Did Apple Beat iPhone Sales Forecasts or Not?

A few days ago I wrote a post here saying that Apple (AAPL) had surpassed most first-weekend iPhone sale estimates from analysts. Now, however, the idea is out there that iPhone actually didn't meet initial expectations.

So, what's the story? Did Apple meet/beat iPhone sales forecasts or not?

The answer, it seems, depends on how much credence you put in those vestiges of the 1990s, whisper numbers. While it seems clear Apple sold more iPhones than analysts publicly forecast, at least some analysts also had non-published numbers that they said iPhone could hit, like ... one million units.

Fine, you say, so with 700,000 or so units of first weekend sales did Apple meet, beat, or miss? The answer really depends. If you don't put much stock (no pun intended) in whisper numbers, then Apple beat the numbers; if you want to give credence to whispers then Apple missed (slightly).

Looking farther out, however, I will say that I think the ongoing iPhone run rate is likely to be slower than expected. Run rate is driven by word of mouth, and word of mouth on iPhone is somewhat worse than I expected. People are complaining about usability, call quality, missing features, and a long list of things that need to be fixed. While iPhone will be a major product, this 1.0 release will need to be updated very quickly.

Comments

[Julian Ivan...:]

Words fail me... 1M iPhones sold, ecstatic reviews, jubilant owners (a few activation issues aside) and he manages to find "things that need to be fixed," that "word of mouth is somewhat worse than I expected," calling sales "below expectations."
The most successful CE launch in history, probably the most rapturous reception ever received by a new product that almost everyone says actually exceeds the hype, and this is the dross he comes up with?
In my books, Kedrosky joins the likes of Bill Shope over at JPM ("iPhone sales were disappointing because Apple Stores didn't sell out on day one") as a 'nay-sayer extraordinaire.' Have fun with your Treos boys.

2007 Jul 05 05:18 AM

[Socrates' Dog:]

I'm with Tommo on this. I'm appalled, esp. at Moritz's article in the link. I think one has to question his motivations. Reporting on "whisper numbers" is nothing shy of horrific journalism. No evidence is given for what what people were whispering about in the stock market or from within the company (e.g. Apple). One can conjure up any number one wants--depending, say, on just how one dreams of manipulating the stock market. If a company sells 1.5 million, and published estimates were .5 million, no problem. Just raise the "whisper numbers" to 2 million, what the heck, make it 3. Then say the company failed to meet expectations. Writing on whisper numbers ranks among the tactics of palm readers, astrologers, and cult leaders. There is no place for such empty and ad hoc strategems like this in articles that can bear on the stock market. (Read up on your Karl Popper!) As a side note, let us remain mindful that there are without question big businesses with vested interest in seeing reports that say "the iPhone is not all that." (As one who does own an iPhone (yes, I must confess that I do): it simply rocks. Blows everything else out of the water. But that's beside the point . . .)

2007 Jul 05 07:07 AM

[mac.user:]

"whisper numbers" journalism ? I already know news based on rumors, but whispers ? Why don't you start making news based on what "a little bird as said to you" ? or better yet, why don't you just flip a coin ?

It will never be enough with Apple no matter the product and its sales. There will always be "dark side forces" investing more on negative analysis more than on R&D to their lousy products.

From your part let me just say that your words are not "the market", they are just a way of trying to mislead it...
I don't know if 700.000 sales on a hand full of days is good enough or significant for you. What I know is that you have just made a guy across the ocean burst out laughing.

Next article for you : "Whispers say the earth is not round. Deep investigation following"

2007 Jul 05 08:14 AM

[Tom B:]

Has the "Zune" broken 1 million yet? How about that 33% failure rate on the XBox360-- and this is arguably MSFT's best product of all time?

2007 Jul 05 08:58 AM

[Dan Poarch:]

I haven't heard one complaint from iPhone owners, other than one enterprise user in our firm that felt Exchange polling was too slow and ultimately gave up because of ATT/Cingular. However, he still absolutely loves the iPhone. Hmm...

This is an unnecessarily ugly post from Mr. Kedrosky.

2007 Jul 05 08:58 AM

[jgphoto1:]

Whisper numbers are nothing more than professional cowardice at best and smear and manipulation tactics at worst.

As for word of mouth. Limited anecdotal evidence suggest that not many words are needed to move the iPhone. Just a quick demo and one on one exposure seems to be all that is needed. I am quite happy with mine but am not on a mission to evangelize or sell it to others. In spite of this I know for a fact that three additional phones have been purchased as a result of folks who have taken mine for a test drive. Based on this I am fairly confident in the iPhones ability to sell itself and suspect that the second wave sales will be quite strong.

2007 Jul 05 09:52 AM

[bstone:]

Why do some people hate Apple so much? It's obvious to any objective person that the 'first generation' iPhone is incredible. Look at the first iPod compared to the latest. The first seems almost primitive, yet it was a huge hit. Get the idea? You are not someone I would listen to about anything.

2007 Jul 05 11:03 AM

[Tom B:]

"Why do some people hate Apple so much? " Well, there are lots of people that own MSFT, Dell, HP, Nokia, MOT, Ericsson, Palm, Verizon-- all companies that could be gone in 10 years. There are others that want to engineer a "buying opportunity" for Apple stock (I DO NOT wish to imply that this article's author has either motive).

Apple's been making great products for DECADES. The products were less great during the years when Steve Jobs wasn't there, but they were still better than anything MSFT had, even then. It's time Apple gets its due.

2007 Jul 05 11:10 AM

[moosebump:]

After reading the comments here the question is: why do people LOVE Apple so much? Only true Apple fanatics could find Paul's article so offensive. (and who mentioned the Zune or the 360 anyways? I don't think anyone except MSFT is claiming the Zune to be a success)

Its hard to argue that the iPhone launch was a success based on initial sales. But since 95% of those sales were to rabid Apple fans who could care less what reviewers did or would write, the real success of the iPhone will be its sales trend over the next few months.

Why compare actual sales to 'whisper numbers'? because investors need to figure out what the market is pricing into the stock. It could be the greatest product of all time but expectations can just get ahead of reality.

It is this type of reaction from fanboys who are also investors that make me think there is the potential for a short here.

2007 Jul 05 12:10 PM

[mathue:]

I don't know why we should even care about these various analysts? I'd be FAR more interested in if the iPhone beat 'Apples' own first week estimates! I think it's unlikely to some 'secret' number. Heck, even fake emails get reported as fact (who whole iPhone delay debacle) so I can't imagine that if this phantom number existed that it wouldn't all ready be out in the public.

2007 Jul 05 11:20 AM

[just_simple:]

Oh yeah, Apple missed (my) forcast of 10 millions unit sold in the first 3 days. And d... my Apple short!

2007 Jul 05 11:34 AM

[jonreagan:]

To Richard's comments, many people love Apple so much because of the creativity, and steady stream of innovation that consistently delivers new and saleable products. It's not JUST about the i-phone; as Jobs' recent interview with WSJ stated fairly succinctly, Apple is in (1) the music business, (2) the phone business, and (3) the computer business. There are plenty more horses in the stable to follow up on the i-phone success. And Apple is capitalizing on that with advertising and promotion that represents true "lifestyle merchandising", e.g., the commercial with the young good-looking kid, and the tired, boring fat guy. The not-so-subtle message being, Apple is hip, and "you should really be into our products"

As to who is buying the phones, it's obviously difficult to find empirical evidence, but I seriously doubt that 90% are "rabid Apple fans". I live in a fairly blue collar area of Southern Arizona, and the local paper interviewed many of the folks who were in line this weekend at both AT&T as well as Apple stores. One interview was with a waitress, who had worked extra shifts over the past few weeks to get the $499 to buy her phone. In short, this is one of those products that is capturing the imagination of a broad slice of the public. As to how many were sold, estimates from Piper Jaffray that 500,000 phones were sold this past weekend were pretty much in psync with those that came from acknowledged Apple fans.

SO--with an often bleak retail forecast and mixed economic signals continuing, can't we just declare victory on this one, folks? As a career retailer, who has worked over a broad product continuum, I have never seen a product launch as successful as this one.

2007 Jul 05 12:43 PM

[Dan Poarch:]

Indeed. I must comment to Richard that few of the purchases I've observed are Fan Boys. I'm a self-confessed Fan Boy and I'm not buying one until the new year. I've been strictly Mac for 20 years and I know better than to buy the first rev. So, if there's more like me, sales will be strong on this product for the rest of the year.

The point being made here is that Kedrosky is making claims against "facts" that are totally unquantifiable. Not unlike the FOXNews tactic of starting a question with "some say" when in fact none have said, they're just trying to editorialize and control the message from the journalist's chair.

2007 Jul 05 01:58 PM

[moosebump:]

I think the iPhone is a success already and is likely to be a success over the next year at least. The launch was a huge success in terms of marketing hype and initial sales, and though I haven't had a chance to use the device my guess is that it is a great piece of consumer electronics.

But this is quite different from calling it a success from an investment perspective. That depends entirely on how many iPhones have sold and will sell over the next year or more relative to the expected number implied in the stock price. Investor SHOULD figure out how many devices they think AAPL can sell and then figure out how much the company will earn, discount it back to the present and bid or sell the stock accordingly. (a highly inexact science obviously)

The problem I see with a stock like AAPL is that there are too many people willing to ignore fundamental reasons for the value of the stock and buy it because they love Apple and its products.

Great products - yes. Great investment - ??

2007 Jul 05 02:31 PM

[geniver:]

Typically, if you sell out of a product, that means you beat your forecast, or your forecast was too low.

2007 Jul 05 01:18 PM

[rlh:]

You just don't have a clue, do you?

2007 Jul 05 01:35 PM

[peter02l:]

Word of mouth? Have you heard Steve Colbert and Robbin Williams pleading publicly on TV for Steve Jobs to send them one? You know how much it would cost to run adverts like that?

We already have one iPhone in our family. I would like to buy two more, if they only were available! I can tell you this, based on first-hand experience this is the only 1.0 product I would wholeheartedly recommend.

Besides, where did you hear these whisper numbers? From sensationalist journalists on thestreet.com?

2007 Jul 05 03:32 PM

[Lucmee:]

People are complaining?!? Usability?!? Long list of missing Feature?!? For Pete's sake! Get a grip! The vast, vast majority of buyers and reviewers are pretty darn happy with the thing. Not to mention... wait for it.... This is v1.0!! Even if "only" 500K were sold... Does that not count as friggin amazing? You remind me of Dudley Dursley from Harry Potter at his birthday... "Isn't there More?!?" Types like you are never satisfied. If you want to grouse and be deemed minimaly credible... Then point out some competing units that outperform the iphone. I suspect you will still be grousing when v3.0 comes out... Come to think of it... Have you even TOUCHED a unit yet? Boneheads like you truly smoke my hams... you write to draw attention to yourself. Run rate?!?! Lower than YOU expected?!? What... Pray tell... did you expect? I don't own one but just from doing the research and going to the AT&T store and playing with one... I've felt absolutly no compunction about recommending the phone to many even though it's only v1.0. (Full disclosure... I'm 3 months from 3 contracts expiring W/ Qwest) Take some heartfelt advice... Go out and touch one... Talk to some real people. Do some research... Just stop being silly.

2007 Jul 05 10:14 PM