Is AT&T An iPhone Sales Anchor? 36 comments
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A recent poll show customers planning on switching to the AT&T (T) network has not been this low since 2006. Since one can only buy an iPhone on this network, isn't that bad news for Apple's (AAPL) US iPhone sales?
The survey shows those planning to switch to the AT&T network peaked in June, just prior to the release of the iPhone and fell off a cliff in October.
The explanations for this are obvious. The folks who were going to buy the phone no matter what the cost were the reason for the run-up in June. Since that pent up demand was satisfied, we are now into the people who will buy the phone not just because it is an Apple product, but because of value considerations. Those consideration are only two things, the cost of the product and the cost of switching plans. Apple has slightly relieved the first by dropping the price from the initially insane $599 to a slightly more reasonable $399. While this angered those folks who paid the $599, Apple did try to kiss and make up by refunding these folks $100.
If you remember, back in early May I said that the iPhone would not gain mass acceptance chiefly because of the price and the fact that it is available only on one network, AT&T. The #1 complaint among Apple users? The painfully slow AT&T network.
With Apple devotees not happy with AT&T and the number of current cell users planning to switch to AT&T dropping like a stone, that adds up to US iPhone demand falling fast. Worse is the fact that those planning to switch to Verizon (VZ) is on the rise. Could this mean that with Verizon unveiling its iPhone competitor in time for the holidays, people are choosing the network over the phone? It is a little early to tell for sure but that is what it looks like initially.
Apple has sold 1.3 million units to date so far, which puts it about 40% behind the selling pace (2.5 million per quarter) it needs to reach the 10 million unit goal CEO Jobs set before the launch. I know a few folks who have the phone and like it, but lament the network it is on. The problem for Apple is word is getting around and my guess is folks who may be buyers are sitting back waiting for another price drop OR, the phone to be available on other networks before making the purchase.
Will this kill Apple? No. Mac sales are taking off and there is no viable competition to the iPod. It will show that Apple is not perfect and that may scare a few folks. See Apple's earnings here.
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This article has 36 comments:
Great math but for 3 small matters:
1) Europe is coming on line
2) Apps are coming
3) Black Friday is approaching.
Bet you a Krispy Kreme they make the target.
I agree ATT could be a much better partner. They DO seem to be improving their network infrastructure. They are bigger than they were before acquiring BellSouth and SBC. The new CEO is "techie". On the negative side, ALL their advertising seems to be about clearing out phones previously considered "smart". I HOPE they figure out they have a cash cow with the iPhone and reflect that in their ads before Turkey day.
i am sure they got the best deal, or at least thought they did at the time. I do not think they anticipated having to cut the price so much so soon and that takes a huge chunk out of the anticipated results. I think a year from now, the singular carrier choice will be a regrettable one.. we'll see
Will I be holding Apple in 5 years? Hard to say. When Mac sales blow past 20% market share and AAPL's market cap tops MSFT's (they're about on par with IBM now), my "sell" finger might get itchy. It is hard for tech "darlings" to stay on top forever. Maybe by then, it'll be G-Apple (Google-Apple) instead of Apple. Who cam say?
the gphone, based on google model would real tough to resist..
i keep hearing about t losing exclusivity but to date i have not seen how this could happen, ideas?
competitors... the gphone would be just that. google fans are just as fanatical as apples..
What's a Google phone gonna be based on LINUX? Symbian? Windows Mobile? It would suck. The UI is what makes the iPhone-- not the Apple label.
As for GOOG "fans". I'm a fan. I like their stock performance. I'm an Apple fan, too. I like their stock performance and LOVE their products as a long-term user. Would I switch to something else if something better came along? You bet I would. It ain't a religion. But where would come from? LINUX? Nice technically, but "designed by committee" in terms of usability. MSFT? They just spent 5 years putting lipstick on Windows XP, upping the price, killing the performance, and re-naming it "Vista".
Second, Apple is aiming to change the cellular industry, not just sell handsets. For now, it needs its carrier partners to make the change happen. You need to take a broader, big-picture, strategic view instead of such a short-sighted, tactical, next-quarter revenue view.
So Todd, you really need to listen more to others, who are not even Apple "fans", objectively recognizing the impact of the iPhone and its relationship with the carriers.
Here's some reading for some more ideas:
communities-dominate.b... (site has other related articles as well)
www.news.com/8301-1357...
www.rcrnews.com/apps/p...
And this is what I think is the long-term change to AT&T and carriers? (Hasn't happened yet!) As soon as broadband data is somewhat viable over cell networks, (definitely not with EDGE, possibly with 3G, more likely with 4G or even WiMax), Apple will get the carrier to charge for being a pipe from your mobile device to anywhere on the Web (not just the walled garden), just like telcos/cablecoms charge for being the broadband pipe from your home to the Web (where those walled gardens have already disappeared). If iPhone is the best device for using the mobile Internet, it will persuade many who do not bother with data to become willing to pay from $20 to $200 for various speeds/capacities/serv... of mobile data. Especially corporations. So you can bet iPhone will be tying in to more and more enhanced data services, some through .Mac, some like Salesforce. As other carrier competitors see the writing on the wall, they'll have to also have open data plans (initially using other phones of course).
And if the carrier can bundle this with home broadband or corporate wired networking, this becomes even more valuable to the carrier. I'm sure you can imagine further tie-ins that will eclipse anything Blackberries do today.
i do agree on the carriers comment you made. did you see the piece in the journal about it? the phone should not be tied to the carriers like pc's are not to your ISP. hopefully someday that might happen. apple could have expedited this but i actually think they prolonged it with the AT&T agreement..
Much as i have no stake in apple, i would not be a person who bets against RIMM. they invented the arena and there is no reason to think they will not adapt... you can't say apple will do "x" in the future and then presume RIMM will sit still.
we all win in the end in this one
the facebook deal is huge... how many 15 year olds will be walking around with a blackberry now?
i think you sort of miss my point. the point was (i said this to Tom in a response to a comment) was that iPhone sales are suffering because of T, can you imagine the demand and sales if sprint and VZ users could get them? all the changes you are talking about would be put into hyperdrive then
In the long run, Mossberg is right. But getting that privilege without other fundamental changes is a hollow victory.
This is analogous to DRM and the music industry. Even though Jobs criticized DRM before iTunes ever existed, Apple went along with DRM (buying Fairplay pretty much at the last minute) just to get a foot in the door. Once industry and customer culture changes began to occur, Apple started to push for no DRM, even offering the industry a plum in a higher 1.29 price. Which the labels, other than EMI, has continue to reject. So be it.
Anyway, same steps for cellular and walled gardens and carrier reqts for handsets. Jobs has criticized the labels as orifices, but has now locked-in to one such company to effect the changes Apple thinks are needed.
But deep down, you and everyone know it's a reaction to the iPhone. No iPhone and we wouldn't have seen this for a longer while.
I recall your ridiculous posts before the iPhone even launched and they all went something like this: "AAPL WILL FAIL YOU'RE ALL IDIOTS"
Well, Toddy, guess what? Why don't you go ahead and look at yesterdays results?
Why do you bother?
the results were wdue to the Mac sales..... did you listen to the call?
See www.blackfriarsinc.com...
Based on Gene Munster's and Dan Frommer's analyses, each iPhone sold and on contract is possibly generating over $800 in revenue (and $550 in profit) over 2 years, So 10 million phones leads to 5.5 billion in profit. Yes, there's iPhone software development cost that wasn't accounted for, but that will be almost negligible if they sell lots of iPhones, and because it's shared across Macs and iPods.
I don't think Apple conceded anything on price, since the drop was clearly preplanned, as there's no way Apple could sell a $599 8GB iPhone, when the 8GB iPod touch is priced at $299. And there's no way the iPod touch could be more expensive if the 8GB iPod nano is $199. And there's no way the 8GB iPod nano could be more expensive if the 4GB iPod nano is $149. So why is the iPod nano at 149 - because the number of mobile video players sold so far is really small, and Apple wants a huge huge market for mobile video. Why? To drive content owners to put video (esp. movies) into the iTunes Store, which will then drive future sales of AppleTV, which Apple hopes will turn its hobby into a business. And what does Apple's huge forecast tell us? That between Sep 5 and Oct 22, Apple has seen huge sales of its iPods (surely, nanos and up) and iPhones, thus, validating its pricing strategy.
Apple is not just a bunch of unrelated parts. This incredible Jobs-led strategy is thoroughly integrated in every which way, with each product driving other products, and leverage everywhere (i.e., OS X, Quicktime-based content, consuming devices-production devices).
Echoing my point about data - Yahoo: "In terms of internet usage nothing is holding a candle to the iPhone."
Echoing my point about how the other carriers will follow - Motorola: "For us, it's been quite beneficial, because wireless carriers are now willing to talk about all kinds of new experiences on handhelds that they wouldn't consider in the past." Plus, "It opened up a whole new pricing tier. There are [people] who are willing to pay a lot for a phone. They're willing to do more than sign up for a wireless plan and get four phones for free - which is where the market was headed."
Really, Todd, the impact of the iPhone on carriers is being talked about and written about by "experts" everywhere except here. From these articles, Jobs' comments (at preview, All Things D, and at launch), and Stephenson's (AT&T CEO) comments (at launch), you can see where AT&T (and other iPhone partners) has to go.
Last point: The carriers are spending (and risking) really big bucks building out higher speed cell (and wifi) networks. Once built, almost all customer revenue goes toward paying off the investment, then when that is done, it is just profit. So until the network is completely saturated, every additional customer is beneficial (and desired). iPhone will bring in those customers who will pay for data use. (BTW, this is largely analogous to investing in expensive flash production factories.)
sluggish sales were the reason for the drop. it was a PR fiasco and Jobs is too good at PR to have walked knowingly into that... you are also assuming the "touch" was destined to be sold at $299 and apple did not want to sell it higher and only lowered it after the iPhone pricing debacle..
the whole price drop is very "un-jobsian" of apple and for that i cannot believe it was pre-planned
Next, my point, which you missed completely, on the touch pricing was that all Sep 5 iPod pricing on was linked to the 4GB iPod nano going to 149, which caused the 8GB iPod nano to be 199, which caused the 8GB iPod touch to be 299, which caused the 8GB iPhone to be 399. Had the 4GB iPod nano been priced at 199 and the 8GB 249, then the touch could've been 349 or maybe even 399, and the iPhone 449 or 499. Don't you realize that all the variants are priced for upsell? So each model needs to have a solid value proposition for the price differential. But why 149 for the nano - because Apple wants a boatload of handheld video players in the market.
Since Apple was so focused on increasing the market presence of video players and iPhones, and the positive vibe of lower prices, they were surprised by the reaction of the mainstream iPhone buyers to the price cut.
Finally, were iPhone sales really "sluggish"? Would making its publicized goal (projected on Jul 25) of 1M total sold by Sep 29 (4Q end date) been considered "sluggish"? I'll spell this out: price cut on Sep 5 midday; 1M sometime on Sep 9; press release next morning. Assume supercharged run rate of about 25K for those 4.5 days. Which means 887K sold by Sep 4. At even a truly "sluggish" 5.5K a day run rate from Sep 5 to 29 (24 days), Apple would've reached 1M by Sep 29.
In any case, my calculations yield about 610K iPhones sold from Jul 1 to the day of the price cut, or approximately 10K a day; or about 200K more than yours; 89K of which you cut out by saying Apple sold just 1.3M instead of 1.389M.
Regardless, one survey says iPhone is in top 4 models, #1 for AT&T, and trending to #1 across all carriers in the US. I'm sure, even without the price cut, iPhone would still be in the top 10 models. I wouldn't consider that not a "hit".
I recall your ridiculous posts before the iPhone even launched and they all went something like this: "AAPL WILL FAIL YOU'RE ALL IDIOTS"
Well, Toddy, guess what? Why don't you go ahead and look at yesterdays results?
Why do you bother?
I agree that Apple needs to do all they can to encourage AT&T to upgrade their network however since reports of bad service in one market can affect the perception in other markets.
I've had one since launch. The web browsing via EDGE, while not the fastest, is definitely usable. The Visual Voicemail feature is a godsend, and something that was only possible by partnering with a carrier.
Word is getting around? Perhaps you missed this little tidbit on SeekingAlpha: seekingalpha.com/artic...
I can't wait to see how you try to spin the release of the 3G model in January.
you miss the point.. I said a $599 phone would not be, it wasn't. i also said "lower it to $299 and it will be a hit" (back in April or May?). A $399 is is a moderate success,? slightly popular? hugely mediocre?
no reason to spin the 3G. i said it was price and network..... price taken care of... network? who knows
Huh?
In other words, you can't name another phone that sold over a million at $399+ in its first three months. I notice you conveniently passed over the link to the SeekingAlpha post on how iPhone user satisfaction is off the charts. Do you think if AT&T was as bad as you try to portray it that the iPhone would have garnered a 77% "very satisfied" rating? Meanwhile, your beloved Blackberry only hovers at the 50% mark. If you're hanging your hopes for the iPhone's failure on some dropped calls or slow EDGE speed, you're setting yourself up for disappointment.
Let's take a look at a little history. Apple released another little device a few years ago for $400 in a market they had little experience with. It was called the iPod, you may have heard of it. There were many who proclaimed it would flop since "it was too expensive and only worked on Macs, which tremendously limited its appeal." We all know how that turned out. By the way, Apple only sold 125,000 iPods in its first quarter (a holiday quarter no less). So your limited approach of simply trying to extrapolate 18 months of sales from the first three months of one model's sales in one territory really doesn't hold much water.
The iPhone probably started out as a defensive play against cell phones that were starting to encroach on the iPod's turf. But it's turned into something far better. It's going to be the foundation for a whole new generation of devices. I don't expect you to understand if you haven't used one, but there's a reason that iPhone owners are so satisfied.
"no reason to spin the 3G. i said it was price and network..... price taken care of... network? who knows"
So once the 3G iPhone is released - and we all KNOW it's coming, hell Steve Jobs mentioned that at the launch of the iPhone - what's the hurdle for Apple? I've held on to most of my AAPL since 1999, which obviously has paid off handsomely. I held it because I could see firsthand how well their products were being received. Until I see them lose focus ALA Motorola, I'll be a happy Apple long.
Huh?
In other words, you can't name another phone that sold over a million at $399+ in its first three months. I notice you conveniently passed over the link to the SeekingAlpha post on how iPhone user satisfaction is off the charts. Do you think if AT&T was as bad as you try to portray it that the iPhone would have garnered a 77% "very satisfied" rating? Meanwhile, your beloved Blackberry only hovers at the 50% mark. If you're hanging your hopes for the iPhone's failure on some dropped calls or slow EDGE speed, you're setting yourself up for disappointment.
Let's take a look at a little history. Apple released another little device a few years ago for $400 in a market they had little experience with. It was called the iPod, you may have heard of it. There were many who proclaimed it would flop since "it was too expensive and only worked on Macs, which tremendously limited its appeal." We all know how that turned out. By the way, Apple only sold 125,000 iPods in its first quarter (a holiday quarter no less). So your limited approach of simply trying to extrapolate 18 months of sales from the first three months of one model's sales in one territory really doesn't hold much water.
The iPhone probably started out as a defensive play against cell phones that were starting to encroach on the iPod's turf. But it's turned into something far better. It's going to be the foundation for a whole new generation of devices. I don't expect you to understand if you haven't used one, but there's a reason that iPhone owners are so satisfied.
"no reason to spin the 3G. i said it was price and network..... price taken care of... network? who knows"
So once the 3G iPhone is released - and we all KNOW it's coming, hell Steve Jobs mentioned that at the launch of the iPhone - what's the hurdle for Apple? I've held on to most of my AAPL since 1999, which obviously has paid off handsomely. I held it because I could see firsthand how well their products were being received. Until I see them lose focus ALA Motorola, I'll be a happy Apple long.
You have it my friend. What people DO NOT REALIZE is that the iPhone, and now the Touch iPod, both based on Mac OS X, are a COMPUTING PLATFORM.
They are both easy to use handheld touch screen computers, one of them having an integrated cell-phone, both of them having integrated MP3 players.
Once 3rd party software companies start cranking out applications for the devices after Feb. '08 (when Apple opens up the API) - watch out.
if you read my previous (May?) stuff i have referred to the ipod consistently as "brilliant" but let not forget that ipod sales did not take off until cheaper versions were introduced
you will see that satisfaction # fall as non-apple nuts buy it. i wonder how many of those blackberry folks were wanting to trade up into a better one? i did not gloss over it, i just could not get my questions answered from it.
shares.... good for you. although it is odd, i have yet to run into a single person who ever lost $$ on apple or sold early... who is selling all those shares?
it is funny, people think i hate apple but i do not. i love my ipod and think the phone is decent, just not worth $500 (apparently jobs did not think so either). I stand by my statement in my first post of this months before the phone came out, $299 it is a huge hit...
AAPL is now about $183/share, very high according to some analysts. If you really believe what you are saying about Apple's prospects (or lack thereof), why don't you either short or buy puts on Apple's shares? I'm not saying I know the direction AAPL will take, then again, I'm not writing articles on Apple's sub-par performance.
If you believe what you are saying, then put your money where your mouth is, otherwise, keep that mouth closed.
mashny
That's unfrair, mashny, and irresponsible. Todd is paid to comment on investing related topics and his articles, regardless of the opinions espoused therein, are catalyst for intelligent discussion and discourse.
Telling him to "put up or shut up" is like telling a bunch of football analyst talk show "experts" on Sunday morning to "shut up," go strap on a helmet and shoulder pads, and do their talking on the field.
Believe me, this discussion is much more palatable than say the manure that can be found on the Yahoo AAPL message board.