Apple's AAPL combination smart phone, video iPod and mobile Web browser will appeal mostly to well-heeled consumers at first. That's a market now served by high-end smart phone maker Palm PALM.
"Palm will be taking the hit going forward," said Paul Carton, an analyst at ChangeWave Research.
Palm already is reeling from bad news. Its sales hit a wall last year, and its user satisfaction ratings have dipped, Carton says. ChangeWave's surveys of tech-savvy consumers and corporate IT buyers also show a pronounced drop-off in planned purchases of Palm phones, he says.
The surveys also show RIM RIMM increasing its smart phone market share among corporate buyers and holding its lead among consumers.
ChangeWave's surveys of corporate tech buyers show RIM increasing its market share in smart phones sales to 65% in the next 90 days from 61% last quarter. At the same time, Palm's share looks to drop to 19% from 22% last quarter. And Apple is expected to grab 9% market share, taking sales from Palm, Motorola (NYSE:MEU) (NYSE:MOT) MOT and Nokia (NYSE:NOK) NOK.
Among tech-savvy consumers, Apple is poised to tie RIM in sales of smart phones in the next 90 days. Apple and RIM each got 26% share of planned smart phone purchases in the next 90 days in the most recent ChangeWave survey. Palm's share is forecast to fall to 10% from 14% last quarter.
Motorola and Nokia also are forecast to see market share declines in consumer smart phone sales, ChangeWave says. The share of smart phone buyers looking to get Motorola devices is expected to fall to 5% from 14% last quarter. Nokia's share is projected to drop to 3% from 8%.
RIM targets corporate and enterprise markets with its BlackBerry devices, which emphasize e-mail rather than voice communications. A successful iPhone launch would put a damper on RIM's recent efforts to expand into the consumer market with phones like the BlackBerry Pearl and Curve, says Avi Greengart, an analyst with research firm Current Analysis.
RIM's core business of providing secure e-mail devices to corporate and government customers is safe, Greengart says.
"It's hard to imagine corporate IT departments giving out $600 MP3 players for any reason other than a reward for a job well done," Greengart said. While the BlackBerry is seen as a business tool, the iPhone is seen as an entertainment device, he says.
The iPhone goes on sale nationwide Friday evening with models costing $500 and $600, depending on storage capacity.
The first wave of iPhone buyers will be made up of tech early adopters and Apple loyalists, analysts say. But it's the follow-on buyers who will determine whether the product is a hit.
That second wave of buyers will wait for word-of-mouth reviews and for a chance to touch and feel the iPhone themselves.
The product has been demonstrated in TV commercials and Web videos, but hasn't been available in stores for potential buyers to give it a test drive.
"There's only a handful of people without the word 'Apple' on their business cards who've actually used this," Greengart said. "It is one of those things where you've got to touch it to believe it."
The iPhone features a multi-touch user interface that Apple and early reviewers have described as revolutionary. It doesn't have a hard button keypad like most cell phones. Instead you use your fingers on a glass touch screen for dialing, tapping out messages and navigating. Users scroll and zoom in on Web pages with their fingers, and flick through album cover art to find music.
Potential follow-on buyers will be influenced by the reaction of early adopters to the touch-screen interface as well as the speed of AT&T's TT Edge data network.
Early reviews have criticized AT&T's Edge network as slow. But the device also can access the Internet from much faster Wi-Fi hot spots. AT&T is the exclusive wireless carrier in the U.S. for the iPhone launch.
"A lot of people will wait on the sidelines" until the price of the iPhone drops or until it's available from carriers other than AT&T, said Michael Greeson, an analyst with the Diffusion Group.
In the meantime, cell phone makers will have to respond to the iPhone with high-end products of their own, he added.
"It raises the bar on the Nokias of the world," he said.
Originally published in the June 28, 2007 version of Investor's Business Daily.
Copyright (c) 2007, Investor's Business Daily, Inc.
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