AT&T's 1.6 million activations equals 3.7 million iPhones – Analyst

@Juan,

Last quarter 1.9m activated and 4.4m sold. ratio = 4.4/1.9 ~ 2.32

This quarter 1.6m activated so by same relationship number sold ~ 2.32X ~ 3.7m

3.3m is the analyst estimate for this quarter.

One, the relationship between AT&T activations and total global shipments is a tenuous one.

Two, though shipments were just under 4.4m last quarter, they actually ran down inventory by 250k units, meaning they sold 4.65m. So, the correct relationship between AT&T activations and units sold globally, last quarter is 1.9m to 4.65m, or about 2.4x.

Three, applying this 2.4x to this quarter's AT&T activation number gets us to about 3.9m units, globally.

The fly in the ointment here, is that Apple, MAY, run down inventory going into this quarter as they prepare for the new iPhone in June. That's what they did last year. Hopefully, they manage it better than last year, when shelves lay bare for a number of weeks.

Since there were about 1.75m units in inventory going into the last quarter, that's a big number that Apple will have to factor in, in the 3rd quarter's sales, so dropping shipments in this 2nd quarter's to further draw down inventory going into the 3rd seems likely. By how much, noone knows.

This inventory change is important, as I have a feeling that people will read the press release at 4:30pm ET, and conclude the shipments of iPhones were below their level of expectation, when in fact, sales were probably as expected, but that Apple was drawing down inventory, in expectation of a new model coming in their fiscal Q3.

Anyway, my predictions are:

$8.3B GAAP

$9.1B non-GAAP

3.5m iPhones sold, not shipped

$1.29eps

-inventory drawdowns will affect those numbers, as they did last quarter. If you don't recall, Mike Abramsky of RBC was the closest analyst, but was lucky, since Apple drew down inventories in several lines.

i don't get the relationship that Jaffray's has defined between activations vs sales.

Last quarter (which was the Christmas quarter) there were 1.9 m iphones and 3.7 m sold, i.e. my math 1.974 iphones sold per activation. I guess that includes Non-US sales.

But this quarter they are saying 1.6m activations will equal 3.7m sales or 2.312 iPhones sold per activation.

3.7 is greater than the expected 3.3m iPhones which would be great for Apple, I just don't get the math.

If the last quarter's math is used, you get 3.1584 million iPhones sold not 3.3 million. If anything I would think the sales/activation ratio would go down. All (or a high percentage of Apple sales and US retail sales are activated by AT&T). the international sales have not been accounted for – perhaps they are way up?

So, less activations means more sales this time? and it's not Christmas?

I am a Mac fan and love the iPhone I just don't understand the math here.

I think Apple will surprise with iPhone sales today but what does my opinion matter we will know in 6 hours.

'Getting rid of inventory' – True

But, there clearing out the channel for the new phone(s) going forward.

Nothing in ominous in that. As a confirmation for the new model(s), the clearing action is good news.

We've all seen how Apple is trying their best to get rid of inventory. They haven't been shipping significant quantities of product like they were in the December quarter, so the relationship doesn't hold completely. The Apple numbers are presumably less than the extrapolated numbers above since we know that Apple reports shipped iPhones and AT&T reports activated iPhones.