By Connie Guglielmo
Oct. 3 (Bloomberg) -- Kevin Willis, the retired basketball center turned entrepreneur, gave up on the BlackBerry and depends on Apple Inc.'s iPhone to stay in touch with buyers, suppliers and the high-profile clients who wear his custom jeans.
``It does everything I need a phone to do for me and my business,'' said Willis, 46, who left the National Basketball Association last year after more than two decades and now helps run Willis & Walker clothing company in Atlanta.
That's just what Apple Chief Executive Officer Steve Jobs wants to hear. After more than 30 years pitching first Macintosh computers and then iPod media players to consumers, Apple is using the iPhone to attract a new audience: business buyers.
Jobs is seeking to recharge a stock that's shed 51 percent in 2008 and to keep momentum after revenue almost quadrupled in the past five years. Cupertino, California-based Apple gets at least 80 percent of sales from consumers and half its revenue from the U.S., putting the computer maker at risk if people cut spending amid economic turmoil, Sanford C. Bernstein & Co. said this week.
The company already had suffered with many of technology's high-fliers as investors pulled back from stocks like Apple and Google Inc. Continuing questions about Jobs's health also weighed on the shares. Now Apple may have to cut prices to draw budget-conscious U.S. buyers, compressing profit margins and limiting the shares in the next three to six months, Morgan Stanley analyst Kathryn Huberty said in a report this week.
`Not So Bad'
The iPhone's success depends in part on Apple's ability to win over corporate buyers, Jobs said when he unveiled the faster 3G model in June. Apple added business features that mimic some functions in Research In Motion Ltd.'s BlackBerry, which controls more than half the market for e-mail phones in the U.S.
Jobs spent much of his time on stage talking up new security functions and a link to Microsoft Corp.'s Outlook and Exchange business e-mail system. Thirty-five percent of the Fortune 500 were testing the iPhone, Jobs said. That includes Walt Disney Co., Oracle Corp., Genentech Inc. and Kraft Foods Inc. ``Not so bad,'' Jobs, 53, said at the event.
The challenge is pulling it off. Apple has to convince companies the iPhone can be a serious tool for business -- and not just the latest hip product. And Jobs has to sidestep a flood of competitors determined to stanch his advances.
The market for smart phones that send e-mail and access the Web may more than double to 288 million units in 2009, according to technology researcher Gartner Inc. in Stamford, Connecticut. In August, Gartner hedged its endorsement for the iPhone 3G, saying it is ready as an alternative to the BlackBerry if users are willing to compromise on security and battery life.
BlackBerry Stumbles
``We've seen significant interest in iPhone from enterprises,'' said Apple spokeswoman Jennifer Bowcock. Research In Motion spokeswoman Marisa Conway had no comment when asked about Apple's efforts to win business users for the iPhone.
Threats to Research In Motion abound now, and the Waterloo, Ontario-based company last week said it will sacrifice profit to spend more on building lower-priced products and on marketing campaigns to stop customers from defecting to other brands.
That prompted the biggest drop in the shares in more than eight years last week as analysts said the iPhone's $199 price may limit how much Research In Motion can charge for its latest products, making them less profitable than older models.
Samsung Electronics Co. began selling an iPhone killer called the Instinct in June for $130 and T-Mobile USA unveiled a $179 smart phone last week with programs from Google.
Apple, which reached a record $202.96 in December, fell $3.03, or 3 percent, to $97.07 on the Nasdaq Stock Market at 4 p.m. New York time. Research In Motion, which has lost 46 percent this year, dropped $1.04, or 1.7 percent, to $60.96.
Halo Effect
``The iPhone will likely be the first Apple device for millions of corporate users,'' said Andy Hargreaves at Pacific Crest Securities in Portland, Oregon, one of 27 analysts tracked by Bloomberg who recommend buying Apple shares. ``Positive impressions could drive stronger demand for Macs over time.''
Sales of the Mac, Apple's biggest moneymaker at almost half of revenue, climbed 40 percent to $10.3 billion in the year that ended in September 2007.
It wouldn't be the first time Mac sales were spurred by demand from another Apple product. Consumers, enamored with iPod players, are buying Macs in record numbers. Apple overtook Acer Inc. in the second quarter to become the No. 3 maker of PCs in the U.S. behind Dell Inc. and Hewlett-Packard Co., according to Gartner.
Mac Switchers
After a survey of technology managers, Hargreaves estimates Macs account for 1 percent to 2 percent of the U.S. corporate market and says that may rise to as much as 5 percent within five years. If Apple posts similar market share gains globally, it could add $6.5 billion or more in revenue, Hargreaves said. Apple doesn't detail Mac sales by customer type.
Corporate Mac switchers said the ability to run Microsoft's rival Windows Vista software won them over.
``Windows runs better on a Mac than it does on a PC,'' said Jeremy Burton, CEO of Serena Software Inc. The Redwood City, California-based company allowed employees to pick between Macs and PCs this year after Serena did a study and found that Apple's products were no more expensive to buy, support and run than rival PCs with Windows.
Employees were also showing up to work with their own Mac notebooks and asking the company to support the system, Burton said. He was one of them, having decided to buy his first Mac after becoming an iPod user. ``People just like the Mac better.''
Chipping In
Apple sold 1 million iPhones in the first three days after shipping the 3G version in July and more than 6 million of the original product, released in June 2007. At the end of August, 19 million people had BlackBerrys.
In the second quarter, Research In Motion held 54 percent of the U.S. market for smart phones. Apple ranked fifth, with 7.4 percent, said researcher IDC in Framingham, Massachusetts.
Alan Weckel, an analyst with Dell'Oro Group in Redwood City, California, said he wants to be able to use his iPhone at work one day soon.
``I do not use the iPhone for work, only because our company doesn't subsidize the phone or plan,'' he said. ``If they chipped in, I would use it.''
To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net
Last Updated: October 3, 2008 16:10 EDT
