Infrastructure
News
7/25/2007
08:04 PM
Connect Directly
RSS
E-Mail
50%
50%

Apple's Quarterly Earnings Show The iPhone Revolution Is Succeeding

AT&T sold more iPhones in their first weekend than any other device, and Apple says more consumers will buy iPhones in the first quarter of sales than bought iPods in their first seven quarters.

Apple shipped 270,000 iPhones in the first weekend of sales and plans to ship 1 million in the first quarter they're available, a rate of sales seven times greater than the initial sales of the iPod, the company said in an earnings announcement Wednesday. In the long term, Apple wants to make the iPhone a third line of business, alongside the Mac and iPods.

While early iPhone sales fell far short of Wall Street expectations, that's because expectations were ridiculous. The iPhone is a smash hit.

Consumers snapped up 270,000 iPhones in the first 30 hours of sales, beginning June 29, Apple said Wednesday in a conference call announcing earnings for the quarter ending in June. AT&T sold more iPhones in the first weekend of sales than it sold any other wireless device in the first month of sales.

Moreover, customers are very satisfied with their purchase, Apple said. The company touted a USA Today report on iPhone customer satisfaction that found 90% of Apple customers were "extremely" or "very" satisfied, and 85% were "extremely" or "very" likely to recommend the product to others.

"Customers are clearly loving their iPhones," said CFO Peter Oppenheimer.

COO Timothy Cook said, "Our view is that the starting gun has fired and we're off to a great start. However, our primary focus is not on the initial sale. We're focusing on building a third great business for Apple, alongside the Mac and iPod business."

That won't be easy, because the competition is large and entrenched, Cook said. It will require "years, not months." But Apple is committed to the course. "We hope to grow ourselves step by step, year by year, model by model," Cook said.

One big gap in Apple's comments: It would not say how many iPhones shipped to date, or for any period after the first 30 hours that the device was on sale.

Total revenue recognized for the iPhone in the June quarter was $5 million, which does not include payments from AT&T, which will be included in September's quarterly results, Apple said.

Apple will move into European iPhone sales during the next quarter, starting with major countries and then adding smaller countries and expanding iPhone sales into Asia through 2008.

Gartner analyst Charles Smulders said the iPhone shipments were good news for Apple.

"I think by a normal company's standards, sales of the iPhone were very brisk," he said. "I think any sense of disappointment came from over inflated expectations in the market, which were driven in many by Apple's marketing machine."

AT&T, the exclusive service provider for the iPhone, reported on Tuesday that it activated 146,000 iPhones in the first two days of sales. Apple stock slumped, because analysts were expecting much higher; Goldman Sachs estimated sales of 700,000 units that weekend.

It remains to be seen, however, whether Apple will hit its goals for iPhone sales over the next 18 months, Smulders said. "We have to see a full month's or quarter's data to really understand the trend. There was so much marketing, so much hype and expectations in a small amount of space," he said.

Apple hopes to sell 1 million iPhones by the end of the first quarter of sales, Sept. 29. By comparison, Apple needed seven quarters to sell 1 million iPods, Oppenheimer said. And the company said it is on target to reach its previously stated goal of selling 10 million iPhones in calendar 2008.

The iPhone has pushed the mobile phone market past a "tipping point" for capabilities, said analyst Charles Le Tocq of Guernsey Research. "You've got a real browser, you've got gigabytes of memory, you have a serious processor, and you have a serious operating system. This is the type of platform that the next-generation of mobile phones will have to compete with," Le Tocq said.

Previous
1 of 2
Next
Comment  | 
Print  | 
More Insights
2014 Next-Gen WAN Survey
2014 Next-Gen WAN Survey
While 68% say demand for WAN bandwidth will increase, just 15% are in the process of bringing new services or more capacity online now. For 26%, cost is the problem. Enter vendors from Aryaka to Cisco to Pertino, all looking to use cloud to transform how IT delivers wide-area connectivity.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest September 18, 2014
Enterprise social network success starts and ends with integration. Here's how to finally make collaboration click.
Flash Poll
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
The weekly wrap-up of the top stories from InformationWeek.com this week.
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.