Even Recession Can't Dampen Demand for Faster iPhone

By Mike Musgrove
Washington Post Staff Writer
Tuesday, June 23, 2009

Evidently, a faster iPhone is enough to get consumers to reach for their wallets again. Apple announced yesterday that it sold 1 million units of its latest iPhone over the weekend.

The heavy demand for the new devices, priced at $200 or $300 if purchased with a two-year commitment to AT&T, happened even as the company cut the price of its older iPhone line to $99. The company did not say how many people bought the cheaper 3G iPhone.

The 3G had a similar uptake by consumers during its debut weekend last summer, said Michael Gartenberg, an analyst with market research firm Interpret, but "it's more impressive this time around because it's a third-generation product, and we're in the midst of a nasty economic recession."

Apple isn't the only smartphone maker defying the nation's economic woes. Research firm IDC has projected that U.S. sales of the devices this year will beat last year's sales by more than 20 percent. Palm's new Pre smartphone and new phones running software developed by Google are also expected to sell well this year. Analysts say about 100,000 Pres were sold the first weekend on the market after its June 6 debut.

"During this recession, everyone's talking about cutting costs, but as a whole the mobile phone market is growing," said Ramon Llamas, a senior research analyst at IDC.

Apple's share price has nearly doubled this year, even with chief executive Steve Jobs out on medical leave, partly thanks to sales of the hot smartphone. Even so, tech industry analysts said they were surprised at the level of consumer uptake for the new device.

"It totally blew through any kind of analyst estimates for the weekend, that's for certain," said Charlie Wolf, a tech industry analyst with Needham & Co. Wolf said he believes the strong sales are a sign that consumers are interested in the wealth of software applications available for the smartphone.

Llamas credits everything from falling prices to an increased consumer interest in social networking for the demand in smartphones. "We're living at a time when people want to communicate a lot of information with each other," he said. The iPhone's success has helped create a "ripple effect" among consumers who are interested in staying online with their phones, even if they don't buy Apple's device, Llamas added.

Wolf said he expects to see more corporations supporting the use of the iPhone this year, if only because so many consumers are buying and using the device. In recent years, Research In Motion, creator of the BlackBerry, had enjoyed a dominant level of support from corporate tech buyers. At this point, Wolf said, the iPhone is mainly limited by the fact that it is available on only one carrier.

"I'm telling you, if the iPhone ran on Verizon, BlackBerry would be in serious trouble," he said.

Jobs is scheduled to return soon to the company he co-founded, though the company has not specified when he will be back. Still, some Mac fan sites were abuzz yesterday over the fact that the Apple announcement included a sound bite from Jobs.

"With over 50,000 applications available from Apple's revolutionary App Store, iPhone momentum is stronger than ever," Jobs said in the statement.

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