A Look At Apple Since The iPhone Launch

It has been a month since the launch of the iPhone and in this post we will see how Apple (NASDAQ: AAPL) has been doing since the launch.

Following the launch, estimates of the first weekend sales of iPhone took the figure to an over optimistic and ridiculous level of 700,000. The announcements from AT&T and Apple brought it down to 146,000 activations and 270,000 sales (including accessories, it appears). Though it looks modest in comparison to the earlier estimates, it is nevertheless a strong sale and Apple expects to sell 1 million iPhones in the first three months. May be more. The iPod took a bit of time to hit its stride, and there is no reason for the iPhone to not follow suite.

A USA Today report on iPhone customer satisfaction shows that despite initial activation glitches, 90% of the customers are very happy with their iPhones. However, the report says that the customers wish the iPhone had longer battery life, faster Internet speed and more internal memory. AT&T being the exclusive carrier does not seem to be a problem with 50% of the buyers switching from another carrier. [It is with me, and I have not switched from Verizon yet.]

Another issue with the iPhone is its high cost. As per the report, it ranks as the No. 1 reason for deterring consumers interested in the device from buying an iPhone. When viewed as a laptop-replacement device, the iPhone’s cost justifies just fine. However, for me, the keyboard remains a problem to meet that goal. Nonetheless, there are many users who don’t need to type as much, and can effectively use the iPhone in this mode, as a laptop replacement device.

iPhone is a great consumer device but it just isn’t suited for heavy use as a computer and does not let you edit documents. One of the many reasons why it is not suited for corporate use. Some more issues with corporate use are its high cost, slow AT&T network, and lack of support from mobile security suites and major business mobile e-mail solution providers. I don’t see it as a business use machine quite yet, and not until the keyboard issue is addressed. RIM, Palm - not to worry!

However, there are many takers for the iPhone. It is set to launch in Europe in the fourth quarter.

On the financial front, Apple reported third quarter revenue of $5.41 billion and EPS of $0.92, a 24% growth over the last year’s June quarter sales. Record-breaking Mac sales and strong demand for iPods led to this landmark quarter with the highest revenue in a June quarter. Total revenue from iPhone and iPhone accessory sales was $5 million, which does not account for the payments from AT&T. Apple would not be accounting for iPhone revenues in one go, but would be apportioning it across a 2-year period. For the next quarter, Apple expects revenue of about $5.7 billion and EPS of about $0.65.

Its stock has done well since the launch when it was $122.04 and hit $148.92 last week, before it dropped today to ~$135 on the news that Apple was cutting production orders from 9 Million to 4.5 Million units. [I am not sure to what extent this news is confirmed, but nonetheless, it has certainly crashed the stock for now.]

AAPL 1-yr chart:

Comments

[peter02l:]

I agree. The iPhone may be a great consumer device. However, not only it's unsuitable for heavy use as a computer, but it cannot be used as an application server or a high end database back end. Furthermore, it cannot be used for weather modeling in spite of its weather widget.

Financially, many smart analysts may consider Apple's 13.8 billion in cash a liability because it will encourage suppliers to overcharge the company and its customers to sue it.

There is more where that came from. I can also do stand-up comedy, and some cossack dancing.

2007 Jul 31 06:10 PM

[artman1033:]

The "rumor" reported at thestreet.com was just that a bad rumor

2007 Jul 31 07:23 PM

[Andrew:]

Apple is now viewed globally as a mainstream luxury brand. It's iMac sales have been increasing at a much faster rate than general pc sales (1.5 and 1.76 MM units in the previous two quarters), while unit price and margin have been improving . At the same time, pc pricing has dropped over 25% in the past year.

The biggest unsung hero in Apple's growth engine is the decline in the dollar against Euro. European sales is now responsible for over 30% of aapl's revenue, and the growth rate is much stronger than US.

Apple's iphone sales for the coming year is heavily dependent on introduction of a lower priced phone and on time introduction into the European market. Over the next two years, Apple will have to resolve technical issues and put out a CDMA phone.

The increasing sales of iphone franchise has to grow very quickly, in order to replace the flattening (and soon declining) iPod sales.

One can't expect rewards without risk. Then again, who would of thought anyone would pay $79 (shuffle) for what is basically a $5 flash memory stick with some basic software...or $1200 for a basic iBook laptop, when a comparable pc version goes for $450.

2007 Jul 31 07:29 PM

[Dan Poarch:]

Do some research. Comparable Dells are exactly the same price as iBooks but run a clogged and inferior OS and don't have nearly the quality of free applications as found in Apple's iLife suite.

2007 Jul 31 09:09 PM

[Dan Poarch:]

Oh yeah, one more thing, the hardware components and design of said comparable PCs is completely and entirely inadequate, built for instant obsolesence, and often aren't even fully compatible with hardware found on the same motherboard. 5-year-old Macs still run the current OS, and run it well. The same simply isn't true of comparable PCs.

You get what you pay for.

2007 Jul 31 09:12 PM

[Dan Poarch:]

The reaction to the rumor today was simply a push to get people in on weakness. I don't know if Apple will recover immediately, this was a huge drop. But in a month, they'll be back on top. New iMacs and new iPods are dropping anytime in the next 4 weeks, this was a push down to get in before those launch.

There are many more rumors, more credible at that, of great things in the pipeline. Besides, the drop in orders may be absolutely correct if Apple is moving to replace a current device in the coming months. Just which iPod order has been dropped? One that's end-of-life and due for replacement? If so, the change in this mythical order was great news.

Todays dip was not a reflection of anything wrong at Apple. It proves that everything is right and people want on board. So push the price down and buy in. Enjoy the ride.

2007 Jul 31 09:18 PM

[gc.alpha:]

There was just one estimate of as many as 700,000 sales - over the whole weekend. The 270k was only through the first Saturday; perhaps another 75k on Sunday? We don't know, but it should be made clear when comparing apples to oranges.

There's news, and then there's news. For something to be 'in the news' is possibly entirely different from being actual news, and is infrequently newsworthy. In this case we had what could more appropriately be called an unsubstantiated rumor. It's possible to imagine scenarios in which such rumors could be thrust upon John Q Shareholder to get him to sell, and let others privy to the facts to kindly pick up those shares at much lower prices.

More impressive than Q3 top line growth was bottom line of 70% - and in a tough quarter where margins were expected to decline, some iPod buyers were expected to wait and/or buy iPhones, and Mac buyers might just hold off 'til Leapord.

2007 Aug 01 01:10 AM

[Jon T:]

FACTS FACTS FACTS?

1. Apple announced 270,000 sales of iPhones in the first 30 hours - iPhones, NOT accessories. It seperately announced $5m of revenue from accessories.

2. iPhone is expensive. Not it is cheaper and represents better value than many other so-called top of the range smartphones... try reading this analysis: www.roughlydrafted.com...

3. Not sure when this was written but the bear raid based on production drops of iPod and or iPhone were completely debunked yesterday.

4. When considering iPhone it should be recalled that it took seven quarters before the iPod hit 1 million of sales.

5. Keyboard a problem? Another myth perpetrated by people who have not even used it?! Read the reports of real users - it is no problem and faster than fixed keyboards of Treo's and Blackberry's.

6. Great post above from 'pay man'. But you forgot to say that the iPhone is really no good at all for hakers and virus makers who will really have to stick with Windows CE devices...

7. Apple a luxury brand. It's products are designed beautifully, the software is second to none, so yes it feels like a luxury brand. But every time you line up it's products against competitors on a like-for-like basis you find Apple products cost the same and even sometimes less. Measure up HP's or Dell's to Macs, the Zune to the iPod, the top Nokias to iPhone, or the Blackberry. Apple just design and make better products at decent prices that represent much greater short and long-term value.

My question is, why does Apple attract such half-baked and badly researched commentaries from people who don't know their subject?

Is it as some people suggest, the work of a certain Redmond based company's PR machine?

2007 Aug 01 03:35 AM

[Tom B:]

"My question is, why does Apple attract such half-baked and badly researched commentaries from people who don't know their subject?

Is it as some people suggest, the work of a certain Redmond based company's PR machine? "

There are plenty of people still holding lots of MSFT, Dell, etc.

MSFT's latest plan is to dump Vista at deep discount in the Third World. They twisted the Chinese Govt's arm into buying a bunch of licenses.

2007 Aug 01 07:54 AM

[Neil Anderson:]

The earnings call clarified the 270,000 figure was for iPhones sold and did not include accessories.

2007 Aug 01 10:07 AM

[Alan Williams:]

iPhones are not expensive smart phones. A free Blackberry was offered by Verizon during the first week of iPhone sales. Free Blackberry verses a $500 iPhone. After you add in the cost of the minimum 2 year contract required for both phones, the total cost for the two phones over 2 years was the same.

On top of that, a 2 year old, used Blackberry sells for less than $10 on E-bay. A 2 year old iPhone will still be a Widescreen Video iPod and a WiFi enabled, hand held internet surfing device worth $150 to $200 on E-bay, just like other high end 2 year old iPods sold on E-bay, even if you don't use it as a phone.

That resale value makes the iPhone the least expensive of all smart phones by $100 to $200.

So much for the expensive iPhone myth.

2007 Aug 01 07:44 PM

[brewer:]

Do we really need another nimrod to tell us that the iPhone isn't the same as a desktop or laptop computer? Geez, you guys have been in windoze land so long you are brain damaged. You still need a computer. This is an iPhone, it's not something you probably want to use as a server. Duh. But it MOST CERTAINLY can edit documents. Google apps will be working for this in no time. But you probably are not going to want to
write a novel or report on your phone...

Buy the stock now, you will never see it this cheap again. Next week's announcement is going to be a game changer. I think they will finally ship a real PC killer.

2007 Aug 01 09:43 PM