iPhone

Analyst: App Store Could Net Apple $1.2 Billion by 2009

Profits estimated at $254, based on the same optimistic scenario

By Filip Truta, Apple News Editor

13th of June 2008, 09:35 GMT

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Piper Jaffray analyst Gene Munster has recently presented investors with an interesting set of case scenarios concerning the upcoming App Store's potential to generate huge profits. Noting that iPhone users are more "sophisticated" than other smartphone users, Munster's most conservative case scenario sees the App Store generating $416 million in sales and profits of $75 million. The most ambitious one would net Apple over a billion in revenue.

"Mobile service adoption rates show that

iPhone owners are more sophisticated mobile users, likely a result of both the user profile and the device itself," Piper Jaffray's analyst told clients in a note, according to AppleInsider. "The bottom line is that we expect similar adoption of the App Store to other advanced services."

The image available to the left depicts Munster's said predictions. The Neutral Case scenario assumes 77.7 million active App Store users will download two apps using the new service, one of which will be free (demo, trial version). Apps would cost 10 bucks a piece, as some of the iPhone developers have already confirmed at Apple's WWDC this year. This would generate sales of about $777 million and a profit of $163 million, according to Munster's predictions.

The man goes as far as predicting that adoption rates could be much higher, hinting at the iPhone's intuitive nature, of around 95 percent - 80.8 million active users. This would generate revenues of approximately $1.21 billion and profits of $254 million, according to Munster's charts.

Munster's least ambitious case scenario says the App Store can generate a minimum of $416 million in sales and profits of $75 million, assuming only 75% of the iPhone and iPod touch userbase will download content from Apple's new service.

"Applying this 70% higher likelihood to the rate of game usage for smartphones, we arrive at 75% of iPhone users engaging in downloading third party applications," wrote Munster. "The reason we believe this could be conservative is that the iPhone heavily overindexes other smartphones in advanced services," he added.

AppleInsider notes that all of Munster's predictions assume a 60% operating margin on the 30 percent cut Apple gets from App Store sales, also maintaining his Buy rating and $250 price target on Apple's shares.

Munster's assumptions were also based on the adoption rates announced at WWDC for the iPhone's existing services.

TAGS:

iPhone | App Store | Piper Jaffray | Gene Munster | analyst

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