Apple's App Store Keeps Dialing In The Hits
April 20 2009 - 2:10PM
Dow Jones News
Apple Inc.'s (AAPL) iPhone software store contributes next to
nothing to the company's revenue. Yet, the digital bazaar continues
to prove a key weapon keeping Apple's iPhone atop a growing number
of smartphone rivals.
Since it opened 10 months ago, the App Store has been a runaway
hit selling a host of software that turn the smartphone into
everything from a carpenter's level to a virtual change purse. Any
day now, the Cupertino, Calif.-based computer company is expected
to announce total downloads have surpassed 1 billion.
The App Store shows no sign of letting up. That, analysts say,
is key to the iPhone retaining its popularity with consumers, even
as a host of new competitors are readied for market. "They are
little value enhancers," Gartner analyst Mike McGuire said of the
downloads. They are why "Apple is the platform of choice" in the
consumer smartphone area, he added.
The App Store's popularity may never have been more important.
In coming weeks, Sprint Nextel Corp. (S) will begin selling Palm
Inc.'s (PALM) Pre smartphone, a cutting-edge gadget that's getting
good reviews and is seen as a big challenger to the iPhone's
popularity. Meanwhile, Nokia Corp. (NOK) and Research In Motion
Ltd. (RIMM), both battling the iPhone with their latest
smartphones, have launched online application markets hoping to
capture some of the magic the App Store has delivered for
Apple.
On Wednesday, Apple is expected to report second-quarter results
that show earnings rising 5% to nearly $8 billion even as the
economy sputters. During the quarter, sales of iPhones, which
retail at $199 apiece, are expected to reach 2.3 million units. The
App Store will likely contribute less than 1% to revenues, even
though roughly 110 million "apps" are downloaded every month.
On Monday, Apple shares were down 2.7% at $120.04. Apple had no
immediate comment.
Behind the App Store's success is a dedicated army of software
companies that prefer to write for the iPhone rather than for rival
devices. More than 30,000 developers write iPhone software. Though
many are smaller than the companies focusing on phones from Nokia
and RIM, they stock the App Store with somewhere around 4,000 new
programs a month.
This puts Apple ahead of competitors, chiefly because developers
will devote more of their time to the iPhone, instead of its
competitors. This impact is felt more so in smaller software
operations rather than large iPhone developers, like game publisher
Electronic Arts Inc. (ERTS) and online auctioneer eBay Inc. (EBAY),
with the resources to churn out iPhone-compatible versions of their
products.
-By Ben Charny, Dow Jones Newswires; 415-765-8230;
ben.charny@dowjones.com