On Friday Sept. 20, Apple will begin selling the new iPhone 5S and 5C in eleven countries.
On Monday, Sept. 23, Apple will announce some astounding millions of iPhones that sold during the 3-day launch weekend. With the new models launching simultaneously in more countries than ever, the number they announce will dwarf the latest launch weekend record. (In 2012, Apple sold 5 million iPhones in nine countries and in 2011 it sold 4 million iPhones in seven countries.)
Investors will have to wait awhile to find out the real results, though. When Apple reports its third quarter results in late October, they will include only ten days' of sales. Finally, in January 2014 Apple will report a full quarter of results.
Investors and analysts play a great guessing game about the total number of iPhones sold. That figure also serves as a good indicator of Apples' past performance. Yet, two key data points give better insight into the actual market acceptance and lifecycle of their leading product line, and Apple's future performance. Here, we key on:
iPhone 5S Needs a High Share of Total iPhone Sales
Apple needs its flagship phone to lead the brand. When investors realized that the iPhone 5 did not dominate iPhone sales (Table 1), as prior top-of-the-line iPhones did, Apple's share price started its disappointing decline from the lofty $700/share level. Even though the lower-priced legacy iPhone 4S and 4 models brought customers to the Apple ecosystem, investors wanted more from Apple's best phone.
Table 1: iPhone Sales by Model and Storage
The iPhone 5 accounted for almost 70 percent of sales in the month following its launch. With the simultaneous launch of the iPhone 5C, the 5S probably won't reach that level. And indeed, a strong performance for the 5C may sway some investors, though its success in the U.S. is not critical to Apple's global low-price/mid-price strategy.
And, if the "free" 4S (now costing $0 with a two-year carrier contract) captures a significant share of sales, Apple will attract more new customers. Yet, these late adopters may well wait more than two years to upgrade their new smartphones. And they may avoid the lines in the store and sit out the launch quarter altogether, as they did in the past.
Attract New Apple Customers and Upgrade Current iPhone Owners "On Schedule"
As the flagship, the iPhone 5S should attract mostly existing iPhone owners. Its predecessor iPhone 5 did so, with 69 percent of its early buyers coming from a prior iPhone (Table 2).
Table 2: iPhone Model Sales by Previous Phone
The iPhone 5C needs to attract new Apple customers -- and assuming it sells well, probably will. Under the same circumstances, the iPhone 4S took 43 percent of its customers from other smartphone platforms, and another 30 percent who bought their first smartphone (Table 2). If the 5C becomes a trade-up phone for current 4S and 4 owners, the mid-price strategy will not have succeeded.
When looking at iPhone upgraders, we also like to the see the age of their prior iPhones and other phones. Apple needs to continue offering flagship phones that entice customers to stay on a 2 year upgrade cycle. This was clearly the case with the launch of the iPhone 5 (Chart 1).
Chart 1: Age of Previous Phone
Until the data from our first survey of new iPhone buyers is available, we'll be counting people in line at the Apple Store.
Follow Michael R. Levin on Twitter: www.twitter.com/cirpllc