Bloomberg News

Apple’s IPhone 4S Lines May Help Weekend Sales Hit 4 Million

October 14, 2011

(Updates share price in ninth paragraph.)

Oct. 14 (Bloomberg) -- Apple Inc. is poised to sell as many as 4 million units of its new iPhone 4S this weekend after customers around the world lined up to buy one of the last products developed under Steve Jobs.

The device, available today in the U.S., Australia, Canada, France, Germany, Japan and the U.K., is projected to outperform last year’s introduction of the iPhone 4, which topped 1.7 million units in its first weekend. For the iPhone 4S, most estimates range from 2 million to 3 million, with Yankee Group analyst Carl Howe predicting sales of as much as 4 million.

In New York, London, Tokyo and Frankfurt, hundreds of people lined up overnight 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. yesterday and spent the night checking e-mail and news on his iPad 2. “This company has rocked American life.”

Biggest Debut

The release represents the end of Apple’s era under Jobs, who died this month after an eight-year battle with cancer. The iPhone 4S has received mostly 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.

The phone costs $199, $299 or $399, depending on features. Apple also has 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.

Android Showdown

While the iPhone is the best-selling single smartphone, all of the 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 now accounts for $2.5 billion a year, the company said yesterday when it released quarterly results.

Apple’s stock rose 3.3 percent to $422 in today’s trading, capping 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.

High 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.

Storefront Memorials

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.

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.”

‘A Mom’s Duty’

In San Francisco, 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.

At a store in the city’s Marina district, the line started forming at 2 a.m., according to Douglas Johnson, who stayed up all night to make sure he was in front.

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.

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.”

Tokyo Shoppers

In Tokyo, about 80 people were lined up a day before the debut and there were more than 800 people by 8 a.m. at the Ginza district store.

In New York, Ousphea San, a 28-year-old warehouse manager, left his home in the Bronx at 3:30 a.m. and found 257 people ahead of him in line when he arrived at the Fifth Avenue store two hours later.

“I use my iPhone more than any other gadgets,” said San, who prefers the device to a computer for watching videos and sending e-mails. “The phone is better than anything else.”

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 -- AT&T Inc., Verizon Wireless and Sprint Nextel Corp. -- sold out of preorders as well. The demand puts Apple on pace to sell a record number of iPhones in the quarter ending in December, according to the analysts’ reports. Gene Munster, of Piper Jaffray Cos., estimates that Apple could sell more than 25 million iPhones this quarter.

App Cakes

At 7:30 a.m., 25 people were lined up outside a Verizon Wireless store on 34th Street in New York. The store had just received 10 unmarked cardboard boxes filled with 20 iPhones, which the staff was opening. Three doors down, 19 people gathered outside a Sprint store, waiting for it to open.

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.

Raised Expectations

“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.

The release of the iPhone 4S, along with new Android models, should mean that smartphone users account for the majority of U.S. mobile-phone customers for the first time, said Roger Entner, an analyst at Recon Analytics LLC in Dedham, Massachusetts.

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 reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

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


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