Apple following iPod, PS2 model to sell 23m iPhones in one year

[AppleInsider]

With a new price cut for the iPhone that hits the magic $199 mark, Apple is said to be following the same paths taken by the iPod and even the PlayStation 2 that triggered explosive growth and cemented both devices as champions in their fields.

In a research note, Pacific Crest's Andy Hargreaves notes that both the iPod mini and the PlayStation 2 both saw "massive acceleration" when their prices dipped below $200 for the first time, selling several times the amount they'd managed the year before.

For Apple, the change saw iPod sales grow from selling 8.3 million of the players in one year to 32 million -- or nearly four times more. If Apple's estimated six million iPhones sold in the past year matches that same change in growth rate, the Cupertino, Calif.-based company would sell over 23 million iPhones by June 2009.

"The relationship [between price and sales] is shockingly consistent," Hargreaves says. "At average prices above $200, Apple never sold more than [6 million] units in a rolling four-quarter period. At prices below $200, Apple never sold fewer than [8 million]."

The analyst also explains that this doesn't take into account the wildcard of free iPhones and heavier discounts in Germany, the UK, and other countries, which could add "several million" more iPhones to sales for every quarter and overcome rivals like Nokia, whose N95 is often given away with many plans.

The iPod's surge in sales after price drops.

Even on the more modest curve on Sony's PlayStation 2 console, the iPhone is likely to sell many more units, according to the report. When the Japanese electronics giant slashed the PS2's price to $199 in May 2002, it not only reversed a drop in sales but saw Sony's monthly sales jump 61 percent on average. A similar change would give Apple a still significant 17 million iPhone sales in 12 months.

Pacific Crest's researcher further suggests that Apple is generating more money per iPhone than already high estimates: an early prediction would have AT&T alone subsidizing as much as $350 of the cost of an iPhone to reach the $199 price point.

Regardless of Apple's income per phone, the company is also thought to have momentum on its side by launching earlier than phones based on Google's Android as well as very similar touchscreen phones from other rivals.

"We believe Apple has already established its brand as a premium name in the space, and the company appears to be continuing its recent history of introducing revolutionary products," Hargreaves asserts. "This combination should allow it to maintain a leadership position and mitigate the margin pressure that can come with increased competition."

[ View this article at AppleInsider.com ]

[vinney57]

Ooh Am I first?

I'm still sticking to my prediction of 60 million total sold by end 2009

[iCarbon]

Ok, now this is getting ridiculous -- every analyst seems to feel a need to top the last one on how many iphones Apple will sell. Well, I'm going to win this little pissing contest; I think Apple is going to sell 43 trillion iPhones. There, I said it. now you can all shut up and stop ensuring that the stock price will tank at every quarterly report for the next 20 years, despite solid 2-digit growth.

[Hobbes]

The most significant difference between the iPod/PS2 and here is that the iPhone comes with $70+ monthly plan for two years.

Still, though, that $199 price point is a big, big deal. They will sell many iPhones in '08 - easily over 10M. And once a ultra-thin, lightweight iPhone nano comes out ('09?), they will *really* do well.

[aaarrrgggh]

It's all a function of how many they have produced. If you figure there was a 3-month production ramp at an average of 2MM phone's per month, they should have good supply for the re-launch. Because of the lost months of sales though, they really have a lot of catch-up to do, so I am really hoping they maintain good stock levels everywhere.

If all the stars are in alignment, I can easily imagine 20MM units in the last half of the year.

[NOFEER]

ok all this celebrating higher and higher sales, the extra cost of the plans has to have some influence, but if other smartphones have the same extra cellular cost then maybe....but why the stock price is down down down......what's this sell on good buy on bad news. i would have expected the stock price to be over 200 not 175. what do the analysts say about this....
so it doens't make sense, maybe when these numbers start coming in will the stock price come up
also i can't wait for the apps store to open that will be another indicator.

also, these analysts don't have any accountability they can say a billion and what lose their jobs? no because its about reading the story next to the ads selling right next to the story

why even list this anyway, why don't we just post updated numbers
here's mine
50 million by the end of 2008 because they will have a iphone nano and announce a $100, price point now give me a raise.

now don't fire me, its my analyst part of me saying this.

[Rot'nApple]

Originally Posted by Hobbes

The most significant difference between the iPod/PS2 and here is that the iPhone comes with $70+ monthly plan for two years.

Yeah and the PS2 come with games costing around $30.00 to $50.00 each some a little less and some a little more and a visit to the iTunes store, for those that don't have a huge library of songs to rip, but can easily purchase from Apple while only spending .99¢ a song, while not much, a few songs within a few visits each month and hello, what's this on my credit card bill?!

It's all relative... I don't have have an iPod but then again I don't listen to much music. I mean I have a few songs from a few artists I enjoy every now and then but music is not that big a part of my daily routine, even while driving, no music on the radio. I don't have a PS2 or 3, X-Box 360 or even a Wii, so I don't have a lot of $40.00 games around the house. I am, one day, interested in getting an iPhone and when I do, the App store will have matured, and I will have solved all three of my dilemmas.

[solipsism]

Originally Posted by NOFEER

ok all this celebrating higher and higher sales, the extra cost of the plans has to have some influence, but if other smartphones have the same extra cellular cost then maybe....but why the stock price is down down down......what's this sell on good buy on bad news. i would have expected the stock price to be over 200 not 175. what do the analysts say about this....

There hasn't been a retail sale of an iPhone for over a month and supplies were constrained longer than that. Once the sales start coming in we start seeing the market react.

[Booga]

but why the stock price is down down down......what's this sell on good buy on bad news. i would have expected the stock price to be over 200 not 175. what do the analysts say about this....

My personal opinion is that it has more to do with the fact that every other day there's another high-profile article about what Apple would (or wouldn't) be able to do without Steve Jobs than anything to do with actual sales or profits which seem to be healthy.

[shlomo]

Originally Posted by Hobbes

The most significant difference between the iPod/PS2 and here is that the iPhone comes with $70+ monthly plan for two years.

Still, though, that $199 price point is a big, big deal.

Excellent point Hobbes - Neither of the two products had the added commitment nor did these products had to bed tie to a particular service, in this case AT&T in the US -- which is excellent in some areas and downright horrid in others.

The outrageous predictions on the sales of the iPhone are predicated on the fact that this phone will be purchased all over the world, thus effectively expanding the market base, but ignoring the fact that the US market is cornered by AT&T, and their ridiculous practices. Of course Apple can't resolve the problems of their partners and this was discussed last year in the same manner, but I have had the phone for a year now and I can tell you that the only thing more frustrating about the phone other than AT&T, is AT&T customer support.

My questions for AT&T are this:
1. If a person can only activate the phone in store, and there is a line of 100 people outside the store the first day, how many people inside the store does it take to activate all those phones. In my experience, working with a sales rep in AT&T is no less than a 20 minute affair. (Activating at home was less than 10 minutes).

2. Last year AT&T reps had zero knowledge about the iPhone and its features - same thing this year? With an influx of a less savvy and less techy user base, this will have to be a home run, else the complaints about service and support will go through the roof.

3. AT&T is notorious for dropped calls and straight to voicemail calls. I've missed many an important phone call this way, but hey, I think we've all learned to live this.

4. Making changes to a plan with the iPhone can only be done in store or over the phone, no online support has been available for the iPhone.

When people are switching over to a new carrier, these things will be very prevalent and will affect the residual sales. I hope AT&T is as responsive to issues as Apple, else Apple will feel the pain second hand.

[NOFEER]

my solution----buy the contract in the store and get a "iphone card" take it home to "finish" the activation. less time less hassle. and those lines will turn many off, but then ALL phone activation at the time of "iphone sales" will be hit, because you can't get to a sales rep.....number 315 you can go to the next "wait" line...something like getting into disney world.....a line to get to a line to get to a line to the line for the monorail. i'd laugh but the few att stores don't have the floor space to handle the people what next "iphone beepers" and 2 hr waits......that will be the challenge....that's going to be the story line for at least the first 2 weeks, and sales potential is "another wait in the line"

between now and sales day one, they have to get at home activation to work.... for the very few that want to jailbreak a phone for another carrier many many many more will have to be in line waiting.
hey even at the apple store they have a better solution, sales people with portable gizmo's all you needed was a credit card and an apple bag.

[digitalclips]

Originally Posted by Booga

My personal opinion is that it has more to do with the fact that every other day there's another high-profile article about what Apple would (or wouldn't) be able to do without Steve Jobs than anything to do with actual sales or profits which seem to be healthy.

I hope the rumor is true that the new massive building being built by Apple is where their new human cloning device will be ...

[solipsism]

Originally Posted by NOFEER

my solution----buy the contract in the store and get a "iphone card" take it home to "finish" the activation. less time less hassle. and those lines will turn many off, but then ALL phone activation at the time of "iphone sales" will be hit, because you can't get to a sales rep.....number 315 you can go to the next "wait" line...something like getting into disney world.....a line to get to a line to get to a line to the line for the monorail. i'd laugh but the few att stores don't have the floor space to handle the people what next "iphone beepers" and 2 hr waits......that will be the challenge....that's going to be the story line for at least the first 2 weeks, and sales potential is "another wait in the line"

between now and sales day one, they have to get at home activation to work.... for the very few that want to jailbreak a phone for another carrier many many many more will have to be in line waiting.
hey even at the apple store they have a better solution, sales people with portable gizmo's all you needed was a credit card and an apple bag.

I think they have activation working properly. I assume they are better prepared this year for the influx of activations.

What I think will happen in Apple and AT&T stores is the formation of two lines. One is for new customers to AT&T who need to go through the full contract process to get the handset. The other line is for current AT&T customers who will only need to show proof of who they are, verify the data on the account and let the CSR record the IMEI on the iPhone box. Then they can activate via iTunes at will within the next 30 days.

[macinthe408]

The relationship [between price and sales] is shockingly consistent

Wow, can someone please give this analyst an Adam Smith Award for Most Insight?

Read that sentence again. What amazing insight. People, what he is saying here is that when prices go down, it has the effect of {drum roll, please} making sales go up.

FAAAAATHUUUUUUUUUUUUUUMMMMMMMMM! {That was the sound of my brain falling on the ground}

This guy gets paid to say these things. He should get paid way more than he's getting right now. I mean, with insight such as this it's no wonder we're all just a bunch of idiots following supremely intelligent people such as this guy.

[IAmMacUser]

TBH, I think they'll just make you sign on the dotted line, ask you to choose a tariff, register the IEMI number then you'll activate on iTunes at home as normal.

[SpamSandwich]

Originally Posted by digitalclips

I hope the rumor is true that the new massive building being built by Apple is where their new human cloning device will be ...

I think that was on the planet Kamino.

[SpamSandwich]

Forget at&t. I'd rather pay the $600 to activate the iPhone on my own network.

[solipsism]

Originally Posted by SpamSandwich

Forget at&t. I'd rather pay the $600 to activate the iPhone on my own network.

The suspected $600 price is only to bypass the contract, you're still locked into AT&T until a ambitious hacker unlocks it.

Though, I don't think Apple will care as much, except to give lip service to AT&T, as they are getting their money for the device upfront. AT&T will still care, but they may be less concerned as they know they are they are the only HSDPA for the iPhone.

[nvidia2008]

Do you all know that Apple, Inc. is going to double its retail stores globally in one month's time, and triple their retail presence globally by the end of the year? ... Once you count the telecom providers around the world that will be selling iPhones.

You may say, "sure, that's just a phone..." ...Except come early next year, all these telecom companies are going to be selling Macs too. Except these Macs are, well, you know, the tablet, handheld, etc. etc. etc. Everywhere sells iPods. Almost everywhere will now have iPhones available (mainly through telecom and releated companies' retail presence). In 2009, the Mac may more clearly be some kind of phone and a phone some kind of Mac. Of course, in 2009, and towards the end of 2008, the upsell "cream" is to move as many people as possible (a percentage of iPhone 3G customers) onto a MacBook, MacBook Pro, MacTouch, iMac. Because an iPhone clearly goes much better with a nice Mac at home. AppleTV too.

I realised this Master Plan of Steve's walking home from an Apple Store just then. It's incredibly brilliant. Forget a $100 laptop, get a $199 Mac. ...There's no more need for an xMac. Feel free to debate this below. Let's discuss.

[solipsism]

Originally Posted by nvidia2008

Do you all know that Apple, Inc. is going to double its retail stores globally in one month's time, and triple their retail presence globally by the end of the year? ... Once you count the telecom providers around the world that will be selling iPhones.

If they offered a Mac Tablet with UMTS that would rock and I can see the mobile carrier's selling that, but I don't think it's going to happen.

As for the number of outlets selling the iPhone worldwide, I wonder what that count will be. Over 50,000?

[nvidia2008]

As evil as the telecom companies are (as some people think), they are the key to doubling, tripling Apple's global retail presence, global corporate reach and marketing exposure.

It is the real ultimate genius of leverage. The marketing, financial, etc. *strength* of the service providers and related companies, all leverage to spread our favourite fruit far and wide to the far reaches of the Earth. Many Macs in Madagascar. Who would've thunk it?

As much as I think the Apple Premium and Apple Authorized Reseller programs are important, it is the telcos and related entities that are the next big, huge, Apple Reseller. Many of them, would've no idea, that if the iPhone 3G is so fricking awesome, just wait until you fire up Leopard... Or Snow Leopard.

[nvidia2008]

Originally Posted by solipsism

If they offered a Mac Tablet with UMTS that would rock and I can see the mobile carrier's selling that, but I don't think it's going to happen...

Ah. I wonder what the "one more thing" in MacWorld SF Jan 2009 will be? One can only hope. Well, I'm hoping it's the Mac Touch with 3G and Wifi ...

Originally Posted by solipsism

As for the number of outlets selling the iPhone worldwide, I wonder what that count will be. Over 50,000?

In 2004/05, O2 UK had 235 stores. By now, let's say 300-500 stores in the UK as "O2 Retail" branded. Carphone Warehouse has 1,700 across Europe, with many of them in the UK, I believe. Apple, Inc. and Apple Resellers have about 20-50 stores in the UK.

On a low estimate, let's say each country has about 500 stores selling the iPhone. The July launch has almost 25 countries. Very roughly, an average of 500 outlets per country, that's 12,500 outlets where you can buy an iPhone in July.

By the end of the year, say about 70 countries in total, let's drop the average to 450 outlets per country, that would be... 31,500.

Since India is included and let's say they go in big, there could be 1,000 outlets in India alone.

Let's say the lowball figure is 25,000 outlets by the end of the year and highball at 50,000 by the end of year.

On the low estimate, If each outlet sells 100 iPhone 3G each by the end of the year, that's 2,500,000. 2.5 million iPhones. If each outlet sells 250 phones, on the low estimate, that's 6.25 million phones.

On a high estimate of 50,000 outlets around the world, each selling on average 250 phones during the whole of the 2nd half of 2008, that means... 12.5 million phones.

[nvidia2008]

My interest here is not to push up the stock price like the analysts ... I am interested in retail operations though, so it *is* interesting to note that the model we are looking at is (very) roughly, at a high estimate, 50,000 outlets around the world in the 2nd half of 2008, each selling on average 250 iPhones = 12.5 million iPhones.

Some people may say, 50,000 is a very high number, 250 each store for 1 to 6 months is pretty low. Remember this average takes into account everything, Apple Stores, telco, "online", etc. etc.

So let's say 30,000 outlets globally, 500 units sold each store on average = 15 million iPhones sold in 2nd half of calendar 2008.

What do you all think? I'm sure proper scientists and retail specialists have got this all modelled out and worked out because Apple is going to have to figure out (or already have figured out) how to make and move 15 million iPhone 3Gs out the door in over 70 countries by Christmas 2008. There are certainly downside risks with such a big operation like this, but, they've done it before with the iPod.

And tech support and training for all these mostly new-to-Apple customers?

[solipsism]

Originally Posted by nvidia2008

Since India is included and let's say they go in big, there could be 1,000 outlets in India alone.

I based my estimate on autorized retailers. While that is available in the US, as far as I know, I think it would have to be in other countries like Brazil and India where their are probably a 1000 just in Delhi.

[nvidia2008]

Originally Posted by solipsism

I based my estimate on autorized retailers. While that is available in the US, as far as I know, I think it would have to be in other countries like Brazil and India where their are probably a 1000 just in Delhi.

Yeah. The tricky bit here, is that if there are a 1000 authorized resellers in Delhi alone, how much stock would each have between now and the end of the year? On average? How the heck is Apple going to figure that out? Must be some smart people there at the ol' Apple HQ.

[nvidia2008]

Originally Posted by macinthe408

Wow, can someone please give this analyst an Adam Smith Award for Most Insight?

Read that sentence again. What amazing insight. People, what he is saying here is that when prices go down, it has the effect of {drum roll, please} making sales go up.

FAAAAATHUUUUUUUUUUUUUUMMMMMMMMM! {That was the sound of my brain falling on the ground}

This guy gets paid to say these things. He should get paid way more than he's getting right now. I mean, with insight such as this it's no wonder we're all just a bunch of idiots following supremely intelligent people such as this guy.

Yeah, the analysts need to start factoring other stuff in, such as, clearly the limitations are how many iPhones Apple can *actually* make, finance operations required to make, market, and of course, all the distribution to consumers. This would be the "beef" of any analysis on predicted iPhone sales figures going into 2009.

[solipsism]

Originally Posted by nvidia2008

Yeah. The tricky bit here, is that if there are a 1000 authorized resellers in Delhi alone, how much stock would each have between now and the end of the year? On average? How the heck is Apple going to figure that out? Must be some smart people there at the ol' Apple HQ.

I speculate that in most of the countries that don't have Apple Stores or a real Apple presence they will just sell them to to the local carrier they are teamed with who will then sell them to the retailers. I don't expect all to carry them but I would expect most of them would carry one or two.

[Bageljoey]

Originally Posted by NOFEER

ok all this celebrating higher and higher sales, the extra cost of the plans has to have some influence, but if other smartphones have the same extra cellular cost then maybe....but why the stock price is down down down......what's this sell on good buy on bad news. i would have expected the stock price to be over 200 not 175. what do the analysts say about this....
so it doesn't make sense, maybe when these numbers start coming in will the stock price come up
also i can't wait for the apps store to open that will be another indicator.

Well, one thing that is going on is that the analysts tend to give projections on what the value of the stock will be in 12 months time. They usually don't focus on how the price will get there (I mean if they could nail the trends and the short term fluctuations, what the hell are the working for?).

It is easy for people on the boards to spout off when the price dips after an analyst predicts great things, but, in some sense, you are comparing apples and oranges.

As for what is happening right now, my theory is that many investors think that AAPL has great potential. Mac sales are strong despite a weak economy and the iPhone 2.0 is about as sure a thing as there is in tech these days, at least in the medium term. (In the short term, well, they are not for sale yet and beyond 2 years one can reasonably expect Apple to be adjusting to market changes but that is a long time in the cell phone market (look at the RAZR).) Anyone who is going long should be holding or buying AAPL.

However, it may be a while until it ramps up. As I stated parenthetically, currently there are NO iPhone sales. Furthermore, the market as a whole is jittery now with commodity prices in uncharted territory, the housing/mortgage/banking situation still unsettled and a presidential switch in the offing. Markets don't like uncertainty and that is what we have in spades right now. In the absence of any real news (between WWDC and the iPhone launch) AAPL is susceptible to the general winds of the market--sometimes more so since its current valuation already prices in some iPhone goodness that has yet to come.

To get ridiculously specific, I suspect the price will dither around the 170s and maybe even spike down after July 11 if there are any glitches or late breaking news causes panic. Then I expect a steady rise to $250. On the other hand, it is not hard to imagine prices starting to rise next week and everybody who has been waiting for a bottom-out to buy in on could pile in fearing missing their chance all together.

Bottom line, AAPL is going up within 12 months. You will make the most money either buying now or waiting, depending on what is going to happen.

And remember, I learned this today: generally, when prices go down, sales go up.

[Nobody Special]

Originally Posted by Hobbes

The most significant difference between the iPod/PS2 and here is that the iPhone comes with $70+ monthly plan for two years.

You're assuming that the buyer does not already pay for cellular service. My current provider charges me ±$60 a month, so the incremental cost is ±$120 a year, not $840.

[quinney]

Originally Posted by Bageljoey

However, it may be a while until it ramps up. As I stated parenthetically, currently there are NO iPhone sales. Furthermore, the market as a whole is jittery now with commodity prices in uncharted territory, the housing/mortgage/banking situation still unsettled and a presidential switch in the offing. Markets don't like uncertainty and that is what we have in spades right now. In the absence of any real news (between WWDC and the iPhone launch) AAPL is susceptible to the general winds of the market--sometimes more so since its current valuation already prices in some iPhone goodness that has yet to come.

To get ridiculously specific, I suspect the price will dither around the 170s and maybe even spike down after July 11 if there are any glitches or late breaking news causes panic. Then I expect a steady rise to $250. On the other hand, it is not hard to imagine prices starting to rise next week and everybody who has been waiting for a bottom-out to buy in on could pile in fearing missing their chance all together.

The next quarterly earnings report is around July 24. The long period of no iPhone sales
could cause some people to be disappointed in the earnings, even though it should not
come as a surprise. This could cause a tradable decline in AAPL, before the sales of the new
iPhones are appreciated. (did I just say the same thing as you?)

[Ireland]

Originally Posted by vinney57

Ooh Am I first?

I'm still sticking to my prediction of 60 million total sold by end 2009

That prediction isn't outrageous. I can actually see it happening.

I predict 27M iPhones will be sold by January 1st 2009.

[sennen]

Originally Posted by Nobody Special

You're assuming that the buyer does not already pay for cellular service. My current provider charges me ±$60 a month, so the incremental cost is ±$120 a year, not $840.

i am glad someone finally pointed that out.

[Constable Odo]

I only want to know how many iPhones have to be sold for Apple's stock price to reach $250/share. Anything less than that means absolutely nothing. Will 10 million iPhones push the stock up to $190? Units sold mean nothing, only stock price matters.

[nvidia2008]

Originally Posted by quinney

The next quarterly earnings report is around July 24. The long period of no iPhone sales could cause some people to be disappointed in the earnings, even though it should not come as a surprise. This could cause a tradable decline in AAPL, before the sales of the new iPhones are appreciated. (did I just say the same thing as you?)

It is strongly suggested that the earnings for this financial quarter (April-May-June-2008) is "buffered" to some effect by subscription method of accounting that Apple is doing with the iPhones sold previously:

http://forums.appleinsider.com/showthread.php?p=1269722

That is, the iPhone revenue for this financial quarter (April-May-June-2008) (FY Q3-08) would be a few hundred million even with very little sales.

[nvidia2008]

Originally Posted by Ireland

That prediction isn't outrageous. I can actually see it happening.
I predict 27M iPhones will be sold by January 1st 2009.

6 million sold so far, my model suggests above 15 million 2nd half of this year, that = 21 million. We could see 30 million or more total sold by the end of 2008 if the production and distribution, global launch co-ordination goes well. Crazy stuff.

I can picture the Macworld 2009 Jan San Fran keynote:

"We set ourselves a target to sell 10 million iPhones by the end of last year."
(keynote slide shows 10 million as the number)

"I'm pleased to announce, that we sold...
(keynote slide transitions, the 10 million number "bursts", a slide comes in...)

"35 million iPhones..."

"That's... (keynote slide shows big "25 million" graphic)

"...25 million more iPhones than we set ourselves to achieve..."

"This is the most successful Apple product in your history. Ever...."
(keynote slide shows impressive, colourful chart of iPhone sales...)


.........
.........
Ah, I can already feel the RDF. It is getting more powerful, it can now travel through time, this RDF thing.

[Ireland]

Originally Posted by nvidia2008

I can picture the Macworld 2009 Jan San Fran keynote:

"We set ourselves a target to sell 10 million iPhones by the end of last year."
(keynote slide shows 10 million as the number)

"I'm pleased to announce, that we sold...
(keynote slide transitions, the 10 million number "bursts", a slide comes in...)

"35 million iPhones..."

"That's... (keynote slide shows big "25 million" graphic)

"...25 million more iPhones than we set ourselves to achieve..."

"This is the most successful Apple product in your history. Ever...."
(keynote slide shows impressive, colourful chart of iPhone sales...)

I can see the RDF has an effect on you anyway.