COULD BE I-PHONY
Fears are mounting that Apple’s much-hyped iPhone may not be the instant hit many in media and tech circles were anticipating.
Shares in Apple Inc. slid over 6 percent yesterday to $134.89 following word from AT&T on Monday that it activated 146,000 iPhones in its first day-and-a-half of sales following its June 29 debut.
While AT&T called the product’s performance “robust,” nervous Apple investors were less than impressed. Some analyst estimates were forecasting initial sales of as much as 500,000 units.
All eyes will be on the Cupertino, Calif.-based Apple today when the company releases its quarterly earnings and presumably its first comments on the iPhone’s performance.
There are hopes that AT&T’s numbers may not tell the whole story of how the device is faring.
Technical glitches in the activation reportedly prevented at least some consumers from using their iPhones right away.
Others were buying phones with the intent of reselling them – another trend that could impact activations.
That means that even though consumers may have purchased the phone from Apple, if they weren’t able to activate the device they would be not reflected by AT&T.
Analysts now expect a figure in excess of 200,000 units, but below the high-end of sales forecasts.
Even more potentially troubling, some analysts are saying that demand for the iPhone has seen significant declines over the last 10 days.
“We have noticed decent inventories at stores, and thin demand at best, said CIBC World Markets telecom analyst Ittai Kidron in a note to investors yesterday.
In fact, most Apple store visitors were not looking at the device and only a very small subset bought it,” Kidron said. However, AT&T said sales of the iPhone continue to be “strong” in July with store traffic above historical levels.
AT&T, Apple’s exclusive partner for the device, also indicated that the iPhone is showing success in luring customers from rival carriers.
More than 40 percent of its iPhone activations came from new subscribers.
The iPhone, an iPod/cell phone hybrid, boasts a dazzling array of features, including the ability to make calls, send and receive e-mail, listen to music and watch video.
But it also comes with a steep price tag – $499 and $599.
Even more than price, some customers are taking issue with the slow connection speed of AT&T’s EDGE network, leading to increased analyst speculation that an updated 3G version of the phone is likely to hit store shelves before the end of the year.
Apple stock has risen over 73 percent this year. Shares rose from $83.80 at the beginning of the year to $145.22 July 23 – riding a wave of anticipation and excitement around the iPhone.
To be sure, buzz about the product ahead of and around its launch has been through the roof.
Nielsen/NetRatings reported that in the second quarter of 2007, Apple’s Web traffic grew 27 percent year-over-year to 44.3 million unique visitors – traffic driven in part by iPhone curiosity.
Apple has said it hopes to sell 10 million iPhones worldwide by the end of 2008.
To keep pace with that target, the company will have to sell an average of 500,000 units over the next 20 months.