Can Apple’s iPhone sales grow in holiday quarter?

“One the features of Apple’s recent earnings report for the fiscal fourth quarter ended September was that the company sold 6.9 million iPhones, many more than some analysts expected, and enough to push the company into the ranks of the world’s largest cell phone vendors, ahead of even mighty Research In Motion,” Eric Savitz reports for Barron’s.

“But the strong performance – and the rapidly eroding economic landscape – raises an interesting question: Can the company sell more phones in the December quarter than it did in the last quarter? On the one hand, we’re headed into the holiday selling season. But this is shaping up to be a Christmas season that only the Grinch could love, with sales expected to be the worst in years. Needham analyst Charlie Wolf, a roaring bull on Apple’s shares, noted in a report this week that of the nearly 7 million phones sold in the latest quarter, 2 million are in carrier inventories. He says that fact “suggests that iPhone sales might decline in the December quarter,” although he notes that the company is in the process of expanding distribution to 15 smaller countries, which could provide some offset,” Savitz reports.

“Investment research firm JRPG took a look at this issue today, with the help of Rethink Research, which tracks the wireless industry, and concluded that Apple could sell as many as 8 million iPhone in the quarter,” Savitz reports.

Full article here.

18 Comments

  1. It’s all a guess between 5M and 10M. Is it like an iPod which doubles in the Xmas quarter? Was the 3rdQ benefited from the launch? Will the iPhone benefit from launching in 23 more countries in the Xmas Q? Impossible to calculate, beyond a range of 5M to 10M.

  2. Yes, sales could decline. Please recall that there were basically NO original model iPhones to be had for nearly two months prior to the introduction of the iPhone 3G. That’s two months worth of pent-up demand that were pushed into the next fiscal quarter – meaning that quarter had 5 months of iPhone purchases rather than the more typical 3 months of purchases. If Apple sells 3/5ths as many iPhones in the current quarter as it did last quarter, I’ll be happy (because the current economic environment stinks). If they do any better, I’ll be ecstatic. Of course, I still fully expect the Street and their analysts to crap all over the stock.

    (sigh)

    I’m just glad that I’m a long-term investor.

  3. There is still the holiday gift-giving factor. Under normal conditions, people don’t buy their gadgets during the summer that much. Therefore, the much-hyped rollout pushed the numbers up. However, it still left many who heard the hype wait until the holiday for the purchase. In other words, while many have bought on all the hype right away, many others had made up their mind due to the hype, but are waiting for the gift-giving budget to open up. I’ve heard from many colleagues at work, back in July, that they have just decided on their Christmas gifts.

    Even with the depressed economy, there is no question the December quarter will be big, and more than likely, bigger than the September one.

  4. This Savitz is a stupid mother fsker. Really, a lard arse do nothing blob of nothing.

    He is part of the vast horde of people publishing their articles on the net which any fsking 5 year kid could cobble together from other stuff published on the web.

    Stupid jackass needs to go flip burgers at the nearest Jewish craphouse near his rathole.

  5. how does one buy an iPhone as a gift if it needs to be activated in store? now that’s a problem.

    Dad: I’d like an iPhone for my son
    Apple: ok, lets pick out a plan
    Dad: But its December 10th. I’m not paying 15 days of a contract before the phone is even used.
    Apple: We don’t care. Oh, and no cash.

    This is just getting stupid on Apple’s part.

  6. The 15 new markets are small potatoes. The big question is how many unlocked iPhones are being sold in Hong Kong. That one market could be supplying a significant number of phones into China. Apple already had good insight into this by the time they issued their guidance of $9-10B in overall revenue for the quarter, so should extrapolate from there.

  7. The dropped call problem is very annoying and is hurting sales. I’ve had several folks tell me that their current plan is up and would buy an iPhone, but they have big concerns about dropped calls. Unfortunately, I cannot reassure them, it is a pain.

  8. The initial low cost of the phone will make it an attractive purchase, who can argue with $99 ? It’s the higher priced electronics that will suffer unless the resellers offer 0% interest financing. Apple will feel the economic downturn to some degree.

  9. Apple sold iPhones for 78 of 89 selling days during Q4 to carriers in 45 countries (some were available for only 40 days). The average daily sales rate was 88,000 units. Applied to a full quarter (Q1) you get 8,000,000 units. This does not include sales growth rate, the fact that one of those smaller countries is Russia, or that the December quarter is the #1 handset selling quarter of the year.

    Applying an iPhone specific monthly sales growth rate on top of the industry’s seasonal growth rate, then adding the impact from adding Russia to the distribution mix, I get 16,000,000 iPhones sold during Q1.

    That number is about double the ‘experts’ estimates, which is about what Apple did during Q4.

  10. Savitz is missing the point big time when he tries to guess whether Apple’s revenues will hit the mark in 1Q09.

    Of course sales levels are important. But, for a so-called analyst, he misses an important factor that really shows him up as being totally unqualified to do what he says he does. The point is so fundamental to Apple’s reported results that it is astonishing he could have missed it. He talks about iPhone sales so let’s stay with that.

    Apple does not report all its revenues according to how much it sells in a quarter. For proper accounting reasons, it uses deferred revenue recognition accounting which is the correct procedure to use for the iPhone and a few other products. Revenue deferral has been discussed to death elsewhere and so I won’t go into it here. But what it means for the Christmas quarter is this.

    On the iPhone, among other products, Apple spreads the sales revenues earned in a month over 24 months (2 years). Each month therefore, it recognises only 1/24th of sales in that month. As the months pass, these deferred recognition slices of 1/24th for each prior month, come up for recognition as earnings.

    By December, Apple will be into its 18th month of the iPhone….18 months since June 30, 2007. So if Apple sells $2.4 billion in iPhones etc each month from October to December, it will have sales of $7.2 billion for the quarter. But, by only recognising 1/24th of each month’s sales in each month it reports on, Apple will list a much smaller figure for 1Q09 than it shows by its sales revenues of $7.2B. Looks like bad news, no?

    However, the point that Savitz and most others are missing is that, since 30 June 2007, Apple will also have that accumulated 1/24ths of 18 months’ share of unrecognised sales revenue coming up for recognition in this quarter. That is 1/24th of the sales for each month starting with July 2007. Savitz completely missed that which is the best measure of his incompetence and proves that he is not fit for what he does.
    This delayed recognition is the reason for Apple’s high revenue and earnings figures in the September quarter. It took everyone by surprise.
    I am not saying that Apple will have a bumper Christmas quarter. I am saying that, if sales slow a little, it also has tose maturing deferred revenues over the prior 18 months also kicking in to enhance the revenues and earnings figures for the quarter.
    Now see, I did this without mentioning Obama or McCain, or lipstick and pigs till now.

  11. I think Apple may be blowing it when it comes to packaging the iPhone for gift sales.

    Right now, there’s really no easy method to buy an iPhone for a friend or family member, wrap it up, and put it under a tree for Christmas.

    Apple should have a program where you can buy an iPhone Gift Card or something like “You’re iPhone is waiting for you at ____”.

    I have 3 people I’d like to buy iPhones for, but probably won’t because of the awkwardness of the current method.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.