IPhone Accessory Makers Benefit After Jobs Recommends Cases
Apple made the recommendation that iPhone users buy a case to fix a glitch on their phones following complaints that the iPhone 4 loses reception when held a certain way. Photographer Rupert Hartley/Bloomberg
June 29 (Bloomberg) -- Kevin Keller, a hardware analyst at market research firm ISuppli Corp., talks about Apple Inc.'s new iPhone 4, which went on sale June 24. Keller talks with Bloomberg's Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
June 29 (Bloomberg) -- Bloomberg's Erik Schatzker reports on today's top technology news. (Source: Bloomberg)
IPhone accessory makers are getting an unexpected boost from Apple Inc.’s recommendation that users buy a case to fix a glitch on their phones.
“It is good news,” said Tim Hickman, founder and chief executive officer of Hard Candy Cases in San Francisco. Apple’s suggestion may add allure to an already popular accessory, he said. “The demand is there and Apple has built it.”
Apple made the recommendation after last week’s debut of the iPhone 4, which drew complaints that it loses reception when held a certain way. The company advised customers to hold it differently or use a case. While that solution has irked some buyers, it could benefit Hard Candy, Belkin International Inc. and other accessory sellers -- including Apple itself.
The cases, typically made of rubber, plastic or recycled materials, are already part of a growing market. Mobile accessories generated $135 million in U.S. revenue in the first quarter, according to NPD Group Inc. That indicates annual sales of more than $500 million.
“Consumers are putting more information on these products and they are relying on them more, so they are more willing to invest in protecting them,” said Ross Rubin, an analyst with Port Washington, New York-based NPD.
It’s too early to tell whether the proposed fix for the antenna problem will boost case sales, Rubin said.
‘Thong Underwear’
Apple is selling its own iPhone 4 cases in six colors for $29 each. They’re made of a piece of rubber known as a “bumper,” which surrounds the outer rim of the phone. The accessory doesn’t cover the back or front of the device, prompting the iPhonesavior.com blog to call it “the thong underwear of protective iPhone fashion.”
Shaw Wu, a San Francisco-based analyst with Kaufman Bros. LP, said Apple may have to start giving away the bumpers with the purchase of a phone as a way to alleviate customer concerns.
Accessory sales are “almost pure profit” for the company, said Wu, who recommends investors buy Apple stock and doesn’t own it himself.
“The meat and potatoes of their business are still core products -- the accessories are the gravy,” he said.
Natalie Harrison, a spokeswoman for Cupertino, California- based Apple, declined to comment beyond the company’s remarks on the antenna last week.
Toilet-Paper Holder
The release of a new iPhone every year since 2007, along with devices like the iPad and iPod, has fostered a diverse accessories market. The products include speakers, chargers, headsets, scratch-retardant screen covers and exercise kits.
IPod accessory makers have even produced an aluminum bulletproof case, a leather holder that resembles underwear and a docking station that doubles as a toilet-paper holder.
Manufacturers of more traditional fare range from large corporations like Royal Philips Electronics NV to startups such as Hard Candy. Belkin, Incase, IFrogz and Cozip also make phone cases, which generated $23.5 million in U.S. sales in the first quarter, up 43 percent from a year earlier, according to NPD.
Apple has been “pretty aggressive” in releasing new gadgets, said Mack McCoy, who does marketing for the iPhone accessories division of Playa Vista, California-based Belkin. “All of this opens up new avenues for us to play with.”
With the iPhone 4, Apple changed the design of its antenna, embedding it in the steel-frame chassis. It used to be stored internally. Some customers found that their reception drops out if they hold the bottom-left corner of the device. They’ve taken to blogs, YouTube and online forums to air their complaints.
Rabbit-Ear Effect
The human body can absorb wireless signals, causing potential problems when skin comes into contact with an antenna, said Raj Rajkumar, an engineering professor at Carnegie Mellon University in Pittsburgh.
“Its like when you touch the rabbit ear antennas on an old TV, you affect the reception of the signal,” Rajkumar said.
Even so, not all customers have had problems. Apple Chief Executive Officer Steve Jobs has called the matter a “non issue,” according to an e-mail exchange posted on the MacRumors.com website.
Peter Gloria, founder of Los Angeles-based TRTL BOT, which makes iPhone cases out of recycled materials, said they are designing a case for the iPhone 4’s body shape.
The product’s newest selling point? “It will fix your antenna,” he said.
To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net
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