iPhone Opening Weekend Was as Strong as It Seemed
The revisionist historians are out in full force! Ever since Apple reported blowout sales of its new iPhones on opening weekend -- 9 million, to be exact -- skeptics have come out of the woodwork to denigrate Apple's achievement.
There are a few main themes behind the criticism of the new iPhones' opening weekend sales performance. First, skeptics point out that Apple made China one of the initial launch countries this year, which wasn't the case for previous iPhone launches.
The iPhone 5s is Apple's new high-end model. Source: Apple.
Second, many argue that because Apple was selling two new iPhones, its record-setting sales should be taken with a grain of salt. Lastly, some analysts claim that the 9 million figure included millions of iPhones sitting on retailers' shelves at the end of the weekend -- and thus not "sold through" to customers.
There is some truth to all of these statements. Nevertheless, none of them does any damage to the core takeaway from Apple's launch weekend: The rollout of the new iPhone 5s and iPhone 5c was a smashing success.
A different kind of launch?
Let's start with the first two "complaints." First, it's true that Apple launched the iPhone 5 in China several months after it arrived in the initial launch markets such as the U.S. Apple sold 2 million iPhones on the China launch weekend last year. Some analysts advocate adding those 2 million units to the 5 million units sold on launch weekend in September 2012 to create a better comparison between the two launch cycles.
But this adjustment ignores the issue of supply constraints. Last year, the late China launch gave Apple plenty of time to catch up to the initial wave of demand in the U.S. and other early launch markets. By contrast, this year, iPhone 5s buyers in China were competing with iPhone 5s buyers in the U.S.
Indeed, Apple could have sold millions (or even tens of millions) more iPhones on launch weekend if supply constraints did not exist. The fact that it still sold 9 million iPhones on launch weekend means that not only was demand overwhelming (again!), Apple had better initial supply this year.
The argument that the existence of two new iPhone models this year lessens Apple's accomplishment is also fairly weak. Selling more iPhones is good for Apple, even if doing so means releasing two models. Furthermore, most early studies have found that Apple earns a similar profit margin on the 16 GB versions of the iPhone 5s and 5c. (That said, the dollar profit per iPhone is still higher for the 5s.)
The iPhone 5c reportedly has a similar profit margin as the higher-priced iPhone 5s Source: Apple.
It's true that Apple did not count sales of the $99 phone -- the iPhone 4S -- in its 2012 launch weekend total. But it's unlikely that many people bought the iPhone 4S on launch weekend last year. After all, it had been available for almost a year. Moreover, most customers willing to brave the lines of launch weekend are early adopters looking for the top-of-the-line iPhone.
Just filling the channel?
The strongest argument for downplaying Apple's high launch weekend sales is that Apple counts sales to wireless carriers and retailers in its sales figures. In previous years, that would not have mattered because every outlet would have been out of stock of the new iPhones by the end of launch weekend. By contrast, there has been fairly good supply of the iPhone 5c during the past two weeks.
But while some analysts think that there could have been as many as 3.5 million unsold iPhone 5c units sitting on store shelves by the end of the weekend, others have put the figure at 1 million or less. Apple Stores and Apple's warehouses for online orders tend to get "first dibs" on new products, and iPhones in those channels are excluded from the 9 million figure.
Lastly, it's worth pointing out that there's an upside to having a second new phone that's still in stock in most stores. According to Apple Insider, some Apple retail associates reported that a good number of customers who came in hoping for an iPhone 5s bought the 5c instead in order to avoid waiting. Indeed, the iPhone 5c seems to be closing the sales gap vis-a-vis the 5s as we get further away from the launch weekend.
All in all, a great start
Apple's reported 2013 launch weekend iPhone sales may not be 100% comparable to the 2012 statistics. But the differences are much less stark than pessimists suggest. As always, demand far outstripped supply for the new top-of-the-line iPhone (the 5s). Meanwhile, supply of the 5c was much better than has been the case for previous iPhone launches, and plenty of demand has materialized in the subsequent weeks.
In short, there is every reason for Apple investors to expect that the company will sell more iPhones this year than it did in last year's product cycle. That's exactly what Apple investors were hoping to learn from the iPhone launch weekend.
Be a smarter Apple investor
If someone asked you, "Why invest in Apple?", could you truly answer them? To be honest, few investors could. That's because most of the company's secrets -- the ones that make savvy market watchers rich -- often fly under the radar. If you want an edge on other Apple investors, be sure to check out "5 Secrets to Apple's Future" from The Motley Fool. This 100% FREE guide includes actionable advice that you can put to use right now! Just click here now for instant access!
The article iPhone Opening Weekend Was as Strong as It Seemed originally appeared on Fool.com.
Fool contributor Adam Levine-Weinberg owns shares of Apple and is long January 2015 $390 calls on Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.