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iPhone Sales Run Hot and Cold

iPhone Sales Run Hot and Cold

Has Apple hit the hiccup BGC Partners analyst Colin Gillis predicted earlier in the week? AAPL shares plunged over 6 percent in after-hours trading Tuesday following a quarterly report in which iPhone sales disappointed analysts. That period covered sales before the release of the iPhone 4S, though, and early figures on sales for that phone tell a very different story.

By Rachelle Dragani MacNewsWorld ECT News Network
10/19/11 5:00 AM PT

Apple reported details on its final fiscal quarter of 2011 Tuesday, claiming revenue of US$28.27 billion and profit of $6.62 billion. Both figures bested their respective year-ago results.

Though the quarter's performance exceeded Apple's own forecasts, which are typically very conservative, they did not meet the expectations of many Wall Street analysts, and AAPL shares nosedived by over 6 percent in after-hours trading minutes after the report was released.

Much of the analyst disappointment reportedly centered on iPhone sales. However, the period covered by the Tuesday statement ended just before the release of the iPhone 4S. In its handful of days on the market, Apple's newest phone has told a very different sales story.

Despite what initially appeared to be a muted reception when it was first unveiled, the iPhone 4S broke sales records during its first weekend on shelves, selling more than 4 million handsets in the first three days.

Customers who had waited 16 months for the new device scooped it up at retailers, which now include Sprint and Verizon stores -- two carrier partners that were not on board when the iPhone 4 was introduced in 2010. It's possible the availability on additional networks boosted overall sales.

"There is a lot of pent-up excitement because of the wait to release, and there are really two new additional channels, so that probably helped sales," William Stofega, program director of mobile device technology at IDC, told MacNewsWorld.

New features such as a voice assistant called "Siri" and faster hardware are also probably contributing to record sales.

The recent death of Apple Cofounder and former CEO Steve Jobs may have sparked iPhone 4S attention, but it's unlikely the high sales were the result of masses of mournful customers trying to pay their respects.

Apple didn't respond to MacNewsWorlds' requests for further comment.

Can't Hold on Forever

Before Apple released its earnings, Apple's stock saw a rare downgrade from "buy" to "hold" from BGC Partners analyst Colin Gillis earlier in the week. The note was written early in the week, before Apple's announcement about record iPhone 4S sales, but Gillis pointed out that since Apple was at an all-time high, it made more sense to wait for a "hiccup" in the company to purchase the stock at a lower price.

Gillis isn't alone in thinking a big hiccup is inevitable. Gadgets like iPads and iPhones are crowd favorites and enjoy a buzz that other companies haven't managed to create as well as Apple, but the company has always struggled when operating at a less-than-premium level.

Devices sold by companies like Samsung and HTC, operating on Google's Android platform, collectively perform higher in sales numbers because both the devices and the data packages can be purchased at lower prices.

"Apple has always struggled with tapping into a true mass market. They're going to continue to do well, but there is a trend towards serving customers at the lower end, and there's a question about if they're equipped to do that," said Stofega.

Part of that untapped mainstream market is overseas. Apple's made a leap in Asian and European markets, but it's still sold primarily to high-end customers.

"Apple still doesn't really have markets like India and other foreign growth. There is a question about how they address China, and not just the small amount of people that can afford their phones," said Stofega.

Ongoing Patent Troubles

Other sources of trouble for Apple and the rest of the tech industry are the constant skirmishes over patents being fought between many high-profile handset hardware and software makers. Samsung and Apple continued their debates in domestic and international courts this week. After being slapped with an injunction on its Galaxy Tab, Samsung is seeking an iPhone 4S injunction in both Australia and Japn, the same countries where Samsung's tablet is banned as the result of a design patent lawsuit.

In U.S. courts, a decision is still pending on whether to ban sales of the Galaxy Tab. The suits are a few in a string of disputes between companies and suppliers such as HTC, LG and Oracle.

Since the companies often have complicated relationships as part-time competitors and part-time suppliers -- for example, Apple is the largest customer of Samsung-produced chips -- the battles are often messy.

"It's really the bargaining power that's playing out the most here. Tech companies are using intellectual property as a competitive instrument," Sudeep Basu, practice leader at Frost & Sullivan, told MacNewsWorld.

It's an indication of how complex the in-fighting in technological patent battles has become. Licensing fees are tempting, but if a customer like Apple could use its position as top buyer to gain an upper hand in a court dispute over Samsung, a permanent ban from shelves could be an ultimate goal for the Cupertino company.

"Using the supplier-customer relationship as a bargaining power is not a relatively new tool, but by using intellectual property as a way to reinforce that bargaining power, they are looking at gaining a market share and shows very clearly that Apple sees Samsung as a major threat. It's almost a compliment," said Basu.


Rachelle Dragani is a freelance reporter based in Brooklyn, NY. She enjoys staying on top of e-commerce deals, reporting on what new gadget is coming your way, and keeping tabs on anyone trying to hack into your info. Feel free to e-mail her at rachelle.dragani@newsroom.ectnews.com.


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