How many iPhones can Apple Inc. sell?
With the company hitting sales records with each annual release, that’s a question facing Chief Executive Officer Tim Cook as the latest batch of handsets lands in stores Friday around the world. The latest models, following a hugely popular design overhaul last year that added bigger screens, may not match the success of previous releases, according to analysts.
Demand for the new iPhones appears lower than last year, “possibly meaningfully so,” said Andy Hargreaves, an analyst at Pacific Crest Securities who studied Google search data, shipment times and third-party surveys. Analysts at Sanford C. Bernstein & Co. and RBC Capital Markets also raised concerns about iPhone growth. Since 2013, iPhone sales have increased an average of about 35 percent each quarter. In October to December last year, Apple sold 74.6 million iPhones -- about 34,000 iPhone purchases per hour.
Expectations are tempered partly because the gadget is at the point in its two-year design cycle that entails less dramatic changes. In the first year, Apple generally overhauls the device’s hardware, including its look and feel. For the following year’s model, designated with an “s” tacked on to the number, the Cupertino, California-based company makes more subtle improvements.
The iPhone 6s and 6s Plus resemble last year’s versions but sport new features such as 3D Touch, which provides a shortcut for checking mail, taking pictures and other functions when the user presses down on the screen. Apple also added an improved camera and zippier processor.
Whether Apple can match last year’s demand will be determined when handsets hit stores Friday in New Zealand, Australia, Japan, Singapore, China, Hong Kong, France, Germany, the U.K., Canada, the U.S. and Puerto Rico. They will go on sale in more than 130 countries by year-end, according to Apple.
Customers around Asia again lined up to be among the first to get their hands on the device. Stores in China -- Apple’s largest market outside the U.S. -- drew faithful buyers like Wu Kai, who picked up two phones from a packed Apple outlet at Beijing’s Xidan Joycity mall.
“Apple products are becoming family members,” the 17-year-old student said, explaining how he and his parents rely on every Apple product from the Mac Pro to the iPad. “It’s just good product that’s shaping our everyday life.”
Crucial Quarter
Cook has said he expects the world’s second-largest economy to eventually become Apple’s largest market. Greater China accounted for 27 percent of revenue in the June quarter, more than all of Europe, and remains a swing factor for the company’s iPhone-reliant earnings.
There were signs however that iPhone sales there may have peaked, after Apple reported moving 47.5 million units in the latest quarter, missing analysts’ projections for 48.8 million.
“The biggest area of interest for investors is the December quarter. The major concern is whether they won’t be able to grow off that very difficult comparable to last year,” said Walter Piecyk, an analyst at BTIG LLC in New York, who is predicting an 8 percent rise in shipments to 80 million. “If you can’t grow the number of phones you’re selling, you’re not going to grow earnings.”
Over in Sydney, hundreds braved heavy rain outside Apple’s city-center store. Dozens of staff counted down to the 8 a.m. opening before customers walked in, many recording the moment on their smartphones.
Freelance technology journalist Lindsay Handmer camped for 18 days in front of the store to be the first in line. He showered at a local gym and used the toilets at a nearby McDonald’s. He plans to auction his two new phones for a charity that helps the homeless.
“There have been good points and bad points,” Handmer, 32, said in an interview describing his stay on the streets. “I’ve been heckled and I’ve seen people overdosing.”
A Heavyweight
A smooth release is critical for Apple, which generates more than 60 percent of its revenue from the phone. Cook is attempting to expand other businesses, but the portion of sales coming from the iPhone continues to grow. The Apple Watch hasn’t become a mainstream success and iPad sales are in decline.
The iPhone’s weight in Apple’s results has put further investor focus on the device’s performance. The stock through Wednesday was down 14 percent from its high in February, in part because of concerns that the device can’t sustain its run of unprecedented growth.
Apple last week predicted it would top last year’s opening-weekend sales record of 10 million units, although that figure is boosted by availability this year in China, which wasn’t part of the initial rollout last year. A better gauge for how the device is selling will come in January, when the company reports sales for the holiday quarter.
Pricing options in the U.S. vary more than for earlier releases. The two new iPhones start at $199 and $299 with a two-year carrier contract. Apple also introduced a program for paying in installments of at least $37 a month, similar to plans offered by wireless companies including AT&T Inc. and Verizon Communications Inc.
- Bloomberg Business