Interested in hearing what Tim Cook has to say about the iPhone 4S? Although he’s a tad bit busy being Apple’s CEO he continues to take part in a quarterly call with Wall Street analysts. He discussed a number of topics and we’re sharing what we think you’ll find interesting. Enjoy!
On the iPhone 4S
We’ve gotten off to a great start with the 4S. We’ve sold over 3 million only three days after launch so we are thrilled with the start that we’ve had. We’re confident that we will have a large supply, but I don’t want to predict when supply and demand might balance because the demand is obviously extremely high right now. I’m confident that we will set an all-time record for iPhones this quarter.
If you look on a sell-through basis, the sequential comparison is down 2.4 million units… That 2.4 was much less of a reduction than what we were expecting and was a large factor in our revenue exceeding our guidance by over $3 billion. We expected to be greater than 2.4 because we knew that there was great anticipation of a June or July new iPhone since that was the pace we had been on in the last several years. And as we predicted that sell-through did occur in the quarter, but not nearly to the extent that we thought. We significantly beat our guidance. The reduction happened significantly in the back quarter as the [iPhone 4S] speculation hit extreme highs. However, we are thrilled to be shipping the new iPhone 4S and iOS 5 and iCloud, and we are very confident that we will set an all-time record in the December quarter for iPhone sales. In our wildest dreams, we couldn’t have gotten off to a start as great as we have on the 4S.
On iPhone 4S velocity
We can’t tell you with precision how many units we would have sold had there not been rumors and people weren’t expecting an new iPhone. I certainly believe it was substantial. That’s the reason that we called it out. I think anyone monitoring the press knows this, you can probably talk to a group of customers and get the same answer. I think the 4S is off the charts. If you do a comparison of the three days after launch of last year on the iPhone 4 we came in at 1.7 million; this year we were over 4 million in the same time frame and so that’s the mother of all uplifts. We’re thrilled with how we’ve gotten started. The feedback we’re getting from customers is fantastic, so I couldn’t be more pleased with where we are.
The number of people using it already is amazing. The asking it questions and so forth and the personality it has it incredible. We see this as a profound innovation, and I think over time that many people will use it in a substantial way. What percent of their input will be by that and what percent of the searching, I don’t know. It is substantial and an incredible innovation, and that’s the feedback we’re getting from customers.
On iPhone price reductions
We did it because we wanted to make the iPhone more accesible to a broader market and so not only did we take the 3GS to free on a post-pay basis, but we also lowered the price on the iPhone 4 to $99. We’ve done both of those because as we looked at it, these are still fantastic products and we think that we can do reasonably well selling those in the post-pay market. It also has the advantage of having a lower price in the pre-pay markets, not free and $99, but lower than those entry points were previously. Both of those markets are very important to us. It has been our thinking for a while to do that.
We want the iPhone to be in as many customers hands as possible because we think it’s the greatest phone by far. That’s why we live to do that. We aspire to much larger volumes than where we are. We think the smartphone market with eventually absorb the handset market. The handset market is a huge market, it’s 1.5 billion handsets, and the smartphone market is a bit over 400 million or so. There’s a huge growth in the smartphone market, and we think we can grow with the sector. The big win will be to eat into the 1.5 [billion]. You can tell that with the moves we’ve made recently.
Carriers receptivity of iPhone pricing change
If you look at the channel inventory on iPhone that was there at the end of September 24, there were 5.75 million. Over half of that has already sold through. So one portion of the things driving that is the elasticity question you’re getting at. What we also did in a very few countries last quarter is drop the 3GS price a bit early, particularly in some of the prepay markets and were extremely pleased with the results. It gave us even more conviction to follow through with the plan change we made over in October.
We think Tim is doing an excellent job as Apple CEO. The runaway success of the new iPhone 4S is probably helping as well! What do you think of what Tim has to say? He has big shoes to fill and we look forward to getting to know him during future interviews and presentations.
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