iPhone outsells competitors, but will it hit target?

[4 September 2007]

By Troy Wolverton

San Jose Mercury News (MCT)

SAN JOSE, Calif. - The iPhone is proving a popular product so far.

But whether it’s going to live up to all the sales hype and expectations surrounding it is another matter.

Apple’s new mobile handset was the top-selling smartphone in July, its first full month on the market, accounting for 1.8 percent of all cell phones sold in the United States that month, research firm iSuppli reported Tuesday. The iPhone even outsold LG’s popular Chocolate handset, which was the top-selling feature phone, iSuppli said.

That would seem to be a “remarkable accomplishment,” as iSuppli described it in a statement.

But not so fast.

The total number of iPhones sold in July was below that of the pace needed to meet Apple’s target of selling 1 million phones by the end of September, acknowledged Greg Sheppard, iSuppli’s chief development officer.

“It’s a pretty darn successful product, but (its sales are) probably lower than what everyone else is expecting it to be,” Sheppard said.

Apple representatives did not return calls seeking comment about the report or iSuppli’s estimates.

Should the iSuppli numbers bear out, it would be at least the second indication that iPhone sales, while healthy, are not meeting the hype. Apple said in July it sold 270,000 iPhones in the device’s first day and a half on the market. While that start seemed fairly impressive, it failed to live up to some of the wilder expectations on Wall Street, where forecasts for the first weekend of sales ran as high as 700,000.

Consumers bought some 220,000 iPhones, plus or minus 20,000 or so, in July, according to iSuppli’s research. At that pace, consumers would buy between 600,000 and 720,000 by the end of Apple’s fiscal quarter in September.

In contrast, Apple predicted that it would sell 730,000 iPhones in the quarter. And some analysts, figuring that the company was low-balling its forecast, have set much higher targets for the period.

To be sure, the numbers aren’t directly comparable. Apple’s forecast includes both the iPhones that it sells directly to consumers and that it ships to partner AT&T. Even if consumers don’t buy 730,000 iPhones in the third quarter, Apple could ostensibly hit its mark by shipping more into the channel to meet an expected uptick in demand in the holiday quarter.

But sales could potentially have tapered off after July after the mad rush of early adopters bought their phones. iSuppli has not tallied up August sales yet, Sheppard said.

Still, the firm does expect iPhone sales to surge as the holidays approach, reaching 4.5 million total sold by the end of the year. However, included in that forecast is the expectation that Apple will introduce additional iPhone models and offer at least some models at prices lower than its current offerings, Sheppard said.

Apple offers two versions of the iPhone: one with 4 gigabytes of memory for about $500 and one with 8 gigabytes for $600.

Apple has not disclosed any plans to bring additional iPhones to market, although the company does expect to be selling the device in certain European countries by the end of the year, another factor that iSuppli took into account in building its forecast, Sheppard said.

Smartphones are generally among the most expensive handsets, and function essentially as handheld computers, typically allowing users to check their e-mail, surf the Web and sometimes use sophisticated programs. Apple’s iPhone competes against products such as Palm’s Treo line, Research in Motion’s BlackBerry phones, Motorola’s Q and others.

Unlike Apple, which entered the cell phone market for the first time when it debuted the iPhone in late June, most of its competitors have been making handsets in general and smartphones in particular for years.

Yet, July sales of the two iPhone models combined outpaced sales of all of Palm’s Treo models, not to mention individual models of smartphones from Nokia, Motorola and Samsung, iSuppli said. The iPhone models also outsold every individual line of Research in Motion’s BlackBerry devices, although RIM’s total smartphone sales topped Apple’s, Sheppard said.

Some 48 percent of iPhone purchasers in July were women, and 57 percent were 35 or younger, according to iSuppli’s data, which was derived from a monthly online consumer survey it administers. About a quarter of customers purchasing the iPhone switched to AT&T, with which Apple signed an exclusive deal to market the iPhone.

Published at: http://www.popmatters.com/pm/article/iphone-outsells-competitors-but-will-it-hit-target/