Analyst: Apple’s iPod phone set for production

American Technology Research analyst Shaw Wu believes that Apple’s first cell phone will be introduced in the first half of 2007 and is urging investors to purchase shares of Apple before such an announcement is made. “With a history of revolutionizing the PC industry, the music industry, and the movie industry, we encourage investors to get aggressive in purchasing shares of Apple prior to the potential revolution of the handset industry,” Wu wrote in a research note. “Our research indicates that an Apple-designed smart phone has moved from concept to prototype and recently has progressed to near completion as a production unit,” Wu said. “We believe this smart phone has been in development for over 12 months and has overcome substantial challenges including design, interference, battery life, and other technical glitches. We believe that Steve Jobs is finally satisfied with the end product Apple engineers have produced in terms of quality and the right blend of cell phone and portable media player.”
Citing no sources, Wu claims the Apple phone will have a candy bar form factor, similar to the iPod nano, and will come in three colors. “Clearly, we would like to share more detail as we have conducted extensive work on the product pipeline, but for now, here is what we will convey. The design will be an iPod nano-like candy bar form factor and come in three colors (we are not certain of the exact colors but we suspect black, white, and platinum, similar to Apple’s current color scheme on iPods and Macs),” Wu said in his report.

Before Apple enters the U.S. cell phone market, it needs approval from the FCC. Wu notes that Apple could announce the phone first and then get approval before it ships. This would stop product details from first appearing on the FCC’s public website, allowing Apple to surprise consumers with the product. “We believe a filing would be required at least 6-8 weeks prior to an actual product launch. We believe Apple could protect potential leaks by announcing its cell phone product and then shipping around two months later.” Wu said. “This could be similar to the Intel transition where actual product shipped seven months after the announcement. Moreover, we believe it is possible that a filing under an OEM manufacturer (not Apple) could be possible similar to Microsoft Zune (was filed under Toshiba). We believe the key is that the underlying electronics get approved, as opposed to a specific brand name.”

Wu said the area that is still unclear is Apple’s go-to-market strategy. “As we have mentioned previously, we believe this is under serious debate and consideration within Apple,” Wu wrote. “It could participate the traditional way by partnering with carriers like Cingular, Sprint-Nextel, T-Mobile, and Verizon or it could also go with an MVNO (mobile virtual network operator) model where it would have tighter control over the user experience. We believe the go-to-market strategy is likely the gating factor in Apple shipping its cell phone imminently. However, we believe the company’s 155 Apple stores will prove to be a boon regardless of the marketing strategy, providing Apple local presence and competitive advantage.”

In closing, the analyst said Apple could benefit greatly by only acquiring 1% of the cell phone market. “We are very positive on Apple’s prospects in building a material smart phone business given its strong brand name, loyal customer base, unique user experience, large installed base of 58 million iPods, and what we estimate to be about 300 million iTunes users,” Wu said. “Should Apple gain 1% share in a billion unit market, we believe that could amount to a $2 billion opportunity assuming around 10 million units at a $200 ASP (similar to its current iPod), but not including potential services and accessories revenue.”

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