It is believed that Apple's iPhone business will soon become as profitable as its Mac one. Analyst Shaw Wu, of American Technology Research, predicts that the iPhone could eventually bring Apple some $20 billion revenue each year, according to Macworld.

The publication notes that Wu holds a buy rating on Apple stock with a value of $220. Even though he considers the device a success, Wu noted a few shortcomings as far as the new applications are concerned. One example was AOL's AIM application which times out after a few minutes of inactivity. Shaw Wu claims "this is good in that it minimizes connection with the cellular network, but requires frequent reconnecting if the user is not interacting fairly constantly."

Many analysts predict that Apple will sell huge shipments of iPhone 3G units, and so does Wu, whose forecasts see Apple selling 11 million iPhones this year for a total of 14.6 million shipped by the end of 2008 and 17 million next year for 31.6 million by the end of 2009, the Macworld piece reveals. Wu stated: "We believe there is still room for AAPL to exceed our forecast depending on a broadening product portfolio, new carrier agreements, and continued adoption of unlocked devices. For every 1 million incremental iPhone units, we estimate $0.10-0.15 in incremental EPS, recognized over eight quarters."

Wu and his team of researchers also expect to see an acceleration in iPhone adoption "in the second half of 2008, and beyond with 3G, a broadened product portfolio, additional carrier relationships, native Exchange support and more applications." Wu concludes, saying that "iPhone is a relatively minor contributor today at only 3-4% of revenue," but that American Technology Research believes it "has the potential to become a very significant driver over the next 2-5 years."

"We envision iPhone one day becoming as large as the current Mac business (~$15-20 billion in annualized revenue)," analyst Shaw Wu wrote in his note to investors.