Bloomberg News

Apple May Sell 4 Million IPhones as AT&T Gets Record Activations

October 14, 2011

Oct. 15 (Bloomberg) -- Apple Inc.’s iPhone 4S barreled toward unit sales of up to 4 million this weekend, as the company’s carrier partner AT&T Inc. reported a record number of customers activating the device on its network.

The latest version of Apple’s best-seller, which went on sale yesterday in the U.S., Australia, Canada, France, Germany, Japan and the U.K., is outpacing the iPhone 4 -- a device that topped 1.7 million units in its first weekend in 2010. Most estimates for weekend sales range from 2 million to 3 million, with Yankee Group analyst Carl Howe predicting up to 4 million.

In New York, London, Tokyo and Frankfurt yesterday, hundreds of people lined up at the company’s stores. At London’s Covent Garden store, 20 Apple employees formed a human tunnel for shoppers entering the store, whooping, chanting and doling out high fives. The line outside New York’s iconic glass cube store on Fifth Avenue snaked back and forth across the plaza out front and stretched halfway down the block.

“I’m a diehard Apple fan and I’ve been using Apple products since I was 12,” said Cary Santos, 24, who lined up at the Fifth Avenue store at 11 p.m. on Oct. 13 and spent the night checking e-mail and news on his iPad 2. “This company has rocked American life.”

As of 4:30 p.m. New York time, AT&T had activated a record number of iPhones on its network, the company said. The Dallas- based carrier said it was likely to double its previous high for one-day activations.

Noontime Record

Sprint Nextel Corp., another mobile-phone service provider offering the iPhone, said that by noon it had already reached its best sales day ever. Verizon Wireless also reported a surge of customers, without getting specific.

“We are seeing a nice mix of people who are first-time smartphone purchasers as well as those who are switching from competitors,” Brenda Raney, a spokeswoman for Basking Ridge, New Jersey-based Verizon Wireless, said in a statement.

The release of the new phone represents the end of Apple’s era under Steve Jobs, who died this month after an eight-year battle with cancer. The iPhone 4S has received positive reviews for its voice-recognition software, speedier processor and improved camera. The device also provides Apple with fresh ammunition in its fight against Google Inc.’s Android software, which will appear on a host of new smartphones in the year-end holiday season.

“It’s going to easily outpace any previous launch,” said Charlie Wolf, an analyst at Needham & Co. in New York. It helps that the iPhone is available on the three largest U.S. carriers for the first time, which will bring in new buyers, he said.

New Software

The phone costs $199, $299 or $399, depending on features. Apple also released an update to its iOS mobile operating system, which customers can download to their existing devices. The software comes with 200 new features and a Web storage service for synchronizing photos, documents, music and other files across different Apple gadgets.

While the iPhone is the best-selling single smartphone, the combined devices running Google’s Android operating system account for more of the industry’s sales. HTC Corp., Samsung Electronics Co., Motorola Mobility Holdings Inc. and other manufacturers have adopted the software. Google offers Android for free and then makes money on mobile advertising and services. That revenue is on pace to account for $2.5 billion a year, the company said this week when it released quarterly results.

Topping Exxon

Apple’s stock rose 3.3 percent to $422 in yesterday’s trading, for a gain of 14 percent this week. The company is the world’s most valuable business, with a market capitalization of $391.2 billion. That compares with $379.8 billion for the second-ranking Exxon Mobil Corp.

Heavy demand for the new iOS 5 software contributed to glitches at Apple even before the iPhone 4S went on sale. Customers downloading the operating system to their older phones overwhelmed the company’s servers, making it harder to upgrade.

Apple hasn’t said how many people were affected. The wait time to get a call back from an Apple support representative via the company’s Express Lane service is much longer than usual. Typically, an Apple rep will call back within a few hours. Now, the earliest appointments aren’t for days.

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment.

Jobs’s admirers turned storefronts into makeshift memorials, adding a solemn tone to the frenzy that accompanies the company’s product releases. Jobs co-founded Apple and returned to the company in 1997 after a 12-year absence, rescuing it from near-bankruptcy.

‘IPhone for Steve’

In Australia, the first country where the product went on sale, Jackie Guo, 25, and his girlfriend, both students at Macquarie University, said they lined up as a tribute to Jobs.

“It’s the iPhone for Steve, it’s for the memory of Steve,” Guo said. “It was the last product he worked on. He pushed this company to become a viable company. His ideas are better than others.”

In San Francisco yesterday, a line stretched around the block at the Union Square store. Customers were given bagels, nutrition bars and energy drinks as they waited. Eva Nunez, 46, was in line to buy the new iPhone for herself and her 14-year- old son. “It’s a mom’s duty,” she said.

In Frankfurt, Grigory Stolyarov, a 27-year-old employee of DekaBank Deutsche Girozentrale, spent the night in front of the store on the city’s main shopping street. He had put on two pairs of socks, sweaters and jackets to weather the first near- freezing night of fall and be among the first 20 people in a line of more than 1,000.

‘I’ll Cry’

In London, Harriet Sneddon, 20, a computer science student, waited in line outside a store run by Telefonica SA’s O2 mobile- phone operator.

“I’m an Apple freak,” Sneddon said. “I’m just hoping they’ve got one left or I’ll cry.”

The iPhone 4S will go on sale later this month in 22 additional countries, including Ireland, Italy, Mexico and Spain. Apple didn’t say when it will be available in China, a country Chief Executive Officer Tim Cook has said will be critical for the company’s future growth.

Apple said earlier this week that it had received more than 1 million preorders for the iPhone 4S. The three U.S. carriers selling the device sold out of preorders as well.

The demand puts Apple on pace to sell a record number of iPhones in the December quarter, according to the analysts’ reports. Gene Munster, of Piper Jaffray Cos., estimates that Apple could sell more than 25 million iPhones in the period.

App Cakes

Terry Stenzel, vice president and general manager for AT&T in Northern California and Reno, Nevada, helped manage the crowds at one of the carrier’s stores in San Francisco. He expected to sell out of the iPhone 4S this weekend, even though the location had three times as much supply as it did during the last iPhone release. The store offered water and candy to the crowd. Some AT&T stores handed out Apple cider and cupcakes decorated with application icons.

“If you had asked me two weeks ago, this would have exceeded expectations,” Stenzel said. “But when we saw the amount of preorders, we adjusted them.”

The iPhone, first introduced in 2007, has become Apple’s top moneymaker, accounting for almost half its total revenue. Sales from the new model won’t be part of the fourth-quarter financial results Apple is due to release on Oct. 18. Even so, profit rose about 60 percent in the period to $6.9 billion on sales of $29.5 billion, according to the average of analysts’ estimates compiled by Bloomberg.

Apple controlled 19.1 percent of the smartphone market in the second quarter, according to research firm IDC, ahead of Samsung, Nokia Oyj and Research In Motion Ltd.

Few companies can build excitement around a new product the way Apple can, Yankee Group’s Howe said.

“This is what they are good at,” he said. “They know how to make a big launch weekend.”

--With assistance from Katie Linsell in London, Ari Levy, Ian King, Danielle Kucera and Peter Burrows in San Francisco, Xu Wang and Scott Moritz in New York, Nichola Saminather in Sydney, Cornelius Rahn in Frankfurt, Naoko Fujimura, Yuki Yamaguchi and Takashi Amano in Tokyo. Editors: Nick Turner, Lisa Rapaport

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Sarah Gill in New York at sgill23@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus