Why AT&T’s iPhone activation number may be misleading

“Shares of Apple Inc. took a hit Tuesday morning after wireless carrier AT&T issued disappointing activation numbers for the iPhone for the last two days of the second quarter, when the device first went on sale,” Dan Gallagher reports for MarketWatch.

“In addition, a telecommunications analyst issued a report before the opening bell that said demand for the device at retail outlets has seen a ‘significant decline’ in recent days,” Gallagher reports.

“The iPhone went on sale at retail outlets operated by Apple and AT&T on June 29, leaving less than two full days before the end of the second quarter,” Gallagher reports.

“AT&T said it activated about 146,000 customers who bought the iPhone during those two days,” Gallagher reports. “Before Tuesday, analysts had been projecting opening-weekend sales for the iPhone of between 200,000 and 400,000 units. A few projections reached as high as 500,000 units…”

“‘We have noticed decent inventories [of the iPhone] at stores, and thin demand at best,’ analyst Ittai Kidron of CIBC World Markets wrote in a report Tuesday. ‘In fact, most Apple store visitors were not looking at the device and only a very small subset bought it,'” Gallagher reports.

“Investors will likely get a fuller picture of actual iPhone sales when Apple posts its own results for the June quarter on Wednesday,” Gallagher reports.

Full article here.
Now, after the typical hysterical Wall St. reaction, let’s apply some logic to the information.

AT&T’s quarter ended June 30, 2007. Apple’s iPhone went on sale in the U.S. on Friday, June 29th at 6pm local time. So, the totals are for about a day and a half, not two days, as widely reported. And when did AT&T actually stop their iPhone activation count exactly?

[UPDATE: 1:29pm EDT: An AT&T internal newsletter states, “Although it went on sale just 30 hours before the quarter ended, we had 146,000 activations in that period.” So, 30 hours, not 48. – Thanks, Robert.]

In addition, AT&T’s numbers measure only iPhone activations through June 30th, not sales. Some number of iPhone users experienced activation delays that may have delayed activation until after the June 30th end of AT&T’s quarter.

How many? We don’t know.

What of the iPhones that were sold online that weren’t activated by June 30th?

How many? We don’t know.

In the initial lines were many enthusiastic iPhone buyers. Reports from MacDailyNews readers (and also witnessed by MDN staff) show that many of these early iPhone buyers purchased two phones (Apple’s limit at Apple Retail Stores). When we asked fellow iPhone-waiters what they would be doing with their iPhones, many who were buying two stated that the other phone was intended as a gift. These iPhone gifts may not have been given to their recipients and activated by June 30th; therefore, they wouldn’t appear in AT&T’s provided count.

How many? We don’t know.

It should be obvious that iPhone sales would see “significant decline in recent days” as the initial frenzy of camping out and long waiting lines had set the bar at its highest point. Decline is a given after the long lines are served and the stanchions are removed.

Describing inventories as “decent” is a meaningless measure as Apple has never reported how many iPhones were manufactured and shipped for the initial supply. Based on reports and Apple’s own online resource for iPhone availability, Apple seems to have done a good job of keeping supplies of iPhones flowing and Apple retail stores, at least, resupplied on a regular basis. We don’t know how many iPhone units Apple supplied, so saying inventory is “decent” tells us absolutely nothing about the product’s actual unit sales.

And just how extensive were CIBC’s “checks?” They certainly don’t match our experiences of iPhone interest at Apple Retail Stores (and “on the street” with our iPhones) in recent weeks.

The analysts’ projections (200,0000 – 500,000) are for the entire weekend of iPhone sales, not the first 30 hours of activations.

Need more input, Stephanie.
As Gallagher mentioned in his report, we hope to get better idea of initial iPhone numbers when Apple reports their Q3 07 results (ended June 30, 2007) after market close tomorrow.

87 Comments

  1. As I’ve stated before. I’ve only seen two other iPhones at my place of employment with 1,300 employees. Most of whom pull a decent engineering salary.

    I think this is all over hyped. The iPhone rocks. It really is revolutionary. Just give it some time to gain traction with the masses. So many people are interested in the phone. They just need time to get over the sticker shock and purchase one of their own.

  2. Is it just me, or is it wrong that AT&T gives out this depth of information? Why can’t they call them new customers – those who really are? Why do they have to break out iphones as opposed to other phones? Leave that kind of info to Apple.

    To me, this is just another way of how AT&T shows they are a poor corporate match for JobsCo. Also, you could argue the quarter ended at 6pm on Friday June 29, as that’s the last BUSINESS day of the quarter.

  3. Tech analysts are dumb. Sure, the people who camped in line for hours probably rushed home to activate their phones right away (save for the ones they bought as gifts, as a previous poster mentioned). But lots of people who bought on Saturday probably didn’t bother with it right away. To many people, a new device like this (even one from Apple) is a pretty daunting task, with software and drivers and etc. that need to be installed, cables that need to be hooked up underneath the desk, etc. People simply have better things to do on a Saturday afternoon, and probably figured that they’d get started with the device on Sunday instead.

  4. There was a lot of iPhone activation for a few days, however this is a already highly saturated market. To have a few hundred thousand activations in a few days is pretty good.

    As time goes on, if the iPhone lives up to potential and people find a use for it, they will perhaps upgrade their current phone for a iPhone.

    But remmeber, a lot of people are already in lenghtly contracts.

    Most people just want a cheap reliable phone with a slim profile and a long battery life.

    Lot’s of companies give free phones for wireless contracts.

    The iPhone is the top of the line device at a top of the line price, not many people want or need such a device.

    It may attract those already in the market and the Apple religious, but it’s a slim market and not to be confused with the black hole market that was the iPod/Mp3 player market.

    The mobile phone market is saturated. Expect iPhone sales to closely match iPod HiFi sales.

    In that regard, sell your stock and take your profit.

  5. @ whatever….

    I agree, at the Manhattan Village store in California there are always a group of people playing with the iPhone. This is the majority of the store, so interest is high here as well.

    I must assume the person writing was just another troll on the paper with little ground pounding. Just another dumb…. opps hold that thought!!!!

    Ohhhh… the truth is out there

  6. to Diz,

    your place of work might not be a benchmark – you have to take samples from many places of work….

    I for example have seen it with many everytime I go to Barnes and Nobles.

    Neither me nor you can generalize and draw conclusions from this.

  7. Bought mine on the first sunday. <—- not counted.

    Spent about a half hour at a party saturday night demoing the iPhone for interested people. Did the same thing at a restaurant the next morning.

    People are interested in it and when they see it, what usually follows is a chorus of oohs and aaahss.

  8. i have to agree with the first post, it is still a table of phones several people deep at the local store here….

    and i know 4 people who bought phones, and none of the 4 had it activated in the time period they are talking about. 2 bought after that, and the other 2 charged them all night after buying.

    …and how many were bought online? and just activating them now?

    this is a terrible measure of phone sales. good time to buy stock though before it shoots up on the next really bit of info or big hardware release.

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