Apple stock spanked for low iPhone 5 sales

Apple Inc

(MoneyWatch) Only days after Apple (AAPL) began to put its new iPhone 5 into customers' hands, the company's stock has taken a beating. The reason doesn't have to do with Apple's disappointing mapping software, or even the reports of new iPhones being damaged right out of the box.

Instead, investors have expressed disappointment in how many iPhone 5 units sold in the first weekend. Analysts had expected Apple to sell between 6 million and 10 million devices, while shoppers bought 5 million. Yet that shortfall likely has less do with softer than expected demand for the latest iPhone than with how analysts protect potential sales.

In mid-September, Piper Jaffray analyst Gene Munster, who has a history of being highly bullish on Apple, estimated iPhone 5 sales of 6 million to 10 million through the end of the month. This was even before Apple announced that it had pre-sold 2 million units before the phone's official commercial release date on Sept. 21.

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The hype over huge expected iPhone 5 sales only grew as the days wore on. By last Monday, some analysts were breathlessly painting the phone launch as an economic miracle, as the Yahoo Daily Ticker video below shows:

Here's what Walter Piecyk, an analyst at BTIG Research, said earlier this week before Apple had announced the weekend figures:

As always, the first weekend of sales for them are going to be very strong. They doubled last year; they're probably going to double again or more this year. They're going to have to do probably about 10 million to really excite investors.

Then Apple released the initial weekend sales figures after the phone's commercial release: 5 million. By comparison, that topped the number of iPhone 4S units that Apple sold last year in the first weekend following that phone's release. Even so, oops.

Wall Street assumed that supply was off, not demand, given that iPhone 5 pre-orders were more than double those of the 4S. Therefore, since the 4S had old 4 million in its debut, the iPhone 5 should do twice as much, right?

Maybe not. Remember that the 4S benefited from a lot of pent-up demand. In introducing that device, Apple had shifted from a June release last year to one in mid-October. The 4S also benefited from a third more phone accounts coming up for renewal, meaning that many more people could get a new model without penalty. So if you look at a one-year normal period for upgrades, the 4S might have seen sales of roughly 3 million units.

This year, 11 months had passed since Apple's release of the last new model. Had the company pushed the start of iPhone 5 sales out a month, the company might have sold 5.4 million units.That would have amounted to an 80 percent jump in sales year-over-year.

But in 2011 Apple sold roughly twice as many 4S units as it sold 4 units in 2010, right? Again, remember the extended period of time between the 4 and 4S. Initial post-launch weekend sales the iPhone 4 were 1.7 million. Compare 3 million to 1.7 million and you get an increase of ... 76 percent.

You could argue that Apple sold a few hundred thousand fewer iPhone 5s than what a straight-line projection would have expected, but nowhere near the shortcoming that analysts and investors perceive.

Factor in labor problems at Foxconn, the Taiwanese manufacturer that assembles the devices for Apple, and the fact that smartphone market penetration is perhaps getting closer to a natural limit and suddenly 5 million phones doesn't seem too shabby.

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[littlebrit123]

I would have loved to have the 5 but the fact that they have changed the charging plug to a smaller one sucks ... all my stuff at home is for the bigger plug . I have spent thousands of pounds buying apple gear and now they do this .. The adapter is not very cool and defeats the object . So i will stick to my iphone 4 and when that goes wrong i will buy a sencondhand 4s . I hope i'm not the only one to feel they have messed up here .

[jondroot]

it is now down to $668 lol

[jondroot]

it is now down to $668 lol

[Kenny1111111]

So, in my opinion the lower than expected sales have more to do with availability than demand. There are no iPhone 5's available in most Apple stores.

[fxrsniper1]

It has to do with no one wants old technology that why Android is in top and has been for 3 years

[jhorvatic]

Sorry to break the news but the iPhone 5 is the fastest Smartphone on the market beating even the Samsung Galaxy SIII with a dual core processor. 4 inch wide screen gives the iPhone 5 a bigger screen without losing the ability to type with one hand. Bigger isn't always better. The iPhone 5 is lighter but stronger as proven in drop tests again it beat the Samsung Galaxy SIII.The iPhone 5 also has the best camera on the market with better low light sensitivity. The display is brighter and is more color accurate again beating the Samsung Galaxy SIII. Maps in IOS6 brings turn by turn navigation, Google doesn't want to even provide that feature. Apple will continue to offer free updates, you'll need to buy a new Android phone if you ever want your operating system updated. Number 1 in service Apple provides at over 350 retail stores or phone support. Immediate swaps for hardware failures. You'll have to wait 6 weeks to get that Samsung replaced if your lucky.
The sales of the iPhone 5 were a million over last years 4S record and pre-orders sold out in 24 hours another record. Anal-ists have there heads up there you know what for complaining that Apple sales of the iPhone 5 were disappointing.

[sonysuxpsprocks]

we the consumers of iPhone 5 have been duped
go to apple discussion forums iphone 5
read actual customers problems- hundreds of thousands UNHAPPY!

maps? the map app is utter rubbish! google maps worked fine....

iPhone 5 came with scratches on the back fresh out of the box...
https://discussions.apple.com/thread/4326970?start=270&tstart=0

the battery life sucks
https://discussions.apple.com/thread/4334782?tstart=90

the wifi- is a joke
https://discussions.apple.com/thread/4322714?tstart=0

iPhone 5 sucks!
https://discussions.apple.com/community/iphone/iphone_hardware?view=discussions#/?tagSet=1480

this phone is an open beta test- and we were the guinea pigs- this is outrageous...
dont believe me- go to the apple discussion forums for iPhone 5... the joke is on us.

[hypnotoad72]

sonysuxpsprocks -

A few months ago, Apple execs said they were happy with FOXCONN - the manufacturer who has built Apple's products for some time.

I wonder who is using the lower quality components... if someone in America did, or if someone at Foxconn did... and why? To shave off costs? Or did a worker decide to use lower quality components to make his boss look bad?

It'll be fun, who gets scapegoated when all is said and done...

[Pauly_W]

Well I think the sales are not that significant, basically, nothing that special about the iPhone 5. Is it that improved, new 4" screen, little faster, 4G LTE (which samsung galaxy S2 has had now for over a year, old news apple) same old stuff, nothing special. If some Apple fans would look at what Android has done to the smartphone, always improving, new features that iPhone suddenly added in the "text and cancel call". Sorry to break the news, had that on my samsung infuse for over a year now. Apple is now playing catch up and people realize it. Oh forgot the Apple Maps that is suppose to crush Google! Hey just a thought, would Apple share their amazing Map app had it been amazing, NO, unlike Google that shares their products on other platforms, Apple's keeps it all to them. That's why the sales are not what they expected, basically, just a "new and improved" iphone, been there done that!

[DKlos]

Now at $682.20!

[DKlos]

Geese. The bigger the price of a stock the bigger the swings. You make it sound like it's in a tailspin. On the contrary!. Now up over 16+ at closing and even a bit more in after hours. Every report I've seen has it selling out in nano seconds after launch. The only hitch is in potential supplier delivery which is a chronic issue with every new Apple product launch, but they always solve it, just like that mapping issue is being solved. Apple never lets problems fester too long. Other than that it's one of the most successful new product launches of all time. The LA. Times has huge headlines on how successful the new iPhone is today.

[eriksherman]

It wasn't the amount so much as the rapid reaction to the sales news.

[fxrsniper1]

*** are you talking about do you even know lmao apple faboys

[DKlos]

Apple's up 13 points already today. Give me a spank'n like that Eric. Seems you have to be able to report on a minute by minute to keep relevant. Your story posted at 12:53. Perhaps you'd like to re-do it.

[eriksherman]

It's still below $680 - and certainly below the $704+ it reached on the 21st, when the iPhones first started getting into the hands of customers. No reason to re-do. Of course the stock will climb again. If you look too closely at the minutiae, you miss the trend.