Apple: Confusion Reigns Over iPhone Sales Projections

Remember the telephone game? That’s the game where I whisper something to you, and you whisper it to someone else, and so on down the line, with the original messages inevitable getting mangled in the process. When I was a kind, we used to call it Whisper Down The Lane. Wikipedia says the game is also called Chinese Whispers.

Well, we have one roaring game of Chinese Whispers going on this afternoon, the subject of which is the potential calendar third-quarter sales of the Apple (AAPL) iPhone.

This all started, apparently, with a story in the Chinese-language Commercial Times, which was picked up by the Taiwan-based tech news site DigiTimes. According to DigiTimes, the Commercial Times reported that, according to component suppliers for the 3G iPhone, “total shipments of 3G iPhones are expected to top 10 million units in the third quarter.”

Then Fortune picked up the story, with a post that says Apple will ship 10 million iPhones in the third quarter alone. (That would be Apple’s fiscal fourth quarter, by the way.)

Now, I’m not trying to be negative here, but Fortune apparently took a badly worded DigiTimes story and wrote a piece that likely isn’t true. What I believe the DigiTimes story was trying to say is that Apple would ship its 10 millionth iPhone - a cumulative total since its introduction a year ago - sometime in the calendar third quarter.

At the WWDC, Steve Jobs said that Apple had shipped a cumulative 6 million iPhones to date. Most Street analysts are expecting the arrival of the iPhone 3G to result in much higher sales than in recent quarters; estimates for the September quarter are in the 4-6 million range. If they sold, say, 5 million phones in Q3, then - voila! - Apple would sell its 10 millionth iPhone in Q3.

And by the way: Let’s keep in mind that Apple has forecast it would sell 10 million iPhones in calendar 2008 - not cumulatively - so even the fact that they hit 10 million total phones sold in the third quarter is not hugely significant. The company sold 1.7 million iPhones in the March quarter. And June quarter sales likely will be be quite low, given widespread shortages heading into the 3G launch.

So, yes, they will sell lots of iPhones in Q3. And yes, they are likely to beat their forecast of 10 million phones sold in calendar 2008. And they might sell 10 million in Q3 and Q4 combined. But it is hardly likely they will 10 million in the third quarter alone. Craig Berger, a semiconductor analyst with Friedman Billings Ramsey, estimated in a recent report that Apple would build 3 million iPhones in calendar Q2, and another 8 million combined in Q3 and Q4 as sales of the 3G phone ramp up. That would put the company comfortably ahead of 10 million for the calendar year. But 10 million in one quarter? Maybe some day, but not yet.

Comments

[Doc Sab]

ERIC.. You are incorrect. Apple was supposed to sell 10 Million by the END of 2008.... that's in total... from the original sale date... to the last second of sales in 2008. Your statement is in error.

"And by the way: Let’s keep in mind that Apple has forecast it would sell 10 million iPhones in calendar 2008 - not cumulatively - so even the fact that they hit 10 million total phones sold in the third quarter is not hugely significant."....

[alsi]

the impossibility of selling 10m in CY08 Q3 is actually quite possible. The possibility that Apple would only build 8M iPhone3Gs in CY08 Q3 & Q4 is equally impossible...with 78 countries and an initial rollout into 22 countries at half the price of the prior generation (1/3 of the initial month of sales), with a quantum leap in product ability, a known massive pent-up demand, with the original iPhone selling for MORE than the retail price USED on eBay...Apple will sell every single iPhone3G in Q3 that they produce. And only 4M on avg per quarter over the next two quarters...for 78 countries (and probably more before it's over). that's about 100K iPhones sold per country...sure some countries won't sell as many as others due to the size of the market...but they'll sell millions in a few countries without a doubt.

PLEASE, PLEASE, PLEASE...post this article in bold type every single day...do not let us forget this one...this is as bad as the Toni S. "analyst note" you published on Feb. 22nd. It's just plain wrong. What's the agenda here with this stuff? You should think this through and write an apology to your readers for not doing so the first time.

Oh and this is the same Berger you've quoted before and every time he's come out with some number, a month or two later...he was "surprised" to find the build being 250% higher than previously thought...etc. I suppose we should do that here and figure 25M for Q3 and Q4...which is inline with a number of notable analysts. You discredit yourself by publishing this stuff. Just b/c someone says it, doesn't mean it's wise to print it. If you think otherwise, tomorrow tell us how flat the earth is.

[ellfin]

Apple now has Canada to sell Iphones. They were not available to us until just now. That should add 5 or 6 more phones at least.

[samij]

Doc Sab, you find Apple earnings call transcripts on this very site, please read them. Apple officials have several times stated the 10m goal is for calendar 2008, not cumulative.

BTW, it's good to note that the iphone numbers reported for iphone 3g now are not directly comperable to those from the previous quarters. Bulk of iphone 2g sales were made directly from Apple to customers and unit number reported were therefore mostly end-user sales.

Iphone 3g will be sold increasingly through operators so the numbers reported will not be end-user sales, but iphones the operators have ordered. Given the large number of operators Apple FQ4 and FQ1 iphone sales numbers are likely to be very good, no matter how well the device is received by the public.

[sleepy]

You're right, we don't know for sure, but you're wrong to deny 10M in calendar Q3. It's a subtle but important distinction: Apple has publicly aspired to (like a competitor), but never forecast (like an analyst) 10M in 2008. In fact in recent conf call, 10M was almost stated as a plain fact even as iPhone 1 supplies dried up. That tells us that real expectations are higher. 3 million a month for the rest of the year, is the most likely, IMO, with the timing of availability in each of the 78 countries being adjusted as required, and maybe there's even time to ramp up for the fourth quarter.