Don't Hang Up on the iPhone

The numbers aren't as lousy as you think.

Tim Beyers
Tim Beyers
May 3, 2007 at 12:00AM

You know that guy on the street corner who likes to proclaim that the end of the world is nigh? Someday he's going to be right. And someday us so-called experts will be right about Apple (NASDAQ:AAPL).

I'm not just talking about Wall Street. I've been wrong about the Mac maker just as much as I've been right. In October, for example, I sold my long-term options position because a backdating scandal added an unacceptable amount of risk.

I was sitting on a 150% gain at the time. Had I held till today, I'd be sitting on a four-bagger. Nice work, Tim.

But enough with the sob stories. My point here is that Apple has made a habit of defying conventional wisdom in a way that's made a lot of people rich. History says that can't continue. But the end may be a lot closer than CEO Steve Jobs would like to believe.

Or at least that's how it seems. Analysts at Markitecture found that just 6% of the 1,300 people it surveyed would seriously consider purchasing Apple's forthcoming iPhone. Two-thirds, meanwhile, said there was no chance they'd buy.

Don't take those numbers lightly; 77% of the respondents to Markitecture's survey said they were at least somewhat familiar with the iPhone. They just don't want to pay $600 for it.

How unsurprising. Researchers have been beating this drum for months.

And that, too, is unsurprising. History shows us that no one has ever successfully sold a $600 phone. For researchers, it's like the sound barrier was in the 1950s. Thus, they characterize the iPhone's pricing as nonsensical, like Dick Cheney giving a keynote speech at the annual Greenpeace confab.

Trouble is, history isn't perfectly informative here. Nokia (NYSE:NOK), Motorola (NYSE:MOT), and Palm (NASDAQ:PALM) have never had the benefit of retailers that catered to their products in the way that Apple's retail stores will show off the iPhone.

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We know the effect that can have. Macs are fun to play with. So are iPods. Apple's retail stores -- which account for roughly 18% of annual revenue -- make playing with these gadgets really, really easy. They'll do the same for the iPhone.

And let's not forget that there's already pent-up demand. AT&T's (NYSE:T) wireless group says that one million people have already expressed serious interest in purchasing the iPhone when it is released next month.

Think about that for a minute. Apple wants to sell 10 million iPhones by the end of 2008. If AT&T is right, 10% of that total may be sold on day one.

But I'm not going to play the predictions game this time. I've been burned too many times. Better it is, I think, to leave the crow for someone else.

Like, you know, the soothsayers who are now predicting that Apple can't sell a $600 phone. Good luck with that.

Brrrring! It's related Foolishness calling:

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Fool contributor Tim Beyers, ranked 6,540 out of more than 28,300 in Motley Fool CAPS, is a sucker for growth stocks and a regular contributor to Rule Breakers. Tim owned shares of Nokia at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy won't put you on hold.