2 Million Reasons the iPhone 5 Isn't Boring
Sep 17th 2012 9:53PM
Updated Sep 17th 2012 9:56PM
Immediately after Apple (NAS: AAPL) unveiled the iPhone 5 earlier this month, there were no surprises. The lack of any thrilling "one more thing" announcements or un-leaked specs led some to consider the new device "boring."
The suspense isn't killing me
Here are a handful of headlines in the wake of the announcement.
- The Wall Street Journal, "Is Apple's iPhone 5 Boring?": "Apple's iPhone has been a trendsetter for half a decade. Now the question is whether it can avoid becoming a bore."
- Wired, "The iPhone 5 Is Completely Amazing and Utterly Boring": "It's a weird paradox. The iPhone 5 can simultaneously be the best phone on the market and really, really boring. And that has almost nothing to do with Apple and everything to do with our expectations."
- Forbes, "Applause, Then a Shrug: World Reacts to Apple's iPhone 5": "What was the general reaction? Some applause, then a shrug. Several writers compared the phone to a reliable but boring car."
Sorry, everyone. I hate to break it to you, but this ain't no M. Night Shyamalan movie or Tom Clancy spy novel. This is business strategy. This is long-term profit maximization -- a noble cause for any publicly traded company with investors, myself included, to answer to.
The iPhone 5 isn't about keeping you on the edge of your seat and gasping when it turns out (spoiler alert!) the psychologist who's been helping the kid who can see dead people the entire time has been dead all along. The iPhone 5 is about packing in just enough features to coax millions of people -- again, myself included -- into buying the device while saving some features for next year's model, even if that means everything comes in exactly as expected. At least Wired acknowledges that it's really more about expectations and not so much the device itself.
That was quick
Pre-orders for the device began on Friday, and Apple has now announced that those pre-orders topped 2 million units within the first 24 hours, which "shattered" the previous record held by the iPhone 4S last year. Marketing chief Phil Schiller called the initial response "phenomenal." Carrier partner AT&T (NYS: T) echoed these sentiments with its own announcement that it saw a new sales record over the weekend with the iPhone 5, "making it the fastest-selling iPhone the company has ever offered."
It took just one hour for Apple to exhaust its initial online pre-order inventory, and new orders placed through Apple's website are quoted at two-week to three-week shipping times, pushing those sales into next month -- and next fiscal year. AT&T's website also says new orders will ship in two to three weeks, Verizon (NYS: VZ) says new orders will deliver in October, and Sprint Nextel (NYS: S) has some units still available for launch-day delivery, with others shipping in two weeks.
Remember, though, that Apple still keeps plenty of inventory on hand for product launches at its retail stores, as it greatly enjoys the media and customer frenzies that ensue (who wouldn't?). Last year, Apple made "a very bold bet entering the quarter as to what the demand would be," according to Tim Cook, and was still supply constrained relative to demand. That was the quarter where Apple posted its current record iPhone quarterly unit sales of more than 37 million.
For reference, here's how the past three years of pre-orders have stacked up and how launch weekend sales proceeded.
Launch Weekend Sales
|2010||iPhone 4||600,000||1.7 million||2.83|
|2011||iPhone 4S||1 million||4 million||4|
|2012||iPhone 5||2 million||???||???|
With this year bringing Apple's most aggressive launch rollout, I'm confident that Cook is making an even bolder bet this year with demand, and I think Apple could easily sell at least 6 million to 8 million units on launch weekend. Those estimates would represent a launch-to-pre-order multiple of just 3 to 4, easily within reach considering the past two iPhone launches.
With retail prices started at $650, we'd be talking about a $4 billion weekend in revenue. That's hardly what investors would call "boring."
The article 2 Million Reasons the iPhone 5 Isn't Boring originally appeared on Fool.com.Fool contributor Evan Niu owns shares of Apple, Verizon Communications, and AT&T. Check out his holdings and a short bio. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
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