Apple riding high,but for how long?

Turning sour: The iPhone is becoming ubiquitous,threatening to dull its cachet

Written by New York Times | Barcelona | Published:February 27, 2012 1:38 am

KEVIN J. O’BRIEN

When Ellie Turner decided she wanted an upgrade from her iPhone 3G,she expected to pay more for Apple’s new iPhone 4S than for the other leading smartphones on the market.

Instead,Turner,a public relations specialist in London,got the fast-selling device free.

She consulted Phones4u,a bulk discounter of cellphones and data packages,which offered her a free iPhone 4S and data plan for £2,or $3.20,more than what she had been paying each month. She returned to her operator,O2 UK,which had been selling the 4S for £99 with the same plan. She told people there about the rival offer.

“They didn’t blink an eye,” Turner said. “They matched it.”

Apple is enjoying record profits and sales that have transformed it into one of the world’s most valuable companies. But the mobile computing industry it has conquered in just five years is changing rapidly,and nothing,not even Apple’s vaunted brand premium appears guaranteed.

In Britain,for example,the iPhone 4S costs at least £170 more than the Samsung Galaxy S II with a two-year commitment at O2 UK At T-Mobile in Germany,the Samsung model costs about 80 euro,or $108,and the 4S 130 euro. In the US,the difference between the two models at AT&T is at least $50 and up to $250.

The premium is Apple’s reward as progenitor of the modern smartphone segment: the sum of its software DNA,intuitive user experience,cash-generating universe of applications,cultivated image of hipness and first-mover advantage.

But Apple’s main rivals — Samsung,HTC and Huawei and ZTE of China — are making smartphones for much less,and the iPhone is becoming ubiquitous,threatening to dull its cachet.

For now,said T Michael Walkley,an analyst at Canaccord Genuity in Minneapolis,the iPhone lineup has momentum and Apple,based in Cupertino,California,should be able to pad its lead over its rivals this year.

“But I cannot say with certainty that five years on,Apple will still be on top,” Walkley said,noting that Apple and HTC did not even make smartphones six years ago. “I assume they will be,but it is difficult to predict anything in this dynamic market.” Walkley estimated that Apple had captured 52 per cent of all profits in the industry in 2011,a share he expected would increase to 60 per cent this year.

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