Video Roundup: Deconstructing The iPhone

If there's anything Apple CEO Steve Jobs knows, it's how to create marketable hype. With the iPhone, Jobs has raised the bar once again with another seemingly must-have gadget, which hit the street June 29.

Here's a sampling of CNBC's coverage leading up the launch and thereafter.

Dissecting the iPhone

With the iPhone on the streets, what else is left but to unravel its bodily secrets? iSuppli, which sells reports to customers detailing the processors, memory and materials used in each iPhone, revealed that Samsung Electronics, Infineon Technologies and Texas Instruments all delivered components and worked with Apple to create the device. Each iPhone sold will generate 50% profit on the cost of each phonefor Apple, but Apple is not the only victor. According to CNBC’s Julia Boorstin, Samsung, the biggest winner among tech suppliers, will generate $52 to $76 in revenue per phone, depending on which iPhone model -- the 4GB or larger-memory 8GB – sells the most. Another big winner is Infineon, a maker of Edge chips used in phones like Apple’s iPhone, which will generate over $15 in revenue per phone. Its competitor in Edge chip technology, Texas Instruments, will only generate $4 per phone. Apple is not contractually bound to any of these tech suppliers, Boorstin said, as it hopes to change its suppliers once it has calculated its need for the next-generation iPhone.


Analysts say Apple beat sales estimates, selling more than 500,000 iPhones at Apple and AT&T stores over the first weekend it was available. But some AT&T customers were left wanting, due to network activation delays. Still, Rob Enderle, principal analyst at Enderle Group, told "Morning Call" that "for a first-generation device, they hit it out of the park."

Enderle pointed out that this is Apple's first foray into phones -- and "the only breakage has been with AT&T."

Charles Golvin, principal analyst at Forrester Research, said "the launch did live up to the hype -- which is rare." But he is maintaining a "wait and see" stance, as he looks beyond "the user who will buy anything Apple makes" -- and ponders the strength of the less-devoted "second wave of buyers."

Before The Launch

AT&T, the largest wireless provider in the U.S., teamed up with Apple's iPhone as its exclusive carrier. Apple has AT&T under strict terms, requiring that it share data revenue with Apple and buy a large number of phones AT&T won't be subsidizing for consumers. "If the iPhone is a hit, all of AT&T's rivals will suffer some," reports CNBC's Mary Thompson. Sprint Nextel may suffer, as some 4% of its clients could leave the provider for AT&T, according to Chris Larsen at Credit Suisse. He also expects over two million subscribers will leave Verizon for AT&T by 2009 giving AT&T stock "a modest lift." "It actually could have a material impact on the value created per share of AT&T on the order of $1.50 to $3 per share if things play out the way we think they will," Larsen said. If the phone flops, however, AT&T will be hurt. Ed Snyder of Charter Equity Research said though 60% of people polled showed interest in the iPhone, only 10% agreed to buy the iPhone at full price, about $499 to $599, contracted with AT&T for two full years. "If they don't sell a lot of phones or if the people who buy the phones don't use it a lot for data and pay Cingular more, this is going to be a very bad deal," Snyder said. "AT&T is either going to be the biggest winner or the biggest loser."

AT&T iPhone Plans

So we've all seen what the iPhone can do, but how much will AT&T charge for all of it? With iPhone monthly service plans ranging from a very reasonable $60 for 450 mins, $80 for 900 mins and $100 for 1350 mins, experts think these price points will help attract hesitant consumers weighing the hefty price tag for the Apple device. "I think the plan here by AT&T is to reduce some of that sticker shock people might feel when they go in and they realize they're paying $500 or $600 for a phone" says Amol Sharma, technology reporter for the Wall Street Journal. Considering these plans will offer unlimited mobile web and email access, which is a significant shift in the way wireless carriers traditionally offer these often costlier add-ons, Sharma adds: "Some of these service plans are fairly reasonable." CNBC's Jane Wells and Bill Griffeth also discuss with Sharma the potential difficulty Apple may have attracting business users - accustomed to corporate friendly devices such as the BlackBerry - to the multimedia tool the iPhone promises to deliver.

Verizon Killer?

AT&T's iPhone support will grab “some amount of shares from Verizon” -- though it will stimulate sales for all wireless network carriers in the long run, according to Frank Louthan, an analyst at Raymond James Telecom. “For the folks that fall short of buying the iPhone, and look at other devices with similar features, that will probably stimulate some demand,” Louthan said on “Squawk Box." As for AT&T, Louthan estimates it will make “roughly a 4.5% margin on the sale” of each iPhone. He said this would allow the wireless network provider to subsidize some of the other products that it sells. “Their competitors will be at a margin disadvantage if they match the price,” Louthan said. He expects that of the 10 million iPhones that will be available starting June 29, “seven or eight million” will be sold domestically, while the rest will be sold internationally over the next 18 months. “If you look at where online music is, iTunes really has become the standard, and with the iPhone, that’s where I think people will be drawn."

One Review Of The Device

“The glitzy wonder kit is indeed worth lusting after,” said Edward Baig, "USA Today" technology reporter, who shared his review of the device with CNBC. Baig said the iPhone does everything you see it do on the commercials that have been flooding television, including manually enlarging and minimizing the screen, and accessing everything with the swipe of your index finger. Baig is less impressed with the network of AT&T, Apple’s exclusive service provider. “A lot of times it was not that fast,” Baig of the time it took to connect to the Internet, which can be accessed with the iPhone. The phone works “pretty well”, meaning faster, however, via a wireless home network, he said. As for typing on the keyboard-less phone, Baig said it “takes getting used to.” As for the device’s battery – which is suspect to some -- Baig said it lasted through the day. He did suggest consumers charge the phone each night, despite Apple’s claim that the iPhone’s battery has eight to nine hours of talk time.

Palm May Sweat

More and more analysts say the wireless device will hurt smartphone sales of competing wireless network carriers -- at least in the short term. Travis McCourt of Morgan Keegan told "Morning Call" that, “In the near-term, it’s certainly going to have a negative impact, especially on the more consumer-oriented smartphones such as the Palm Treo.” But, he added, “in the long term, it’s probably a good deal of free marketing for the whole smartphone industry.” Lawrence Harris, a wireless equipment analyst at Oppenheimer & Co., isn’t sure about “free marketing” -- and sees the iPhone having an even more “potentially significant impact” on Treo sales. “If you look at the demographics for the Palm Treo versus the Apple, it’s very similar – generally, people in their 20s and 30s, college graduate students, owners of small businesses,” he said. Harris added that Research in Motion, the maker of BlackBerry handhelds, will also get hurt -- but not to the extent that Palm might.

Another Take on the Device

“This is really a hand-held computer,” said Walter Mossberg, personal technology columnist for “The Wall Street Journal,” who was quick to conclude that the iPhone is easy to use. After testing the Apple device, he found that it accommodated nine hours of exclusive web surfing, 22 hours of continuous music playing time, and seven hours of video time. Mossberg said the phone also works overseas, though one has to pay roaming fees to the network provider. Mossberg added that one clear flaw is Apple's decision to contract with only one wireless network provider, AT&T.