[quote author=“deagol”]So here’s how I’m looking at the Y/Y web order growth rates:

This results in about 3.7M orders (US and EU combined) for the quarter. Using the same ratio as Q4 (as you have voted for), it suggests revenue of around $11.1B.

Not clear on why you expect a YoY growth in revenues to 11.1B (GAAP, I’m assuming) if you are seeing a decline in web-order numbers.

[quote author=“awcabot”]
Not clear on why you expect a YoY growth in revenues to 11.1B (GAAP, I’m assuming) if you are seeing a decline in web-order numbers.

I mention some factors in my first post (look under “Factors contributing to a relative decrease in online orders”) which although I was thinking in terms of a sequential effect, those reasons are also valid for a YoY comparison.

I’ll take another shot at explaining those three, but shifting the perspective to the YoY changes. Of course, there may be other factors at work.

1. iPhone: last year iPhone was available online, this year it is not. Thus, any growth in recognized revenue from iPhone (big big growth there) can’t have a corresponding growth in web orders.

2. new customers: every year Apple keeps reaching new-to-Apple customers, and I believe these customers are much more comfortable going to a retail store where they can look and touch and test the products. Sure, eventually some [edit: ok probably all] of these new customers “graduate” to the online store experience, the question is whether there is a net gain or decline in such “noobs” who stick to retail store for some time. Again, this whole factor is my own common sense, not much data to back it up (perhaps the continuing 50% of Macs sold to new-to-Mac customers in the Apple stores).

3. retail expansion: This is not just the Apple Retail Stores, but also big chains like BBY and WMT (and their European counterparts) as well as smaller specialized chains. You could check the conference call transcripts and research the increase in the number of retail point-of-sales (Apple and third-party, for Mac and for iPod and now for iPhone), but I think I already know the trend. This retail expansion trend has been reflected in the web order data. For years it used to be that web orders would grow by some moderate amount and revenue would grow by some big amount. Thus, declines in web orders should not immediately suggest a decline in revenue, as there is a historical offset (and a slower longer-term trend for it to get bigger) between both growth rates, and depending on how big this offset is you might still have positive revenue growth.

These effects can already be seen at work in last quarter’s YoY web order growth (-10%) vs. revenue growth (+27%). I’m projecting a declining trend for both due to the economy, and the disconnect should not be so big this quarter due to seasonality. So sequentially, YoY web order growth goes from -10% to -18% (difference of -8%) and YoY revenue growth goes from +27% to +15% (difference of -12%).

Hope this helps you to see how and why I’m projecting things as I stated above. Of course, I can change my mind about things along the way, and if the real web orders coming through differ significantly from my projections, I’ll most likely have to change some of the assumptions.

Perhaps I’m explaining myself too much. It boils down to this:
[quote author=“deagol”]
These effects can already be seen at work in last quarter’s YoY web order growth (-10%) vs. revenue growth (+27%).

This is why I made a poll in the first place. I had the same concerns that you point out after seeing this disconnect last quarter. So I asked you guys if this pattern would change this quarter, and you guys voted no, that it would be a wash, no change from last quarter. So, as I promised, I’m going with the vote and modeled for a similar disconnect between web order growth and revenue growth. Why? my reasons for and against it are explained in the first post, and some voters have stated their reasoning in the thread. I assume your vote was for there to be a sequential increase in the relative share of sales coming from the Apple Online Store. I can see that it’s a close call between that and the “it’s a wash” votes, so maybe for the mid-December poll things will be different.

Thanks for the thorough reply. Now it all makes sense.

Re: Q1 sequential change in share of online sales?

[quote author=“deagol”]I need a little help with my Q1 estimates (my crystal ball has caught the October haziness bug). The question is quite simple: whether people this year will more likely buy online in Q1 than in Q4, as it’s happened historically, or instead the iPhone availability will force them to go to retail stores even more than in Q4.

Online retail spending slows in October
Not Apple spcific, but it still may help you in making up your mind. Apple buyers are people too!

Fresh data right out of the oven! 

2008 Black Friday Analysis:

*YoY growth for US based on these 2007 datapoints:

YoY growth for EU and combined not computed due to non-comparable periods:

Here’s an update a week later:

So, I’m feeling much more comfortable with only a 13-16% YoY decline in web orders for the whole quarter, despite the declines in October (-24%) and early-November (-32%). IMO, that would support an estimate for total revenue of $11.1b to $11.7b. I’ll do the whole spreadsheet update after next week.

Here’s the raw order data so you can run your own rates: