Apple’s (AAPL) iPhone: 1 Million Is Below Plan


Days after Apple gets hammered by the Street over iPhones sales, Steve Jobs tells us that he’s selling plenty of fancy phones: 1 million of them in 74 days. The news, announced before the market opened, bumped up AAPL: Shares immediately jumped to $137. But now they’re dropping down again, below $135. So is 1 million a good number or not?

It’s not — not even by Apple’s own low-ball public sales goals. Jobs has announced plans to sell 10 million iPhones by the end of 2008 — a year and a half after launch. But a million iPhones in 74 days works out to a little less than 5 million iPhones per year — if you’re selling them at a consistent rate. Apple sold 270,000 machines in the first two frenzied days it was on sale, which means it took 72 more days to sell another 700,000 phones. That’s a 3.6 million annual run rate, which would give Jobs a total of 5.8 million by the end of 2008…

The iPhone hasn’t been introduced in Europe yet, and when it does that run rate will certainly increase, as consumers there are comfortable with the idea of buying pricey phones without carrier subsidies. And Jobs obviously intended to cut prices — eventually — to boost sales again. But if Jobs was selling enough $600 iPhones, there would be no reason to drop prices by one third after just two months on the market. Lehman Brothers’ Harry E. Blount, who had correctly pegged Apple’s first weekend sales, predicted this move in July.

How much will that help? Remember that most potential iPhone customers can’t buy one no matter what the price is without considerable hardship, because they have long-term plans with other wireless carriers other than AT&T. You may be more inclined to buy a $400 iPhone than a $600 iPhone. But if you’re locked up with a two-year Verizon contract, you’re not going to buy one at any price. We hear, second-hand, that Apple is running 25% below their internal sales goals, and we’re in no position to confirm that. But we think that if the iPhone was on track, we wouldn’t have seen a price cut this early, and we would have heard about 1 million units even earlier.

More Analysis: Impact of iPhone Price Cut: Apple Needs To Sell Nearly 2X As Many
See Also: How Much Would Apple’s Wireless Dreams Cost?, Four Big Questions About Google’s gPhone