Tracking down Apple's missing 1.4m iPhones

Posted:
in iPhone edited January 2014
Apple says it has shipped four million iPhones since launch. With just short of two million AT&T customers using the device, however, one analyst suggests that a large number of the handsets are mysteriously unaccounted for.



Toni Sacconaghi of Bernstein Research observes in a note to investors that the gap between Apple's shipment claims, AT&T's subscription numbers, and European projections should leave roughly 1.4 million of the devices to be split between unlocked devices and those simply idling on store shelves.



While European sales have not been detailed in full, they're unlikely to have represented the majority of that remaining amount, the researcher says. If claims of 190,000 UK iPhone sales are accurate and are combined with official results of 70,000 French models and a similar number from T-Mobile Germany, Apple will have sold approximately 350,000 devices outside of the US -- well short of filling the gap left by AT&T's customer base.



The gray market for unlocked iPhones is also unlikely to explain the difference, Sacconaghi says. For its summer quarter, Apple reported 250,000 likely unlocked iPhones in its sales figures, or about 18 percent of the inventory shipped at the time. Assuming about 20 percent of iPhones were unlocked -- a 'generous' amount, the analyst adds -- this would only account for about 750,000 of the 1.4 million phones and leave about 670,000 of the phones "missing in action," according to the note.







For Sacconaghi, this points to the potentially worrying prospect that a significant number of iPhones remain in Apple's channel inventory, whether at its warehouses or at retail locations. If all the 670,000 handsets were to land at the carrier-specific distribution points around the world, this would leave as many as 150 iPhones at each store by the start of 2008.



This excess stock may be partly absorbed by Apple's own inventory but could run higher still if the company has successfully reduced the number of iPhone unlocking attempts through successive firmware updates or by controlling the number of phones sold at once. If just 10 percent were sold unlocked in the last quarter, it would leave more than one million iPhones unexplained and as many as 238 iPhones unsold per store.







Apple has not provided an explanation for the apparent shortfall. Regardless, the Bernstein report suggests the possibility of cooling demand for the iPhone that is at least partly masked by official shipment numbers, which only indicate the number of products leaving the company's factories.



"This is negative in two ways," Sacconaghi elaborates. "It indicates end-user demand for iPhone is lower than many investors may think based on Apple's [four million] sales figure... and it points to slower iPhone sales in the current quarter, since much of this inventory is likely to be drawn down."
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Comments

  • Reply 1 of 65
    The one bit of information missing from AT&T is if they are only counting new accounts? What about all the people, like my friend who already had AT&T, bought an iPhone from Apple and Activated it on his existing account? Hmmm?!



    I dumped my Verizon, paid the $150 termination fee and never looked back. This device it miles ahead in terms of usability and function. AT&T has better service in my area than Verizon does (hard to believe but TRUE).
  • Reply 2 of 65
    tbagginstbaggins Posts: 2,306member
    Ah, so it's 4 million iPhones SHIPPED, not SOLD.



    That's an old video game console trick, a la Sony and Microsoft. Shoulda seen that one.





    .
  • Reply 3 of 65
    Quote:
    Originally Posted by PhotoMacUser View Post


    The one bit of information missing from AT&T is if they are only counting new accounts? What about all the people, like my friend who already had AT&T, bought an iPhone from Apple and Activated it on his existing account? Hmmm?!



    Reuters: AT&T Inc, the exclusive U.S. carrier for Apple Inc's iPhone said on Thursday it ended 2007 with "just at or slightly under 2 million iPhone customers."
  • Reply 4 of 65
    First off, I think this is a tempest in a teapot. VERY unlikely AAPL would mistate iPhone sales results. Second, in addition to unlocked phones sold how about those sold which have not been activated?
  • Reply 5 of 65
    Quote:
    Originally Posted by TBaggins View Post


    Ah, so it's 4 million iPhones SHIPPED, not SOLD.



    That's an old video game console trick, a la Sony and Microsoft. Shoulda seen that one.





    .



    OMG. Expect AAPL to get pounded again tomorrow. Investors are finally taking full advantage of kicking Apple's butt. Ouch.
  • Reply 6 of 65
    Quote:
    Originally Posted by tbsteph View Post


    First off, I think this is a tempest in a teapot. VERY unlikely AAPL would mistate iPhone sales results. Second, in addition to unlocked phones sold how about those sold which have not been activated?



    Sold and not activated phones appear just like unlocked phones, and since the holidays are over, I don't think many people are hording them anymore. Plus the 4.6 bootloader has put a stop to easy unlocking that doesn't require you to buy a TurboSIM or any of its variants.



    Maybe when an iPhone with a 4.6 bootloader can be unlocked via software, sales might pick up again, but until then I'm holding onto my OTB 1.1.1 dearly and advising none of my non-AT&T friends to go pick one up thinking I can unlock it for them.
  • Reply 7 of 65
    Quote:
    Originally Posted by Matthew Yohe View Post


    Reuters: AT&T Inc, the exclusive U.S. carrier for Apple Inc's iPhone said on Thursday it ended 2007 with "just at or slightly under 2 million iPhone customers."



    The 2 million iPhone question is "Are those 2 million "New" users with iPhone or 2 million iPhones being used on their network total (including customers already with AT&T)?". The way I read the report was iPhone brought 2 million NEW AT&T customers. Perhaps there will be clarification soon. If it is found to be true that Apple/AT&T has misstated the number of iPhones sold, it will have a very negative effect on Apple's stock.

  • Reply 8 of 65
    Probably slipping through the hands of contractors in Iraq.
  • Reply 9 of 65
    Quote:
    Originally Posted by TBaggins View Post


    Ah, so it's 4 million iPhones SHIPPED, not SOLD.



    I just went back and looked at the Keynote. Steve Jobs said that they "sold" 4 million iPhones not shipped 4 million in the first 200 days.
  • Reply 10 of 65
    wallywally Posts: 211member
    Quote:
    Originally Posted by PhotoMacUser View Post


    The one bit of information missing from AT&T is if they are only counting new accounts? What about all the people, like my friend who already had AT&T, bought an iPhone from Apple and Activated it on his existing account? Hmmm?!



    Exactly. Someone needs to cram this "analysts" head in a beach-bathroom toilet, slam the lid down and flush several times. Dipshit.
  • Reply 11 of 65
    tbagginstbaggins Posts: 2,306member
    Quote:
    Originally Posted by davidb1 View Post


    I just went back and looked at the Keynote. Steve Jobs said that they "sold" 4 million iPhones not shipped 4 million in the first 200 days.





    And in contrast, we have AppleInsider:





    Quote:
    Originally Posted by AppleInsider


    Apple says it has shipped four million iPhones since launch.





    What's the dealio? Does Steve not get the difference, is it a slip of the tongue, or is AI's attribution that Apple said "shipped" in error?





    .
  • Reply 12 of 65
    What about all the iPhones that were purchased and gifted for Xmas '07 that have not been activated yet, or were not activated till '08?



    I'm sure Apple sold tons of iPhones which ended up as Xmas gifts that were (a) not opened till Xmas day, and hence (b) were not activated immediately for one reason or another.



    I was at a Xmas party at my prof's house. There were 10 ppl there, I was an iPhone owner, and 2 ppl there received iPhones that day for Xmas. One of them was my prof., and she has YET to activate it, because she hasn't been able to find the time to sit down and transfer all the data from her old phone to the new one. Obviously anecdotal, but it's a very likely scenario for a lot of people out there.
  • Reply 13 of 65
    quinneyquinney Posts: 2,525member
    If indeed there are a lot of iPhones in inventory, that would give more

    credence to the other report that Apple has reduced production this

    quarter.
  • Reply 14 of 65
    According to the another post on AI, ATT added 2.7 million new customers during the last quarter of 2007. See this. During that same period Apple sold 2.3 million phones. This article states that there are only 2 million iPhone users. This is obviously not correct.



    Does anyone smell FUD?
  • Reply 15 of 65
    hattighattig Posts: 830member
    Apple like to keep 5 or 6 weeks inventory in the channel (they mentioned that MacBooks had sold so well they were down to 2 or 3 weeks in the quarterly results thing). At over 100,000 iPhones a week sold worldwide, that accounts for a lot of those missing iPhones. Another 300,000 - 500,000 have probably been unlocked.
  • Reply 16 of 65
    mcdavemcdave Posts: 1,152member
    Quote:
    Originally Posted by AppleInsider View Post


    While European sales have not been detailed in full, they're unlikely to have represented the majority of that remaining amount, the researcher says. If claims of 190,000 UK iPhone sales are accurate and are combined with official results of 70,000 French models and a similar number from T-Mobile Germany, Apple will have sold approximately 350,000 devices outside of the US -- well short of filling the gap left by AT&T's customer base.



    The UK figure was fairly recent but aren't French & German figures older guestmates? And weren't sales in France looking better than the UK (with more abuse and less complaining)? This alone would explain another 250,000.



    Quote:
    Originally Posted by AppleInsider View Post


    The gray market for unlocked iPhones is also unlikely to explain the difference, Sacconaghi says. For its summer quarter, Apple reported 250,000 likely unlocked iPhones in its sales figures, or about 18 percent of the inventory shipped at the time. Assuming about 20 percent of iPhones were unlocked -- a 'generous' amount, the analyst adds -- this would only account for about 750,000 of the 1.4 million phones and leave about 670,000 of the phones "missing in action," according to the note.



    Wouldn't that initial unlocked figure be more US based for logistical reasons? Given there are far more GSM networks everywhere else you'd have thought the globally unlocked % over time would be far larger (there are unlocked phones here in NZ and in Aus). While we're guessing 25% would be better - that's another 250,000



    Quote:
    Originally Posted by AppleInsider View Post


    For Sacconaghi, this points to the potentially worrying prospect that a significant number of iPhones remain in Apple's channel inventory, whether at its warehouses or at retail locations. If all the 670,000 handsets were to land at the carrier-specific distribution points around the world, this would leave as many as 150 iPhones at each store by the start of 2008.



    So of the remaining 150,000 that's 33 phones per store. Is that a bad stocking level?





    Quote:
    Originally Posted by AppleInsider View Post


    "This is negative in two ways," Sacconaghi elaborates. "It indicates end-user demand for iPhone is lower than many investors may think based on Apple's [four million] sales figure... and it points to slower iPhone sales in the current quarter, since much of this inventory is likely to be drawn down."



    Of course there is one upside - the Analyst gets their name in the press



    McD
  • Reply 17 of 65
    Is it in inventory?



    - Steve clearly said "sold" and he said this right before a quarterly report that crushed the stock. If he lied/misspoke/etc etc... Apple is looking at a *monsterous* lawsuit. There's just no way unless "sold" means sold from Apple to ATT for resale... doubt it.



    - There's 1 supplier that says Apple reduced their order. Apple most likely got a second source qualified and shifted some orders to them. Apple always tries to have a 2nd source in place in case something happens to the primary. AUO is the 2nd source for the nano LCD screens for instance.





    Where is it then?



    - Oppenheimer said in the conference call (you should go listen to it) that the 4M # was right up to the keynote of MacWorld. That tells me it includes most of the January numbers. January is when most people start using their returns/giftcards to get something good/better. I'll bet a ton of Razors got traded in for iPhones at ATT. Did Apple sell 1.4M iphones in January... er no... but it sure cuts into the 670,000 missing in action number from the analyst.



    - Other people have already pointed out that activated on ATT by 12/31/07 doesn't mean sold by Apple on 12/31/07. Hell, my cousin didn't even get his present until Jan 7 and I was at my mother-in-law's over xmas and didn't get back home until Jan 2nd.





    Wish she gave me an iphone though....



    Robert
  • Reply 18 of 65
    Does this help any?



    CFO answering analysts' questions:



    Peter Oppenheimer



    . . . We said that since we only have one channel partner in each of our first four countries, we?re not going to report the inventory but we are going to employ our proven systems and processes to manage the iPhone differently, or effectively.



    . . .



    Mike Abramsky - RBC Capital Markets



    . . . Could you help reconcile the 2.3 million iPhones shipped in December versus over the 4 million announced at MacWorld?



    Peter Oppenheimer



    Sure. As Steve indicated at MacWorld, the 4 million iPhones were to date as of the keynote and the 3.7 million iPhones that we had sold cumulatively through the December quarter were part of that.



    Mike Abramsky - RBC Capital Markets



    So would you say that suggests a fairly significant increase in run-rate since December?



    Peter Oppenheimer



    . . . we remain confident in our goal for 10 million for calendar 2008.



    http://seekingalpha.com/article/6111...all-transcript
  • Reply 19 of 65
    I just got off the phone with McCall Butler who works for ATT PR in charge of Financial Issues.



    She confirmed to me that the number of "about 2 million iPhone activations" given in today's conference call was correct. Butler further clarified what those numbers mean by saying that "the number of iPhone activations between June and December 31, 2007 was "about" 2 million. It includes activations of iPhones by new and existing AT&T customers." She also told me that Apple most likely has included iPhones purchased for resale by AT&T in their 4 million iPhones sold number. She suggested contacting Apple about that. Apparently, 40% of the AT&T iPhone activations came from new customers.



    McCall could not speak to the number of iPhones on AT&T store shelves and in their inventory. Thank you to McCall for her input on this subject.



    Rich Cruse
  • Reply 20 of 65
    hobbeshobbes Posts: 1,252member
    Jobs said sold, not "shipped." If Apple wasn't pleased with the number, they wouldn't try to fudge it (especially right before a conference call), they just said "they're really happy" or something not mention any number at all.



    So, I don't buy this anyalst's argument one bit.



    The far more sensible conclusion is that something between 25 - 35% of iPhones sold are being unlocked, and this makes a hell of lot more sense when you notice that Apple wouldn't answer how many iPhones are being unlocked in the conference call (check it out - Oppenheimer dodged it completely). What with the very weak dollar, the iPhone only officially available in the US, UK, France, and Germany and nowhere else in the world (yet enjoying global buzz), and it being not at all difficult to unlock.... is that really that hard to believe?
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