Verizon just announced it activated 6.3 million iPhones for it's latest reported quarter, one data point that points to a potential blowout sales report for Apple (AAPL) for the December quarter. Maybe the toughest task for any Apple investor right now is cutting through the media noise to identify The Numbers that Matter when it comes to measuring Apple success.
For the past 12 weeks the media has been providing a steady stream of stories that seem to portend to lackluster iPhone sales for the company; which would be devastating since iPhone now accounts for over 50% of Apple revenues.
Of primary concern to investors have been reoccurring rumors of a drastic cut in iPhone 5 screen orders for the March quarter. While there is much temptation to act on these "facts", in an earlier article I spent time detailing why, if true, the screen cut might actually be good news. (Read it here.) The key point to take away: 1) We don't know if this rumor is true, and 2) Even if true, we don't know the context of the cuts: Does it point to weakness in iPhone sales? Increases in screen yield rates? Production shift based on upcoming product introduction?
When confronted with a rumor, the most important thing an investor can do it see if the information "fits" with other information coming out of the market.
For my quarterly iPhone estimates I believe I gain better insight from focusing on the following market information:
- During the reporting quarter, iPhone's market share increased 6 percentage points to 51.2% for the U.S. market according to Kantar Worldwide Comtech. An indication of Apple's ability to expand smartphone market share in a growing market despite rumors of supply constraints.
- Apple's aggressive rollout of the iPhone 5 to 100 markets for 2012. An indication that Apple was able to get, what appears to be a successful product, to more customers, more quickly that it has previously.
Based on what appears to be information that supports 1) a successful product launch that is 2) reaching more markets, more quickly; I can use the Verizon (VZ) quarterly report to create a rough estimate of iPhone sales.
First, as Brian White of Topeka Capital Markets has noted, Verizon for the past six quarters Verizon has accounted for 11% of Apple iPhone shipments. However, remember that Apple appears to have executed their most aggressive global rollout, which could lead to a shift toward higher global shares for the quarter, reducing Verizon's total share of shipments leading to 2 scenarios:
- Verizon share holds at 11%: 6.3 million iPhones/.11 = 57.3 million iPhones sold.
- Verizon share drops to 10.7%: 6.3 million iPhones/.108 - 58.9 million iPhones sold.
With consensus estimates for iPhone sales below 50 million, it appears that Apple is positioned for an upside surprise in their quarterly announcement.