Apple Seeking Bigger Share With Iphone 5

When Apple Inc. releases its iPhone 5 for sale at retail stores Friday, the company will be looking to upgrade its already large base of existing customers, as well as convert others using rival devices.

Most of the initial rollout is expected to involve the former, with faithful Apple AAPL -0.44%  customers queuing at the company’s retail stores for a chance to get the latest version of the popular smartphone — after the iPhone 5’s pre-order run sold out on the Apple website in 24 hours.

But to meet Wall Street’s high expectations for the device, Apple also will need to keep bringing in customers who are new to the smartphone market — as well as entice others who are using competitors’ products, including Samsung, Motorola and BlackBerry devices.

“The initial action is typically repeat customers,” Andy Hargreaves of Pacific Crest Securities said in an interview about Apple’s sales immediately following an iPhone launch. “But through the product cycle, we certainly expect [the company] to take share.”

That would pitch Apple into a more intense battle with Samsung Electronics Co. KR:005930 -0.08% SSNLF +5.36% , the Korean electronics giant that quickly has become a top contender in the mobile category.

Up to now, both companies have enjoyed runaway success for a couple of reasons: Large numbers of users of so-called feature phones have traded up to smartphones, and also firms that had dominated the smartphone sector in previous years — namely Research In Motion Ltd. RIMM -2.76%   CA:RIM -2.90%  and Nokia Corp. NOK -0.34%   FI:NOK1V -0.09%  — have seen their positions eroded, leaving a large base of new customers to be tapped.

Apple and the Android platform by Google Inc. GOOG +1.28%  have benefited from the decline of RIM’s BlackBerry, which accounted for more than 45% of smartphone sales in the United States in 2008, but garnered a share of less than 3% of the market in the first half of this year, according to data from IDC.

In addition, Windows Mobile from Microsoft Corp. MSFT -0.39%  had a share of about 19% of the market in 2008 — only to see it fall as the software giant abandoned that platform to focus on the new Windows Phone OS, which did not begin shipping until last year.

But despite the array of new smartphone devices slated for release this fall, analysts still expect Apple and Samsung to dominate most of the action. What’s less clear is how much business they may take from each other.

“I think you’ll see a lot of people switching from BlackBerry and some switching from Android,” predicted Carolina Milanesi of market-research firm Gartner, speaking of the Google’s mobile operating system featured on most Samsung smartphones.

Android has become the most popular smartphone alternative to the iPhone. The first handsets for the platform went on sale in 2008, more than a year after the first iPhone model. Since then, Android has lapped Apple’s iOS platform to become the top-selling mobile operating system in the world, accounting for nearly two-thirds of global smartphone sales in the second quarter of this year, Gartner data show.

Riding that Android wave has been Samsung, which shipped more than 50 million smartphone units in the second quarter — accounting for about 33% of the global smartphone market for the period, according to IDC. Apple shipped about 26 million iPhone units, as the company said sales began a sequential decline as potential customers held off purchases in anticipation of the next version of the device.

The iPhone 5 will go up against Samsung’s family of Galaxy smartphones, mostly the S III, which first launched in late May. At an event earlier this month, Samsung said global sales of the device reached 20 million units in its first 100 days.

Ramon Llamas of IDC said Samsung benefits from having a wider line of Android smartphones that cover more price points and global customer sets. The iPhone, by contrast, has been mostly focused on the higher end of the market; Apple did not make an iPhone that was available free with a two-year contract until last year, when it launched the 4S and kept the two-year-old 3GS available for this market segment.

“Samsung has a much broader and deeper portfolio,” Llamas added, noting that there is still a base of customers out there who have not upgraded to a smartphone — many in developing markets where Samsung has a strong presence.

“The pie is still there, as there is still a lot of people” to switch over to smartphones, Llamas commented, while pointing out that this includes some users not suited for smartphones. “Not every cell-phone user is a candidate for smartphones.”

In the meantime, many analysts expect Apple to sell 10 million iPhone 5 units or more in the first two weeks after the launch, ending the company’s fourth fiscal quarter. Total iPhone shipments for the December period are expected to be somewhere in the 45 million to 50 million range, based on current published estimates.

Ben Reitzes of Barclays Capital predicted Wednesday that he believes Apple has plans to build about 50 million iPhone 5 units in the December quarter, and that strong demand was likely to persist into next year.

“The main driver of iPhone sales momentum into mid-2013 could be China, where Apple needs to strike a deal with China Mobile for the first time,” he said

Marketwatch