New iPhone Could Allow Video Conferencing

Even as the iPhone continues to help drive Apple’s substantial revenue growth, new features in the smartphone’s upcoming version could allow the company to drill into entirely new business areas, including video social networking and conferencing.

On 19 April, tech blog Gizmodo posted an extensive breakdown of a device, reportedly found in a California bar, that it said was the next version of the iPhone. That breakdown described features such as a “front-facing video chat camera,” a larger “back-camera” with flash, support for “Micro-SIM instead of standard SIM,” a higher-resolution display, and “what looks to be a secondary mic for noise cancellation, at the top, next to the headphone jack.”

Waiting For The iPhone 4G

Apple reportedly claimed ownership of the device in a 19 April letter to Brian Lam, Gizmodo’s editorial director, which was posted on the blog. Much of the media has already begun referring to the unit as the “iPhone 4G.”

If the device does indeed turn out to be the next iPhone, the new hardware could potentially have a substantial effect on Apple’s mobile business.

 “We think Apple will spice up the iPhone announcement with services that leverage its front-facing video camera,” Ezra Gottheil, an analyst with Technology Business Research (TBR), wrote in a 21 April research note. “There is a market opportunity for a network platform for video social networking, gaming and conferencing that Apple could address with its distinctive software and design capabilities.”

When it comes to further leveraging a video-conferencing platform, Gottheil added, “By providing critical applications and a platform for third-party development, Apple could create a compelling and very sticky subscription service.”

It could also offer additional opportunities for Apple to interface with the enterprise, which has a definite use for video conferencing, and where BlackBerry has managed to hold a substantial market-share advantage.

The iPhone helped drive Apple’s latest quarter of strong sales and revenue, with the company claiming in a 20 April earnings call that it sold 8.75 million iPhones for the second quarter of fiscal 2010. Overall, the company saw revenue of $13.50 billion (£8.7bn) and a net quarterly profit of $3.07 billion, beating some Wall Street estimates of $12 billion, and representing a substantial increase from revenues of $9.07 billion and net profit of $1.67 billion reported for the same quarter a year ago.

“The iPhone [had] 131 percent year-over-year revenue growth, propelled by 474 percent unit growth in Asia-Pacific,” Gottheil wrote. “TBR believes Apple’s brand marketing mastery and command of the media and public attention paid off in increased sales, especially as consumer confidence recovered along with the global economy.”

Other analysts also see the iPhone as positioned for further growth. “The most interesting part to the Apple story in our view for CY10 remains the international ramp of the iPhone,” Brian Marshall, an analyst with Broadpoint AmTech, wrote in an April 21 research note. “We believe AAPL has only penetrated about 1.5 percent of its 150+ international carrier partners’ total postpaid subscriber base (525mil) vs. its US penetration peak of 5.0 percent with T in September ‘09 (~65mil).”

Competition From Google Android

But Apple also faces rising competition from the likes of Google Android, which runs on high-end devices such as the upcoming HTC Droid Incredible. Those smartphones, along with other contenders such as Microsoft’s Windows Phone 7, integrate mobile applications and Web content into interfaces that pose a serious challenge to the iPhone.

Apple executives played coy with the possibilities of new iPhone hardware and software during the earnngs call. Chief Financial Officer Peter Oppenheimer characterized Apple as “enthusiastic” about the iPhone OS 4, which includes new features such as multitasking, and alluded only to a “product transition” with regard to any devices being released in 2010.

In any case, Apple’s likely mobile-hardware upgrades represent an attempt to alter its competitive profile yet again—and keep those vital revenues for the company flowing.