The widespread adoption of HTML5 for Web apps could cut Apple's operation profit growth by 30%, with Microsoft, Google and carriers benefiting, Bernstein Research predicted.
The financial researchers envision widespread adoption of HTML5 will affectiPhones and iPads, reducing margins for the former and lowering market share for the latter.
"Rough scenario analyses says that even a modest impact in each of these areas could cut our estimated Op. profit growth forecast for Apple through 2015 by about 30%," senior analyst Toni Sacconaghi Jr. wrote in a research paper issued last week. This could reduce the compound annual growth rate (CGAR) from roughly 19% today to 13%.
According to Sacconaghi, the emergence of HTML5 apps is "an important, longer-term issue for Apple investors to monitor." HTML5 technology has the potential to undermine profit margins and market share in Apple's iPhone and iPad franchises.
HTML5 is appealing to developers and businesses because it can be used to build Web apps that target all mobile platforms at once. This is more cost-effective and less labor-intensive than building different native apps for iOS, Android and Windows Phone.
It also allows developers and publishers to circumnavigate the 30% commission charged by Apple and Google for selling apps through their app stores. Furthermore, Apple also takes a 30% cut on subscriptions sold through the App Store. Both cuts could be obviated with HTML5-based apps, the report pointed out.
These are the main reasons why Amazon, the Financial Times and Twitter have each announced Web apps. Executives from Apple, Microsoft, Google and Facebook have all praised HTML5's virtues, Bernstein Research noted.
Jeffrey Hammond, principal analyst at Forrester Research, also thinks HTML5 will have an impact on the mobile ecosystem: "With more and more companies investing in HTML 5 clients -- or even hybrid apps that combine HTML 5 and native code -- what you will see is a reduction in porting costs to support other platforms like Android and Windows 8. This will erode, but not eliminate Apple's first mover advantage," he said in an email responding to questions.
"The primary beneficiaries will be Microsoft and Google and their OEMs. Examples of companies taking this approach include LinkedIn, Salesforce, the Financial Times and Amazon. There are many others as well," Hammond said.
Bernstein's research also painted a possible rosy future for Microsoft and Google. HTML5 apps could help to neutralize Android's advantage in third-party developer support. Also, "commoditization could lead to lower pricing, which could in turn cause some unit elasticity, potentially benefitting Google," according to Bernstein's research.
Carriers in turn could benefit from reduced handset prices and as a result, lower handset subsidies. The researchers expect that HTML5 apps would also cache data, which means that data usage is not likely to increase and the average revenue per user (ARPU) would not be affected. The increase of HTML5 usage would, however, have an overall negative impact on mobile device makers.
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