Briefly: PiperJaffray on Apple, iPhone AppleCare surfaces

[AppleInsider]

Researchers at PiperJaffray say that seemingly low AT&T iPhone numbers mean little in the long run for Apple. Meanwhile, iPhone customers finally have the opportunity to extend their warranties.

High analyst expectations for iPhone remain steady

Senior analyst Gene Munster of PiperJaffray was direct on Tuesday when he noted that AT&T's 146,000 iPhone activations were a "disappointment" for many experts, who had pumped up their estimated sales figures for the weekend to 500,000 or even 700,000 units. The letdown was reminiscent of the late 2004 iPod market as predictions were based more on impressions of the device than actual statistics, Munster said.

"Unpublished Street expectations for iPod numbers were 8m for the [December 2004] quarter, but during the keynote, Steve Jobs announced that only 4.6m iPods were sold in the quarter, which was viewed as a significant disappointment." Munster explained. "In our minds, the iPhone launch is reminiscent of [that past] quarter, because expectations for the product ran wild and the reality of how many were actually sold fell short."

The quality of the product was not a factor in the launch, he added. If anything, the iPhone had "largely exceeded" what could be expected and it was a question of when, not if, a steep increase in Apple's shipments would hit. 2007 and 2008 sales were never poised to see explosive growth, according to the analyst.

PiperJaffray continued holding its aggressive target of $205 per share, with Munster firm on his perception of the iPhone as a game-changing device that would see certain success by at least 2009.

The iPhone "has set the bar for the next generation of phones," he said. "Our belief all along has been that there is a surge of demand coming."

Apple offers up iPhone AppleCare package

Making its promised appearance shortly after the June debut of the iPhone, the AppleCare extended warranty has appeared at Apple's online store.

With the exception of a few states where the law prevents otherwise, the $69 service extension adds an extra year of coverage for hardware defects (but not accidents) relating to the handset. Notably, the warranty also applies to the official Apple Bluetooth Headset despite its selling as a separate accessory.

No extensions apply to over-the-phone technical support, which remains free for any iPhone user over the course of the two-year AT&T contract.

[SpamSandwich]

Munster can't just admit that he totally overdid his numbers. What a Herman.

[steviet02]

Originally Posted by SpamSandwich

Munster can't just admit that he totally overdid his numbers. What a Herman.

Spam,

Can you admit that it's not a product that everyone wants? I mean, $600+ for a multimedia device that requires a specific network, only has 8gb of storage (minus whatever the OS takes), and is missing some very basic features that would be expected of a device like this.

I'm not saying it can't become like the ipod, but the ipod started with alot of storage (for the times) and high price and worked it's way down. The iPhone is starting high priced with very little storage. Remember this is supposed to replace peoples iPods. And hearng talk of a nano iphone, what the hell does that mean, a phone with 2gb storage, hmm... Doesn't sound enticing to me.

[thebigapple]

I am so happy that there are analysts who comment on Apple because ALL of them are on PCs and all of them take out their frustrations on this stock. With the exception of Jim Cramer, every analyst has been wrong about Apple.

They either downgrade it because they don't believe in it or they upgrade it so high, you'd think they were in bed with Steve Jobs.

I've only bought the stock when the analysts downgrade it, because their reasons for downgrades never seem to make any sense. Look at the fundamentals - no debt, great earnings per share, growth for years to come. The only reason I can think the analysts miss every time is because they have a personal problem with Steve Jobs or something.

Especially the "fast money" guys - whew! They've been wrong almost 6 times this year alone! Amazing....

I am now up $72,000 in one year from an investment of only $30,000 and sold before today because there is absolutely no reason why the stock should have been so high anyway. Realistically, this stock should be $110 before earnings and it should go to $130 after earnings. When it drops to $125, I will be picking up more because it's back to school time.

I don't see why any analyst worth his MBA could not have figured out that a stock price of $140 and up makes no sense - they would have had to sell 1,000,000 phones in 30 hours.

THINK ABOUT IT! The stock dropped based on iPhone sales in 30 hours? WHAT A JOKE! 30 HOURS OF DATA! HOW COMPLETELY ABSURD!

How in the world are these guys employed? They completely discounted the entire rest of the country and got caught up in the hype they so despise. PATHETIC!!!!!

Stay with Apple. They will always be ahead of the curve. They've done it for years now...

[drjjones]

Originally Posted by steviet02

Spam,

Can you admit that it's not a product that everyone wants? I mean, $600+ for a multimedia device that requires a specific network, only has 8gb of storage (minus whatever the OS takes), and is missing some very basic features that would be expected of a device like this.

I'm not saying it can't become like the ipod, but the ipod started with alot of storage (for the times) and high price and worked it's way down. The iPhone is starting high priced with very little storage. Remember this is supposed to replace peoples iPods. And hearng talk of a nano iphone, what the hell does that mean, a phone with 2gb storage, hmm... Doesn't sound enticing to me.

took a year foe me to buy my daughter an ipod and i just got one for father's day. what's that ? 5 years after it came out ? Won't be but 6 months before i get my iphone ,,,it won't be 5 years .

[steviet02]

Originally Posted by drjjones

took a year foe me to buy my daughter an ipod and i just got one for father's day. what's that ? 5 years after it came out ? Won't be but 6 months before i get my iphone ,,,it won't be 5 years .

If you had an iPod with storage above the size of the nano's then you would find the storage in the phone inadequate. I'm not saying it's not a product for some people, but it's definitely not a product for the masses. Not yet anyway...

[floribus]

Does Anyone Out There Have Any Idea What The Actual % Of Sales That The Online Apple Store Accounts For ?????????

[Wally]

Originally Posted by steviet02

...Remember this is supposed to replace peoples iPods....

Nanos. When Steve gave his famous iPhone intro speech, he specifically mentioned the things people carry around was a Phone/PDA/Internet device and an iPod Nano. The iPhone was supposed to be those things in one. So the iPhone was never competing against actual high-capacity iPods.

While the price is "high" it has been proven over and over again, that the price is lower than comparable phones/service plans by as much (and sometimes more than) $100. The $600 price tag is probably the factor limiting the sales from being much higher, but they will fall eventually. I think the price is the best it can be for now. There is a lot of expense Apple needs to recoup (for the stock holder's sakes anyway), then when component prices fall - Apple's will too.

[pomo]

Originally Posted by Wally

Nanos. When Steve gave his famous iPhone intro speech, he specifically mentioned the things people carry around was a Phone/PDA/Internet device and an iPod Nano. The iPhone was supposed to be those things in one. So the iPhone was never competing against actual high-capacity iPods.

While the price is "high" it has been proven over and over again, that the price is lower than comparable phones/service plans by as much (and sometimes more than) $100.

I used to be one of those people that would carry a nano and a worthless junkie cell phone. Though its true that I can't carry 80gb, but I can tell you that the iPhone is the best device I could ever have purchased.

Instead of carrying many devices to listen to music, access the web, and to place a call, now I just carry one. I listen to music and surf the web at the same time...incoming call (whew, woulda' hated to miss that call)....listen to music again.

(starts watching Sopranos on 3.5 widescreen display)
SWEET!!!

[eAi]

Its an obvious case of the echo-chamber effect - everyone picks random numbers higher and higher than the other analysts. Apple just sit back and watch, because they know that their share price isn't everything - in the end, if they make good products that people want, the share price will follow.

Anyway, I'm sure Apple will give us a number thats higher than AT&T's tomorrow, it just depends how much higher...

[anantksundaram]

Originally Posted by thebigapple

......Realistically, this stock should be $110 before earnings and it should go to $130 after earnings. ......I don't see why any analyst worth his MBA ... etc etc

I realize that you are trying to be pro-Apple here, and please realize that I am not remotely a fan of analysts, but -- I am sorry to say this -- do you realize that your post makes no sense at all?

[anantksundaram]

Originally Posted by eAi

Its an obvious case of the echo-chamber effect - everyone picks random numbers higher and higher than the other analysts. Apple just sit back and watch, because they know that their share price isn't everything - in the end, if they make good products that people want, the share price will follow.

Anyway, I'm sure Apple will give us a number thats higher than AT&T's tomorrow, it just depends how much higher...

Great points!

[physguy]

Originally Posted by eAi

Its an obvious case of the echo-chamber effect - everyone picks random numbers higher and higher than the other analysts. Apple just sit back and watch, because they know that their share price isn't everything - in the end, if they make good products that people want, the share price will follow.

Anyway, I'm sure Apple will give us a number thats higher than AT&T's tomorrow, it just depends how much higher...

Of course they will. The AT&T number is a FRACTION of the phones sold THROUGH THE END OF SATURDAY the end of everyone's fiscal quarter.

Its a FRACTION because is only activations and not everyone who bought through Saturday activated on Saturday, even ignoring the activation problems. For example only 50% of what I bought was activated. Mine was but the one I bought for my friend, who didn't pick it up from me until Sunday, wasn't.

A bunch of chicken littles. Wish I had more $ to buy more AAPL as littles scatter.

[Ireland]

*makes you wonder how many folks who want this device are still on contracts*

[Rolo]

Originally Posted by floribus

Does Anyone Out There Have Any Idea What The Actual % Of Sales That The Online Apple Store Accounts For ?????????

Something like 48%? I think it's somewhere in the 40s.

I can't believe so many articles and even Munster are still equating activations with iPhone sales. Sales of iPhones are likely 2x to 3x more than activations for a variety of reasons.

[floribus]

today FROM BUSINESS 2.0:
"Switchers. A good percentage of iPhone buyers – "more than 40 percent," according to AT&T – were switching from another carrier, or were new cell phone users. Quite a few of them probably ported their phone numbers to their iPhones. The number porting process can take hours, on top of the time it takes to activate the phone."

[drjjones]

It is now being reported that apple gets from ATT $150 to $200 per iphone and $9 a month per iphone. Divided payments over 24 months. By Aaron Task Street.com 7/23/07 audio show

[wilco]

Originally Posted by floribus

Does Anyone Out There Have Any Idea What The Actual % Of Sales That The Online Apple Store Accounts For ?????????

53.2%

[floribus]

I bought my iPhone Friday night and began the activation process on Saturday. I requested my number from Sprint. For two days I could call out on the iPhone but had to recieve incomming aclls on my Sprint phone. Tuesday ATT sent me an email saying the activation was complete and I began recieving incomming calls on my new iPhone. What was the activation date? Saturday or Tuesday? That date makes a big difference. Bet ATT chose Tuesday and my iPhone was not included in the 140K. I also believe this happened to a lot of customers and explains the low activation number. Anyone out there with the same scenario?

[floribus]

Originally Posted by wilco

53.2%

how did you come by 53.2%

[studiomusic]

106.4 divided by 2.
Or, just a random number (like analyst's numbers)

[JeffDM]

Originally Posted by physguy

Of course they will. The AT&T number is a FRACTION of the phones sold THROUGH THE END OF SATURDAY the end of everyone's fiscal quarter.

Its a FRACTION because is only activations and not everyone who bought through Saturday activated on Saturday, even ignoring the activation problems. For example only 50% of what I bought was activated. Mine was but the one I bought for my friend, who didn't pick it up from me until Sunday, wasn't.

That's a whole lot of missed activations. Why would so many owners wait so long in line to get one then wait so long to activate it? I just don't see that even a quarter of owners having activation problems that long. Given how much we whining we hear about problems that probably only affect 1% of owners of a given product, 25% would be a major fiasco. If only half the phones were activated, that would suggest that many of them were bought for eBay sale, which seemed to be more than likely than not, was returned for a refund, meaning that it's not a net sale.

A bunch of chicken littles. Wish I had more $ to buy more AAPL as littles scatter.

Did you miss the fact that the whole market was down today, about 2% across the board?

[JeffDM]

Originally Posted by eAi

Its an obvious case of the echo-chamber effect - everyone picks random numbers higher and higher than the other analysts.

It happens here too.

[mugwump]

FWIW, I got one on the first day, then learned that the device wouldn't work at all until activation. A few days later, it was activated.

So +1 on a sale w/out activation on opening weekend.

[ajhill]

The magical and sometimes seemingly mystical Steve Jobs will send his financial team out today to give you the numbers and hopefully the full story.

Clearly the iPhone sold significantly more than 146,000 units. I've run across 4 other people at random with iPhones (all content owners by the way) in everyday situations. If there were onlly 146,000 out of 300 million people in the US. that would translate into one iPhone for every 2000 people I ran across. Let me tell you I haven't meet 8,000 people in the last 3 weeks. Not even close.

The iPhone costs Apple $250 to $300 to make. Add in the $200 kickback from ATT and you are looking at a cost of $50-$100 for the cost of each iPhone. How many customers do you think they will get as contracts expire and prices head lower? I'm guessing a ton, maybe two.

Oh, and don't forget Apple Inc. sells other stuff too!

[SpinDrift]

Originally Posted by studiomusic

106.4 divided by 2.
Or, just a random number (like analyst's numbers)

Did you know that 83% of all statistics are made up?

[monstrosity]

My suspicion is that this is Apple cleverly playing with your minds!
I think they sold 500,000, but people have been getting carried away with numbers arround 700,000 or even 1,000,000.
As an event organiser I use a similar tactic, I hype it up, then hype it down at last second so as to not dissapoint.
Its like going to watch a film when everyone tells you is AMAZING, then you watch it and often feel disappointed no matter how good the film was. But if people told you the film was rubbish, and you have already bought a ticket to see it, you would walk out of the cinema much more upbeat about the film.
So, back to Apple, if I was in their situation, i would think "ooh lets ask ATT to release activation stats just before the wednesdays results". Reverse hyping it so it sounds like Apple is doing very bad in sales, then when the true number of 500,000 hits later today, everyone breaths a sigh of relief, the stock bounces back, except minus the overhyped delusion.
Which if wasnt taken care of, may have affected share price wednesday with no particular reason to bounce back, as everyone walks out of the cinema complaining the film(Apple) didnt live up to the hype.

[steviet02]

Originally Posted by Wally

Nanos. When Steve gave his famous iPhone intro speech, he specifically mentioned the things people carry around was a Phone/PDA/Internet device and an iPod Nano. The iPhone was supposed to be those things in one. So the iPhone was never competing against actual high-capacity iPods.

While the price is "high" it has been proven over and over again, that the price is lower than comparable phones/service plans by as much (and sometimes more than) $100. The $600 price tag is probably the factor limiting the sales from being much higher, but they will fall eventually. I think the price is the best it can be for now. There is a lot of expense Apple needs to recoup (for the stock holder's sakes anyway), then when component prices fall - Apple's will too.

My point was that if you have a high capacity iPod than this device is very lacking in memory, and for an all in one, it falls short in that aspect. While I understand it wasn't designed to take the place of the higher cap ipods, the people that are most likely to spend the $600 are just those people. Everyone is comparing the iPhone to the other comparable phones, but people carrying those comparable phones typically are carrying around for business.. How many teenagers do you see carrying a blackberry or a moto q around with expensive data plans? That was the point about the iPhone Nano, that seems to be the age group they might target with that phone, but how much memory is going to be in an iPhone Nano?

[Flounder]

Originally Posted by JeffDM

That's a whole lot of missed activations. Why would so many owners wait so long in line to get one then wait so long to activate it?

But did that many really wait in line so long? What % of the phones sold were actually to people who camped out? I don't know if it's really all that many.

There's also the potential of people buying them as gifts which delayed activation. Will the online sales in the first 30 hours be officially counted by apple, or do they not count until they ship them? How many people simply heard about activation problems so just decided to wait a day or two before activating?

There are simply far too many unanswered questions. I could easily see the actual amount sold in the first 30 hours being doubled or more the number activated in that time span. It will certainly be interesting the see what their numbers are today.

[BillH]

Originally Posted by Flounder

But did that many really wait in line so long? What % of the phones sold were actually to people who camped out? I don't know if it's really all that many.

There's also the potential of people buying them as gifts which delayed activation. Will the online sales in the first 30 hours be officially counted by apple, or do they not count until they ship them? How many people simply heard about activation problems so just decided to wait a day or two before activating?

There are simply far too many unanswered questions. I could easily see the actual amount sold in the first 30 hours being doubled or more the number activated in that time span. It will certainly be interesting the see what their numbers are today.

I bought one. My wife bought one. My brother bought one. Only mine was activated during the weekend. I'm thinking that is pretty close to reality so that would make it just under 500,000 iPhones in the first two days. As for the capacity issue, I would love to have a few more gigs for carting around movies when traveling. (this so seems like the horsepower conversations on the auto boards...c'mon...just a few more!) My reality is that I never intended my phone to replace my iPod which sits nicely connected to my stereo. I believe the "analysts" have it wrong when modeling for displaced ipod sales considering that the large capacity crowd uses them as previously described, and a great portion of the Nano crowd uses them while excersizing and won't want the weight of the phone. Just my nickels worth.

[JeffDM]

Originally Posted by BillH

I bought one. My wife bought one. My brother bought one. Only mine was activated during the weekend. I'm thinking that is pretty close to reality so that would make it just under 500,000 iPhones in the first two days.

An estimate based on one data point and seventy five cents will buy a candy bar.

Anyways, why did your acquaintances hold onto a $600 brick and wait a few days to activate it?

[britwithgoodteeth]

Originally Posted by ajhill

Clearly the iPhone sold significantly more than 146,000 units. I've run across 4 other people at random with iPhones (all content owners by the way) in everyday situations. If there were onlly 146,000 out of 300 million people in the US. that would translate into one iPhone for every 2000 people I ran across. Let me tell you I haven't meet 8,000 people in the last 3 weeks. Not even close.

I'm with ajhill!

I haven't met 8,000 people in the last three weeks either!

[thebigapple]

Originally Posted by anantksundaram

I realize that you are trying to be pro-Apple here, and please realize that I am not remotely a fan of analysts, but -- I am sorry to say this -- do you realize that your post makes no sense at all?

Hi there - sorry - let me clarify - the stock is priced too high to be realistic. If you account for their history, past earnings, estimates, the P/E, and the multiple, the stock should realistically have been around $110 before they reported earnings today. Chances are they will beat expectations, since they guide conservatively, and everyone will go nuts and the stock will go flying. A realistic price after $110 would be $125-$130. As it gets closer to Christmas and all is good sales-wise, only then should the stock be approaching $150.

My point is not to be pro-Apple, but to show how biased the analysts are about this company. They very rarely have good things to say and it's a shame because I know people who work at Apple and although they have had their own fights with Mr. Jobs, it's still an incredibly innovative company with great ideas. They seem to suffer from the "Don't hate me because I'm beautiful" syndrome - great ideas and a great look don't bode well for stilted PC users - did you notice that the only thing Dell could do now is to come out with multi-color laptops?

[physguy]

Originally Posted by JeffDM

That's a whole lot of missed activations. Why would so many owners wait so long in line to get one then wait so long to activate it? I just don't see that even a quarter of owners having activation problems that long. Given how much we whining we hear about problems that probably only affect 1% of owners of a given product, 25% would be a major fiasco. If only half the phones were activated, that would suggest that many of them were bought for eBay sale, which seemed to be more than likely than not, was returned for a refund, meaning that it's not a net sale.

Not really.

1) The 300-500k numbers were quoted for the whole weekend and/or into the week. Very fuzzy.

2) Given that it was reported that ~40% were switchers the transfer of a number added hours to the process ( my and many people I know's experience) most of those wouldn't have activated during that period.

3) as has been pointed out by me and other a number of initial purchases were for gifts and/or friends. My friend didn't pick his up until Sunday.


Items 2&3 together could easily double the number sold from the number activated and they are not the only multipliers.

Originally Posted by JeffDM

Did you miss the fact that the whole market was down today, about 2% across the board?

No

[NOFEER]

Originally Posted by mugwump

FWIW, I got one on the first day, then learned that the device wouldn't work at all until activation. A few days later, it was activated.

So +1 on a sale w/out activation on opening weekend.

so you activated in the NEXT quarter, that's when they will show up.
maybe SJ planned this all along.

[BillH]

Originally Posted by JeffDM

An estimate based on one data point and seventy five cents will buy a candy bar.

Anyways, why did your acquaintances hold onto a $600 brick and wait a few days to activate it?

What kind of candy bar? My wife wanted to set up her contacts properly and transfer a paper calendar, (thanks Apple...been trying to get her to do this for years) and my brother wanted to set his up with corporate email but needed input from their I.T. guy. (bet that was an interesting discussion) I don't buy stocks based on one data point but there are references to these kind of incidences all over the web. I have never seen a device reviewed so well in all my years of tracking tech. The satisfaction numbers are off the charts and the reactions I get from others are pretty amazing. I think this will ramp faster than the iPod did even with its barriers to entry.

[mistergsf]

Originally Posted by steviet02

Spam,

Can you admit that it's not a product that everyone wants? I mean, $600+ for a multimedia device that requires a specific network, only has 8gb of storage (minus whatever the OS takes), and is missing some very basic features that would be expected of a device like this.

I'm not saying it can't become like the ipod, but the ipod started with alot of storage (for the times) and high price and worked it's way down. The iPhone is starting high priced with very little storage. Remember this is supposed to replace peoples iPods. And hearng talk of a nano iphone, what the hell does that mean, a phone with 2gb storage, hmm... Doesn't sound enticing to me.

The iPhone is NOT "supposed to replace peoples iPods". I don't recall Apple ever marketing it in that way. It's a phone that happens to include the best iPod. I don't think there has ever been any question that not everyone wants an iPhone, and the #1 reason being that it only works with AT&T. At least that's the only reason I haven't got one. However, I'm still seriously thinking about switching when a 3G version is released. You can nitpick about the "basic features" that are missing but that is not even a big issue for me considering an update will surely fix that and overall, the thought and technology and the software that Apple has put into their device far outweighs its shortcomings. Can you at least admit that?

BTW, when I do get an iPhone, I will still carry an iPod with me. I still want a "dedicated" music player. I'm pretty sure that I'm not the only one who feels this way.

Just my $.02

[physguy]

Originally Posted by mistergsf

BTW, when I do get an iPhone, I will still carry an iPod with me. I still want a "dedicated" music player. I'm pretty sure that I'm not the only one who feels this way.

Just my $.02

FWIW I thought that way until I started using the iPhone. Haven't picked up my iPod since. Just no need to.

[mistergsf]

Originally Posted by physguy

FWIW I thought that way until I started using the iPhone. Haven't picked up my iPod since. Just no need to.

Understandable. But I like to have my COMPLETE library of music with me all the time so I don't see me leaving my iPod until iPhone capacity increases.

[physguy]

Originally Posted by mistergsf

Understandable. But I like to have my COMPLETE library of music with me all the time so I don't see me leaving my iPod until iPhone capacity increases.

Since I have 30 GB of music and over 400 GB of video that's never going to happen so 8GB is just fine with me, and the picture is sooooooo nice.