Ok I have officially turned bearish on Apple. Has the iPhone been a success? Yeah it was ok, but pretty good in general. I turned bearish because iPhone2 is not a cheap deal. The iPhone at 399 was a cheap deal because you could jailbreak your iPhone. And this was the exact reason why people bought iPhones. Youth could buy an iPhone and use it with their existing cell phone networks.


With iPhone 2.0 this all goes away.

In a research note sent to clients today, analyst Gene Munster said his $1 billion market figure is the best case scenario that he came up with, and that at that level, it would add 3 percent to Apple’s 2009 operating income. The estimate assumes that there will be 61.6 million iPhone and 23.4 iPod touch users who would buy at least one item at the App Store during the year. Another post on the same subject, broke it down like this, the iPhone is a razor, and the App store is selling blades, writes Mark Evans. He he went a bit further, too. He said: “love your iPhone but get ready to pay through the nose for it.”

This is the business model that was used for iPhone 1.0 in Europe! And look what happened? Sales slumped!

Cutting the price and ending exclusive deals with telcos will help Apple towards its target of selling ten million Iphones by the end of the year. But at the end of 2007, the exclusive Iphone operators for Britain, Germany and France had only sold 330,000 phones between them, against a European sales forecast of up to 600,000 units.

The iPhone is not cheaper. You pay less upfront, but Europeans are already used to this model. They look at the plans that they have to take and then decide on the phone. With the iPhone requiring a pricey phone plan it will deter many users. In yesterday’s CASH magazine they found out that iPhone users generate 3x the costs that regular phone users do. Good for the telcos and good for the profit margins, but are we not in a recession?

Are we not in a situation where people are cutting back? I think we are and I think many are going to look and inspect twice before deciding to buy an iPhone. This is why I am bearish and I personally don’t believe the iPhone 2.0 will be a success.

What made me look into my bullish Apple call was the new placing of Apple products in a major electronic chain. The chain had given Apple for the past two years premier placing. Yesterday I saw that they gave Apple a second tier placing. They gave first tier placing to Sony, and HP. This made me wonder, will we get a surprise in earnings?

Three factors are making me bearish on Apple; more expensive “cheaper” iPhone, second tier placing, and a slowing economy. After all if discretionary spending is slowing how can one assume that Apple is immune? I have not yet closed my Apple position, but I am getting ready to pull the trigger.