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Apple iPhone to face tough test in Europe

Rivals up their game as iPhone hype falls away

Apple will face 'strong challenges' from incumbent networks and mobile phone manufacturers as it tries to crack Europe with the Apple iPhone.

Joss Gillet, senior analyst at Ovum, yesterday said that, although Apple's success in selling one million iPhones in the US in just 74 days was "impressive", Europe would be a tougher nut to crack.

"Apple is planning to introduce its hero product in Europe and we expect Apple to face a strong portfolio of rival devices from established handset manufacturers. We also expect that iPhone hype will slow in early 2008 as Apple faces strong commercial pressure in Europe."

Gillet - who concedes iPhone is a, "very exciting product which is disrupting the way manufacturers handle handset usability".

Apple iPhone: the definitive review

The analyst observes that Apple's recent decision to cut prices on the product may not have been a proactive decision to boost sales, as Apple CEO Steve Jobs claimed, but a realistic response to a slow-down in sales on grounds of price.

The analyst observed that Nokia, Sony Ericsson, LG, Samsung and Motorola are unlikely to give up market share in the extensive European market without a fight.

Competing manufacturers will use their existing extensive distribution models; price flexibility and marketing advantages to compete with iPhone.

Gillet notes Nokia's existing plans to introduce an iPhone competitor, observing that company's strength in mass-market distribution could put pressure on Apple's exclusivity and revenue share models.

"Sony Ericsson is not likely to stay quiet as it owns the optimised music market in Europe," he said, pointing out that the company's devices are user-friendly and that the firm has strong brand awareness.

However, this year's SuperBrands survey puts Apple in three of the top twenty slots for UK public recognition of brands - Sony Ericsson gets no space in the list.

LG, Samsung and Motorola are also developing new generations of advanced device with which to challenge Apple's European iPhone foray, the analyst notes.

Leading manufacturers are already working on higher technology standards such as 5Mp cameras, HSDPA chipsets, 30 frames per second displays, over-the-air downloads, external memory, and so on

But the biggest challenge for Apple will be maintaining interest: "We also expect that iPhone hype will slow in early 2008 as Apple faces strong commercial pressure in Europe," he said.

"Ultimately, one can argue that Jobs is aware of the challenges ahead, and that Apple's target is to own only 1 percent of the total market and make it a profitable exercise, Gillet observes.


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