Shares of Apple Inc. (NASDAQ: AAPL) sank in late-day trading Tuesday after AT&T (NYSE: T) said the early surge of iPhone buying wasn't as big as projected. AT&T reported that 146,000 iPhone owners activated its service in the first 36 hours of the phone's debut. While that would be a huge success for any other consumer-electronic product, it was considered a flop by some. Besides, the much-touted iPhone isn't "any other consumer-electronic product." A number of analysts expected AT&T to report activating as many as 500,000-700,000 iPhones for the quarter. "It was a disappointment," a Piper Jaffray analyst told USA Today. The news sent shares of Apple down nearly $9, to $134 yesterday, while AT&T dropped $0.35 to $39.68. Both companies are up notably today.
Richard Linder, AT&T's Chief Financial Officer told the New York Times that demand for the iPhone at AT&T stores had outstripped supply in two days and that the launch "couldn't have gone better." Richard Doherty, an analyst at Envisoneering Group, considered the iPhone sales a success. He told USA Today that "no consumer electronic product at that price point has ever sold 146,000 units in two days."
So how could analysts say that Apple had 500,000-700,000 iPhones sold over the weekend when AT&T reported such a minuscule number in comparison? The Wall Street Journal highlighted an important fact this morning: Apple recognizes revenue when the product is shipped, while AT&T's figures only acknowledged an activated phone.
Linder noted that some people purchased the iPhone to re-sell, some were given as presents and a number of customers had trouble activating their phones the first few days. Keep in mind AT&T's activation number was only for the first 36 hours of iPhone sales – which would put the cut-off time around 2 a.m. Sunday.
Before anyone calls the iPhone a flop, investors should wait another quarter and listen for updated sales numbers from AT&T and Apple. Let the first 90 days of iPhone sales be your guide, not the first 36 hours.
Linder noted that some people purchased the iPhone to re-sell, some were given as presents and a number of customers had trouble activating their phones the first few days. Keep in mind AT&T's activation number was only for the first 36 hours of iPhone sales – which would put the cut-off time around 2 a.m. Sunday.
Before anyone calls the iPhone a flop, investors should wait another quarter and listen for updated sales numbers from AT&T and Apple. Let the first 90 days of iPhone sales be your guide, not the first 36 hours.
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Reader Comments (Page 1 of 1)
7-27-2007 @ 7:11AM
Brian Bauer said...
Cite your source, please....
Where did "...Apple come out saying 500,000-700,000 iPhones were sold over the weekend ..."
I don't believe they did.
Thanks.
7-25-2007 @ 5:24PM
Chuck said...
Apple just posted its earnings. I guess 270,000 iPhones in 30 hours was way better than the bone heads who only listened to ATT's numbers. And Apple blew by Wall Street's numbers coming in at
$.92/share.
Oh, and 1.74M Macs sold. They still sell those, ya know:-)
Just icing on the cake. Take my advice and never bet against Apple.
7-25-2007 @ 5:35PM
Jeff said...
considering much of the stock price is based on hype (i.e. future expectations), a drop is warranted when the hype fades.
They have a great product and a great future, with a lot of irrational traders buying the stock for a quick buck.
7-25-2007 @ 5:51PM
Michael Schneider said...
Was it unwarranted? yes.
Michael Schneider is Web master at http://www.Barrelomoney.com.
7-25-2007 @ 8:23PM
David said...
The crux of the issue is that so many bone-headed investors and even journalists don't understand the difference of meaning between "activations" and "sales" .
7-26-2007 @ 12:02AM
Neil Anderson said...
Oh, my gosh, Apple’s iPhone doesn’t teleport ... analysts disappointed. :)
Cheers, Neil http://www.cyclelogicpress.com
7-26-2007 @ 9:28AM
Studiocite said...
I've been trading Apple stock since i was 30 (thats 24 years ago)- I listened to the death knell calls of the "analysts" before Gil, thru Gil, after Gil. I've heard the "lousy market share" comments for 10 years from analysts. I'v heard the PC tech analysts diss everthing from price to features to lack of programs to looks. And guess what? I bought a ton of AAPL at 12 bucks a share and have been buying since. So thank you Apple for getting it and never letting that ideal get lost and contually baffling the so called "experts". The simple fact is that most analysts dont get it and never have. We're dealing with design and user experience here - if it was purely about money, Apple would be just another Acer....and about as interesting.
7-30-2007 @ 12:16PM
Susanna said...
The problem is, how many people really want to deal with inferior cell service for the sake of having an iPhone? Everyone I know who has Cingular or AT&T says that the services is terrible, calls drop, etc.
Imagine how much their sales would jump if they unlocked the phone, or even if AT&T merged with Verizon? I'm usually not the one in favor of mergers, but the quality of AT&T's network is the only thing hurting iPhone sales.
I heard a rumor that the day all the Apple employees activated their iPhones (Steve Jobs gave one to each employee with over one year employment) it crashed AT&T's servers.
Sure, that could have happened to any wireless provider with a sudden influx of ~10,000 new phones. But it probably would not have happened if the phone were available through multiple providers.