Analyst: Old iPhone, not new, will drive Apple's sales
Those 1 million iPhone GSs sold last weekend represent a "remarkable achievement," writes RBC Capital's Mike Abramsky in a note to clients issued early Tuesday, especially considering the new iPhone's relatively narrow international distribution (8 countries vs. 21 last year).
But according to Abramsky, it's the old iPhone 3G — newly priced at $99 — not the new 3GS, that will drive global sales this fiscal year.
"While early buyers appeared to favor the iPhone S," he writes, "the $99 iPhone is expected to drive 30-40% momentum improvement, in countries like UK, Germany, France, and other parts of Europe and Asia where phones are more highly subsidized (on contract) and prepaid is popular (e.g. ~60% prepay in UK, ~90% in emerging markets like India)."
Abramsky expects Apple to sell 20 million iPhones in fiscal 2009, 64.5% of them the older 3G models. By his estimates the new 3GS won't dominate sales until fiscal 2010, when he expects Apple to sell 30 million iPhones, roughly 60% of them 3GSs. See chart and spreadsheet below.
On Monday, Apple announced that it sold 1 million iPhones 3GSs in three days of sales. The company has not released the number of iPhones 3Gs sold since that device's price was lowered to $99 from $199 on June 8.
This analysis claims that the iPhone 3G will see strong sales because of the price drop, but it neglects to mention that this price drop was US only. In most international markets the price either already dropped in winter (boosting Apple's last quarter from January to March) or didn't drop at all.
So this statement from the report…
"The $99 iPhone is expected to drive 30-40% momentum improvement, in countries like UK, Germany, France"
…is definitely wrong. There were no price drops whatsoever in France, Germany or the UK around the release of the iPhone 3G. Why did Abramsky fail to research European prices?
Since the US is currently only 40 % of the iPhone market, that's the only market that is going to get a boost from this price drop. In light of this, Abramsky's estimate of 11.85 million iPhones sold between April und September 2009, 56 % more than last year, seems too optimistic.
I would suggest something like 33 % growth or 10 million for the 2 quarters (18 million for the whole fiscal year). That would reflect strong organic growth from the rising popularity of the AppStore PLUS some boost from the US price drop MINUS the ongoing economic crisis.
Predicting sales on a per-model basis beyond September 2009 seems very speculative and almost pointless to me because we don't know any of Apple's plans (as usual). We don't know when Apple will drop prices for international markets again and we don't know if and when they are intending to introduce a 3rd iPhone line which could be a more high-end or more low-end smartphone or specialized form factor or even a feature phone. The iPhone business line is still nascent and there a lot of options on the table for Apple. Nobody can predict what they're going to do next.
* iPhone sales over the last 2 years can be found here http://en.wikipedia.org/wiki/File:IPhone_sales_per_quarter.svg
Coverage for AT&T is fine in most cities. I had tried AT&T, Sprint, T-Mobile, and Verizon. T-Mobile was the worst coverage, then Sprint. AT&T and Verizon were closely tied. Sometimes it depends on how close I was to the main freeway, and other times I was way in the country but still got service. Best to try it before you buy. All states have a 21 day free trial, but you must return it by day 21 (even though they say 30 day).
I expect Apple stock to easily hit $150 because of the new phone pricing and new phones. The next version of the Macbook low-end could be the uni-body (no Firewire though) and that will boost Apple laptop sales. Already the most popular laptop on campuses.
I live on Long Island and in NYC frequently–never have a coverage problem and rarely have a dropped call. I can't speak for other areas, but Metro NYC has good coverage through AT&T.
Gary Dee – They would have to put a different transmitter into the iPhone to use t-mobile's 3G network, as it is band incompatible with what AT&T uses for 3G. If you unlock any iPhone and use it on t-mobile's network, it will always connect at EDGE network speeds.
"Give us a $20 or even $30/month data plan and the iPhone will sky rocket. IMHO."
That's how much you pay if you have a 2G or 3G respectively. I wish they would include text messages within that plan since both are data anyway. As is right now it's $30 for unlimited data (for 3G/S) and $20 for unlimited text messages. Plus $50 for the cheapest phone plane of 450 mins/5000 night/weekend.
The carrier issue is a real one … I have a good deal, great coverage on T-Mobile. I would be willing to wait an extra six months to have an iPhone on T-Mo, after first release to AT&T. I bet a lot of Verizon customers also feel this way.
Mons – Can you read? He said the 3G would outsell the 3GS THIS FISCAL YEAR, with the 3GS overtaking it next year. RIF.
mark – The article only mentions prepaid or PAYG as a market factor in those countries, not that Apple or any of their carriers would do it. If they ever do, even a 3G would be a LOT more expensive than $99.
One of the main factors holding consumers back is that iphones are tied to AT&T's network. My roommate in NJ loses probably 20 calls a day with his AT&T company phone. My brother in OH switched to AT&T specifically for the iphone and is going back to verizon as soon as his contract is up… It really doesn't matter where you are, the service is not good. Until they can be freed from that obligation the best thing to do is buy an ipod touch and a cheaper phone.
The only real sale driver would be the introduction of cheaper data plans.
Really! A $100 or $200 difference on the cost of the device is nothing.
Out of $1500 over two years… this is not a big difference we're talking about.
Some people like me just need to phone, text… and do email at most.
Give us a $20 or even $30/month data plan and the iPhone will sky rocket. IMHO.
I wonder at those price points, which version AAPL makes a better profit from at this point? Bottom line, selling old 3Gs for $99 might be a better business than 3GSs at $199.
What's the name of those guys who rip the products apart and spec/price them? That would make an interesting comparison.
I'd really like to believe him, but since he's so wrong on so much concerning Apple, and since he didn't provide any concrete evidence other than hand-wave about PAYG in global countries, I'm super skeptical that he has any clue.
So, first question, is the 3G being sold for many PAYG plans? If so, for how much, and where? India?
Mike Abramsky must have been smoking! IPhone 3GS is going to outsell all earlier IPhones. He does not get the why you buy an IPhone! Some of the new features are needed and the price diff is not going to make the dated version outsell the new one.
I'm sorry, I meant to say: There were no price drops whatsoever in France, Germany or the UK around the release of the iPhone 3G S.