Apple says iPhone 3G S pre-orders will be filled on time

Posted:
in iPhone edited January 2014
Despite warnings from AT&T that claimed high demand for the new iPhone 3G S would prevent it from shipping pre-orders by the June 19 launch date, Apple is still promising to satisfy all web pre-orders with a Friday delivery.



The Boy Genius Report cited internal sources at AT&T as saying that customers who had not ordered the new phone by June 15 would have to wait one to two weeks after the launch to receive their order or stand in line to buy one.



While availability of the new iPhone at AT&T stores is still uncertain, there appears to be no shortage on Apple's side. The company's website continues to take pre-orders for the product without reservation, informing users that their new phone will be shipped to arrive on time on the 19th, with free shipping to boot.



Early pre-orders are reportedly already shipping.



The introduction of the new iPhone 3G S at $199/$299, down from the original $499/599 for the first generation iPhone, and the slashing in half of the current iPhone 3G's price tag are expected spur demand significantly. While Apple will likely increase its market share as a result, concerns are being raised about the company?s ability to sustain its historically high margins.



On June 9, following the price-cut announcement at WWDC the previous day, Keith Bachman of BMO Capital Markets summarized the companies move, saying ?Apple is playing the [price] elasticity curve.?



The key to keep margins from falling below the 34.8% level they reached in the year-ago period is for Apple to sell so many units that volume counteracts decreased per-unit revenue.



Gene Munster of Piper Jaffray told Marketwatch that, "historically, a 50% cut in iPhone pricing has increased demand by two times [over prior sales levels]. The bottom line is we are increasingly confident in our iPhone estimates."



New volume must be great enough to make up for the $1.3 billion projected loss from the cuts, according to Samuel Wilson of JMP Securities. The firm is warning investors to not expect increased margins this year, and estimates third quarter margins to come in at 33%.



In addition to greater volume of sales, the broader market created by the $99 entry level model and a revamped new version will drive the same economies of scale that enabled Apple to remain fiercely competitive in iPod pricing while retaining relatively high margins.



Undercutting Apple in price in the smartphone market will be even more difficult for competitors than matching or beating the price of the iPod was. Additionally, Apple's leading library of mobile apps also play a role in differentiating and adding value to the company's iPhones, tipping the scales for many buyers who might be open to considering other devices.
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Comments

  • Reply 1 of 44
    italiankiditaliankid Posts: 279member
    sounds like when Palm and Sprint said to expect out of stock situations...



    AT&T was doing the same by scaring consumers lol...





    Gotta love these companies.
  • Reply 2 of 44
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by AppleInsider View Post


    New volume must be great enough to make up for the $1.3 billion projected loss from the cuts, according to Samuel Wilson of JMP Securities. The firm is warning investors to not expect increased margins this year, and estimates third quarter margins to come in at 33%.



    How interesting - is Mr. Wilson aware that the price cut is only $100, while Apple gets over $400 per iPhone? Even on the 3G selling for $99, it's only roughly a 20% price cut. Plus, according to the teardowns, the cost of production has fallen enough in the past 12 months that margins on the $99 8 GB iPhone 3G should be higher than they were for the $199 8GB iPhone 3G a year ago.



    1.3 billion... let's see, that's $99 times 13 million. Kinda bizarre way to look at it - if Apple sells 13 million iPhones starting now, that will bring in revenue of around $7.2 billion assuming average rev per unit of $550.



    I just find it pretty nuts that someone could look at the price cut, then assume 13 million sales, and STILL come out saying that it's a negative. Oh well...
  • Reply 3 of 44
    bageljoeybageljoey Posts: 1,747member
    Quote:
    Originally Posted by AppleInsider View Post


    Gene Munster of Piper Jaffray told Marketwatch that, "historically, a 50% cut in iPhone pricing has increased demand by two times [over prior sales levels].



    Can't argue with history.



    He must have the sales figures for the last five or ten 50% iPhone price reductions right there in front of him...
  • Reply 4 of 44
    solipsismsolipsism Posts: 25,726member
    Any predictions on the opening weekend sales, end of quarter sales, end of fiscal year sales and sales up to CES 2010?
  • Reply 5 of 44
    Good work Apple. Gotta love it.
  • Reply 6 of 44
    I don't know where this comes from but I just spoke to AT&T sales and support. They are not advising customers who purchased the 3Gs with any delays. As a matter of fact, they cited that most existing iPhone 3G customers are interested in getting the 3.0 software update. Moreover, internal communication within AT&T stresses Apple's commitment to meet demand expectations.
  • Reply 7 of 44
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by forced528 View Post


    I don't know where this comes from but I just spoke to AT&T sales and support. They are not advising customers who purchased the 3Gs with any delays. As a matter of fact, they cited that most existing iPhone 3G customers are interested in getting the 3.0 software update. Moreover, internal communication within AT&T stresses Apple's commitment to meet demand expectations.



    Welcome to the forums. Could you clean up your post, I?m not quite following what AT&T is advising and citing.
  • Reply 8 of 44
    mark2005mark2005 Posts: 1,158member
    Quote:
    Originally Posted by cameronj View Post


    How interesting - is Mr. Wilson aware that the price cut is only $100, while Apple gets over $400 per iPhone? Even on the 3G selling for $99, it's only roughly a 20% price cut. Plus, according to the teardowns, the cost of production has fallen enough in the past 12 months that margins on the $99 8 GB iPhone 3G should be higher than they were for the $199 8GB iPhone 3G a year ago.



    1.3 billion... let's see, that's $99 times 13 million. Kinda bizarre way to look at it - if Apple sells 13 million iPhones starting now, that will bring in revenue of around $7.2 billion assuming average rev per unit of $550.



    I just find it pretty nuts that someone could look at the price cut, then assume 13 million sales, and STILL come out saying that it's a negative. Oh well...



    Agree. Actually, AT&T hasn't indicated any material changes due to the cuts so AT&T is likely still paying the same subsidy, which means if Apple was getting about $550-600 per 8GB 3G unit before, it's getting $450-500 per unit now on the 3G with the subsidy added in.



    Anyway, if Mr. Wilson was assuming that Apple would've sold 13m units at $199 (thus the "loss" of $1.3B), then Apple would only need to sell an extra 3m units @ $99 (or $450) each to gain back the $1.3B in revenue.



    More importantly, looking at gross profit, if Apple would've made $220/unit (37-40% margin) on each of 13m units for $2.86B before, and now makes $160/unit (32-35% margin), they'd only need to sell 17.9m units (38% more units) to have about the same gross profit. If Apple can double sales to 26m units per Munster's view, that's an additional $1.3B (on extra 8.1m units) in gross profit.
  • Reply 9 of 44
    al_bundyal_bundy Posts: 1,525member
    Quote:
    Originally Posted by cameronj View Post


    How interesting - is Mr. Wilson aware that the price cut is only $100, while Apple gets over $400 per iPhone? Even on the 3G selling for $99, it's only roughly a 20% price cut. Plus, according to the teardowns, the cost of production has fallen enough in the past 12 months that margins on the $99 8 GB iPhone 3G should be higher than they were for the $199 8GB iPhone 3G a year ago.



    1.3 billion... let's see, that's $99 times 13 million. Kinda bizarre way to look at it - if Apple sells 13 million iPhones starting now, that will bring in revenue of around $7.2 billion assuming average rev per unit of $550.



    I just find it pretty nuts that someone could look at the price cut, then assume 13 million sales, and STILL come out saying that it's a negative. Oh well...



    it's growth



    last 8 years or so growth at Apple was powered by the ipod. now people are replacing ipods with iphones and touches. there is still growth, but it's slower growth.



    just like MS starting around 2000. they grew revenues and earnings by 10% a year on average, but that was a lot lower than the 1990's and so the stock tanked



    and apple will probably be hiring a lot of people so it will hurt earnings even more
  • Reply 10 of 44
    mikelbmikelb Posts: 1member
    Quote:
    Originally Posted by mark2005 View Post


    Agree. Actually, AT&T hasn't indicated any material changes due to the cuts so AT&T is likely still paying the same subsidy, which means if Apple was getting about $550-600 per 8GB 3G unit before, it's getting $450-500 per unit now on the 3G with the subsidy added in.



    Anyway, if Mr. Wilson was assuming that Apple would've sold 13m units at $199 (thus the "loss" of $1.3B), then Apple would only need to sell an extra 3m units @ $99 (or $450) each to gain back the $1.3B in revenue.



    More importantly, looking at gross profit, if Apple would've made $220/unit (37-40% margin) on each of 13m units for $2.86B before, and now makes $160/unit (32-35% margin), they'd only need to sell 17.9m units (38% more units) to have about the same gross profit. If Apple can double sales to 26m units per Munster's view, that's an additional $1.3B (on extra 8.1m units) in gross profit.



    If you read the MarketWatch article and see Mr. Wilson's statement in context, you'll see he is including the massive price-cuts for the MacBook Pro and MacBook Air laptops along with the iPhone when he makes his calculation of a $1.3 billion hole to be filled by increased units-sold volume. It makes a lot more sense.
  • Reply 11 of 44
    mark2005mark2005 Posts: 1,158member
    Quote:
    Originally Posted by mikelb View Post


    If you read the MarketWatch article and see Mr. Wilson's statement in context, you'll see he is including the massive price-cuts for the MacBook Pro and MacBook Air laptops along with the iPhone when he makes his calculation of a $1.3 billion hole to be filled by increased units-sold volume. It makes a lot more sense.



    Ah! That would explain it...
  • Reply 12 of 44
    doggonedoggone Posts: 173member
    Quote:
    Originally Posted by mark2005 View Post


    Ah! That would explain it...



    I still think he's way off base. For the 1G iPhone Apple received a cut in the subscriptions from ATT. Apple then cut the price to help drive sales. For the iPhone 3G they switched to ATT providing the subsidies. Revenue from phones was estimated at ~450 each. In reality this hasn't changed. Apple just sell more phones.



    Moving onto the MBP pricing. The drop in price was covered in some part to switching to a lower cost graphics card.
  • Reply 13 of 44
    Any word on separate lines / lack of lines for those who pre-ordered the phone for in-store pick-up at the Apple Store?
  • Reply 14 of 44
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by DogGone View Post


    I still think he's way off base. For the 1G iPhone Apple received a cut in the subscriptions from ATT. Apple then cut the price to help drive sales. For the iPhone 3G they switched to ATT providing the subsidies. Revenue from phones was estimated at ~450 each. In reality this hasn't changed. Apple just sell more phones.



    While this is all true, we don?t yet know what the cost of the new iPhone is in comparison to the old. We know it has the same casing and display (at least in resolution), but the internals are quite different. iFixit will give us a basic idea of costs, but it?s certainly not absolute. I?d wager the cost of the CPU and GPU cost more than iPhone 3G?s, but is it more than the cost 2 years ago when that CPU and GPU were first introduced?



    Quote:

    Moving onto the MBP pricing. The drop in price was covered in some part to switching to a lower cost graphics card.



    The only machine that got a ?lower cost graphics card? was the low-end 15? MBP and that was really just the removable of the discreet GPU while keeping the 9400M as it is. The entire notebook line was given a nice price reduction. Was is just because of the economy or has something like the production costs of the unibody construction finally paid for it?s R&D. If so, that would be something in such a short time, but there probably aren?t too many products that are milled exactly the same millions of times over a quarter. I certainly can?t think of any off the top of my head.
  • Reply 15 of 44
    mdriftmeyermdriftmeyer Posts: 7,194member
    Quote:
    Originally Posted by al_bundy View Post


    it's growth



    last 8 years or so growth at Apple was powered by the ipod. now people are replacing ipods with iphones and touches. there is still growth, but it's slower growth.



    just like MS starting around 2000. they grew revenues and earnings by 10% a year on average, but that was a lot lower than the 1990's and so the stock tanked



    and apple will probably be hiring a lot of people so it will hurt earnings even more



    Sorry but Microsoft in 2000 had 95%-97% of the entire global PC market. Let me know when Apple has that in Smartphones, not to mention PC sales.
  • Reply 16 of 44
    ldg8ldg8 Posts: 4member
    Quote:
    Originally Posted by LiamNYC View Post


    Any word on separate lines / lack of lines for those who pre-ordered the phone for in-store pick-up at the Apple Store?



    I was told by my area Apple Store that there will be separate lines for pre-orders and regular retail buyers. Pre-orders will be filled first.
  • Reply 17 of 44
    panupanu Posts: 135member
    I ordered my iPhone 3GS on June 10, and got the shipping information during the night. UPS says the iPhone is in Shenzhen, China, and estimates delivery on June 17!



    I live near an international airport, where UPS, FedEx, DHL, and my USPS sectional center are located. Even Saudi Air flies there. When the planes fly over my house in their final approach, I can almost tell what color tie the guy in seat 3E is wearing. I routinely get my mail and packages a day or two early, so it will be interesting to see whether Apple is right (June 19) or if UPS is right (June 17).



    It's possible (and it has happened before) that UPS will put it on the delivery truck on June 17 but instruct the driver to deliver it on June 19. <drat!>



    This is going to be an interesting week!
  • Reply 18 of 44
    al_bundyal_bundy Posts: 1,525member
    Quote:
    Originally Posted by mdriftmeyer View Post


    Sorry but Microsoft in 2000 had 95%-97% of the entire global PC market. Let me know when Apple has that in Smartphones, not to mention PC sales.



    they had the PC market, but very little of the server market. in 2000 the server products were Exchange, SMS Server and SQL 2000. Today there is a whole suite of server products that didn't exist 10 years ago. and the games division went from a few games to the powerhouse known as the X-Box.



    but the stock still tanked because the rate of growth had slowed. same with Intel, Cisco and other companies. they all had high single digit or low double digit growth but the stocks tanked because it was slower growth than the 1990's. and they all released a lot of new products in the last 10 years
  • Reply 19 of 44
    walshbjwalshbj Posts: 864member
    My UPS tracking number says Scheduled Delivery June 17.
  • Reply 20 of 44
    ebolagpebolagp Posts: 28member
    I ordered 2 phones from ATT (could not do 2 lines through the Apple Store) on June 11. What are the odds that I'll get my phone by the 19th? (The ATT site still says the order is "in process"...
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