Are we set up for another iPhone forecasting failure?

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    Posted: 22 September 2010 10:34 AM

    I took a look at the data from Analyst Jeffrey Fidacaro with Susquehanna Financial Group in a note to investors here:

    http://wp.me/pWQsq-w4

    Having serious problems with the iPhone forecast of 11.6 million. Not only does it not make sense given the production forecast (18.2 million), but it also implies 39% growth y/y.

    This forecast for 39% growth would make this quarter the second lowest growth quarter for the iPhone. This makes is hard to believe because every launch quarter has usually been breaking records for growth. The 3G launch saw 516% growth and the 3GS saw 644%. To see 39% for the iPhone 4 makes me wonder especially as the comparable year ago quarter was not a launch quarter so growth should be off a low base. Compare also to the Mac which had 33% growth last quarter. Are we to assume that during a launch quarter the iPhone grew no faster than the Mac?

    The figure of 11.6 million is also in-line with other analysts which seems to indicate another forecasting failure for the cohort.

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    Posted: 22 September 2010 11:06 AM #1

    [UPDATE] I checked the figures and 11.6 million iPhones is equivalent to 58% growth y/y. The (now corrected) article was citing q/q growth. However, 58% growth is still the second lowest growth quarter for the product.

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    Posted: 22 September 2010 11:10 AM #2

    Regarding distribution for iPhone and carriers, I quote from the latest RIM quarterly numbers. (I’m looking at RIM as a comparable not at Nokia).


    BlackBerries are available through over 565 carrier and distribution partners in approximately 175 countries and international markets (vs. 150 carriers and 88 countries for the iPhone)

    From a carrier point of view, Apple is not even at a third of RIM’s penetration.

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  • Posted: 22 September 2010 11:27 AM #3

    Excellent topic.  grin

    What should we expect in iPhone unit sales and why might the analysts be off track on their numbers?

         
  • Posted: 22 September 2010 11:29 AM #4

    Production of iPhones = Sales of iPhones. 

    However, I think applying a YOY sales growth pattern on the iPhone 4 carries some risk, because it negates the challenge of producing a significantly different phone than the 3GS was to the 3G.  The wait times for the iPhone 4 could be both demand AND production related.  My iPhone # will probably be conservative relative to the others here, but my EPS estimate will still see something north of $4.50.

         
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    Posted: 22 September 2010 11:44 AM #5

    I think the biggest problem with his forecast is the Verizon angle.  Verizon is not getting the phone and when WS confirms that we will go from 320 to 260.

         
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    Posted: 22 September 2010 11:58 AM #6

    omacvi - 22 September 2010 02:44 PM

    I think the biggest problem with his forecast is the Verizon angle.  Verizon is not getting the phone and when WS confirms that we will go from 320 to 260.

    You may be right with Verizon, but this is about CDMA. CDMA can also mean China Telecom or Sprint or Vivo in Brazil.

    According to cdg.org there are 546 million global CDMA subs. 90 million are on Verizon.

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  • Posted: 22 September 2010 12:18 PM #7

    iPhone escapes AT&T, has sales growth slowed?

    From Computerworld article

    As I expected, Apple’s on track to deliver the iPhone on US carriers other than AT&T early next year, the latest reports claim—meanwhile AT&T ain’t worried at losing up to 1.5 million users to another network, because it has its users “trapped” into long-term deals.As I expected, Apple’s on track to deliver the iPhone on US carriers other than AT&T early next year, the latest reports claim—meanwhile AT&T ain’t worried at losing up to 1.5 million users to another network, because it has its users “trapped” into long-term deals.

         
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    Posted: 22 September 2010 01:00 PM #8

    asymco - 22 September 2010 01:34 PM

    I took a look at the data from Analyst Jeffrey Fidacaro with Susquehanna Financial Group in a note to investors here:

    http://wp.me/pWQsq-w4

    Having serious problems with the iPhone forecast of 11.6 million. Not only does it not make sense given the production forecast (18.2 million), but it also implies 39% growth y/y.

    This forecast for 39% growth would make this quarter the second lowest growth quarter for the iPhone. This makes is hard to believe because every launch quarter has usually been breaking records for growth. The 3G launch saw 516% growth and the 3GS saw 644%. To see 39% for the iPhone 4 makes me wonder especially as the comparable year ago quarter was not a launch quarter so growth should be off a low base. Compare also to the Mac which had 33% growth last quarter. Are we to assume that during a launch quarter the iPhone grew no faster than the Mac?

    The figure of 11.6 million is also in-line with other analysts which seems to indicate another forecasting failure for the cohort.


    Asymco. I really appreciate all of your hard work and you have become a very valuable member, but I have to take exception to the 3g launch percentage. That seems to be statistical manipulation to me. I just don see how a fair comparison can be made to the iphone considering its limited availability in the first year. If I remember right, the 3g sold almost as many iphones on launch weekend as Apple sold in its first full qtr of selling iphones. I am not saying this to offend, I just don’t use aberrations to come to conclusions.


    Sponge, get over the Verizon iphone, it would only add maybe 4 million users in the US. Many people have carrier loyalty, for whatever reason. The iphone has helped AT&T tremendously, those who want an iphone have switched. There are a few stragglers left, but not many. A Verizon iphone IMO would not be stock moving for more than a day. :apple:

    Can I get a 12 million in the house? Yeah. :drool:

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    Posted: 22 September 2010 01:14 PM #9

    asymco - 22 September 2010 02:06 PM

    [UPDATE] I checked the figures and 11.6 million iPhones is equivalent to 58% growth y/y. The (now corrected) article was citing q/q growth. However, 58% growth is still the second lowest growth quarter for the product.

    Assuming adequate production we know Apple will sell what they ship this quarter, since all the carrier sales are booked on delivery and the Apple stores basically stocks out by the end of each day.  The 18.2M production figure would be a welcome surprise.  Even with an inventory build of let’s say 2M units we are at a 16.2M quarter or am I miss reading his production numbers.  We had another data point from Fox Conn which put the 4G build rate estimate over 4M per month and we still have production on the 3GS.  With the iPhone being such a high margin product if we get anywhere close to this guys production estimate, we will all be celebrating.

         
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    Posted: 22 September 2010 01:32 PM #10

    [quote author=“asymco” date=“1285176876"This forecast for 39% growth would make this quarter the second lowest growth quarter for the iPhone. This makes is hard to believe because every launch quarter has usually been breaking records for growth. The 3G launch saw 516% growth and the 3GS saw 644%. To see 39% for the iPhone 4 makes me wonder especially as the comparable year ago quarter was not a launch quarter so growth should be off a low base.

    YoY comparisons of the launch quarter for the iPhone are misleading, since new iPhones have been introduced at the end of the third or beginning of the fourth fiscal quarter. I prefer to look compare the sum of the third and fourth quarter and compare that six month period year over year. This will smooth over any sudden troughs or spikes of the product cycle.

    See:

    2007q3+q4:  1389
    2008q3
    +q4:  7609 +447%
    2009q3+q412575  +65%
    2010q3+q420973  +67% (my estimate

    2009 had a robust 65% increase in iPhone sales in the six months at the middle of the year. I believe this trend will continue.

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    Posted: 22 September 2010 01:44 PM #11

    @mbeauch

    The growth numbers are what they are. I’m just copy pasting from a spreadsheet. I don’t forecast 600% growth for this quarter, but I think 58% is too low.

    Here are quarterly y/y iPhone growth numbers for every quarter that such numbers could be computed:
    159%
    516%
    88% 
    90% 
    644% 
    7% 
    100% 
    131% 
    61%

    The question is: what is the next number in this sequence? Note that the 7% was low because the year-earlier comparable was 516%. This year’s quarter is based on that 7% year-earlier figure. I am just noting that it’s improbable that in a launch quarter we’ll see a growth rate lower than any but one quarter in the product’s history.

    This is not the only input for forecasting, but it’s an important sanity check.

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  • Posted: 22 September 2010 03:59 PM #12

    Barron’s has a different take:

    By Eric Savitz

    Apple (AAPL) has lined up production of the long-awaited CDMA iPhone to begin early in the December quarter, according to Susquehanna Financial analyst Jeff Fidicaro. If he?s right, production could begin as soon as the next few weeks.

    The analyst, who attributes the information to checks with the company?s supply chain, says production of the new phone is estimated at 3 million units for the December quarter, with total production of 20 million to 21 million units for iPhones overall. That?s up about 5% from expectations a month ago, he writes.

    Meanwhile, Fidicaro also says iPhone production for the September quarter is now expected to be 18.2 million to 18.4 million, up from 18 million, and ?well above investor expectations,? as supply constraints from supplier LG Display ?appear to be resolved.?

    Fidicaro maintains his Positive rating and $365 target on the stock.

    http://blogs.barrons.com/techtraderdaily/2010/09/22/apple-cdma-iphone-production-to-start-next-qtr-analyst-says/?mod=yahoobarrons

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  • Posted: 23 September 2010 03:53 AM #13

    asymco - 22 September 2010 02:06 PM

    [UPDATE] I checked the figures and 11.6 million iPhones is equivalent to 58% growth y/y. The (now corrected) article was citing q/q growth. However, 58% growth is still the second lowest growth quarter for the product.

    Great observation. You are an asset to this board. Unless there are production issues, Apple will post blow out iPhone sales. It is inconceivable that iphone sales will only grow at the smart phone market rate.

    Most people/ analysts fail to realize that there is a powerful upgrade cycle in addition to the basic growth of smart phones as a percentage mobile phone sales. Nokia had fantastic growth for many years because the market failed to properly factor in the frequent upgrade cycle from current customers.

    Bottom line three plus years after the first iPhone, this is only the second inning. In other words, Apple is far from topping out.

    Thanks again Asymco for fantastic, detailed, and insightful work.

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  • Posted: 23 September 2010 04:03 AM #14

    omacvi - 22 September 2010 02:44 PM

    I think the biggest problem with his forecast is the Verizon angle.  Verizon is not getting the phone and when WS confirms that we will go from 320 to 260.

    IMO, this prediction is virtually impossible to be come to fruition. Apple’s current sales growth without a Verizon deal is off the charts. In other words, a Verizon deal can drive the stock higher, but the absence of one will not drive it lower. The market has repeatedly incorrectly predicted a Verizon iPhone before without causing a corresponding drop in Apple’s share price.

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  • Posted: 23 September 2010 01:04 PM #15

    mbeauch - 22 September 2010 04:00 PM
    asymco - 22 September 2010 01:34 PM

    I took a look at the data from Analyst Jeffrey Fidacaro with Susquehanna Financial Group in a note to investors here:

    http://wp.me/pWQsq-w4

    Having serious problems with the iPhone forecast of 11.6 million. Not only does it not make sense given the production forecast (18.2 million), but it also implies 39% growth y/y.

    This forecast for 39% growth would make this quarter the second lowest growth quarter for the iPhone. This makes is hard to believe because every launch quarter has usually been breaking records for growth. The 3G launch saw 516% growth and the 3GS saw 644%. To see 39% for the iPhone 4 makes me wonder especially as the comparable year ago quarter was not a launch quarter so growth should be off a low base. Compare also to the Mac which had 33% growth last quarter. Are we to assume that during a launch quarter the iPhone grew no faster than the Mac?

    The figure of 11.6 million is also in-line with other analysts which seems to indicate another forecasting failure for the cohort.


    Asymco. I really appreciate all of your hard work and you have become a very valuable member, but I have to take exception to the 3g launch percentage. That seems to be statistical manipulation to me. I just don see how a fair comparison can be made to the iphone considering its limited availability in the first year. If I remember right, the 3g sold almost as many iphones on launch weekend as Apple sold in its first full qtr of selling iphones. I am not saying this to offend, I just don’t use aberrations to come to conclusions.


    Sponge, get over the Verizon iphone, it would only add maybe 4 million users in the US. Many people have carrier loyalty, for whatever reason. The iphone has helped AT&T tremendously, those who want an iphone have switched. There are a few stragglers left, but not many. A Verizon iphone IMO would not be stock moving for more than a day. :apple:

    Can I get a 12 million in the house? Yeah. :drool:


    Couldn’t disagree more on the number of VZ users who are there for Apple to entice.  I am one, and I am sure there are many millions more. I think 20-25 million (20% of their subscribers) is not overstating it at all. Carrier loyalty (or practical barriers to changing carriers, which comes to the same thing) is exactly why I don’t have an iPhone.  Yet.  I can’t make the switch to ATT, just too complicated with family plans, etc.  Would I pony up $199 to get an iPhone, if that was all it took?  You betcha, just as long as I don’t have to switch carriers.