry,” commented Ovum senior analyst Joss Gillet.

“The iPhone is undoubtedly a very exciting product which is disrupting the way manufacturers handle handset usability.

“However, Apple is planning to introduce its hero product in Europe during the most competitive period of the year and we expect Apple to face a strong portfolio of rival devices from established handset manufacturers,” Gillet added.

Gillet cited the challenge posed by Nokia’s OVI platform and its competing N95 device.

Sony Ericsson, which currently owns the optimised mobile music market in Europe, is also not likely to sit idly as its territory gets invaded and its strong brand awareness and user-friendly platform will present a hurdle for Apple.

Design competition is also strong as LG has already launched its Prada touch screen device.

Samsung’s agility and its ability to counter-attack and face off competition from Motorola and LG with competing devices is also a factor and it could mount a stiff new offensive with its own iPhone challenger.

Meanwhile Motorola has a history of introducing disruptive devices from the Startac to the Razr V3 and having gone through a tough downsizing ordeal will be eager to get back into the fray.

“We also expect that iPhone hype will slow in early 2008 as Apple faces strong commercial pressure in Europe,” Gillet said, pointing to the fact that rival manufacturers already have strong relationships with mobile operators.

These manufacturers also have greater pricing flexibility and access to the prepay market through subsidies and economies of scale.

“The leading manufacturers are already working on higher technology standards such as 5-megapixel cameras, HSDPA chipsets, 30 frames per-second displays, over-the-air downloads, external memory, and so on. Devices such as the N95, Z8, G600 and K810/K850 are subsidized and widely available.

“Ultimately, one can argue that Steve Jobs is aware of the challenges ahead, and that Apple’s target is to own only 1pc of the total market and make it a profitable exercise,” Gillet pointed out.

“However, the recent sudden sharp price drop did not appear to be a pro-active strategic decision: encouraging investors to question the device’s growth potential and upsetting early adopters,” Gillet concluded.

By John Kennedy