It has become a tradition. The Monday after the first weekend a new iPhone is available for sale, Apple Inc. (NASDAQ:AAPL) issues a triumphant press release. Inevitably, a new sales record has been set. This year will be different, though. Apple has said it won’t be revealing launch weekend iPhone 7 numbers.
What’s up with that?
One of the primary reasons why AAPL has been so successful is its domination in smartphone sales. Yes, Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google has a far larger platform market share with its Android operating system. And arch-rival Samsung (OTCMKTS:SSNLF) sells more mobile phones overall than Apple. But when it comes to flagship smartphone sales — the devices that people clamor for and that actually drive profits — the latest and greatest new iPhone is always the one to beat.
These iPhone sales numbers, which invariably set a new sales record, go a long way toward predicting the success a new model will have during the course of the year, and are used by investors to help gauge the impact on AAPL stock.
In 2013, the iPhone 5s and iPhone 5c were launched. Apple was only too happy to tell the world how impressive opening weekend sales had been:
“Apple® today announced it has sold a record-breaking nine million new iPhone® 5s and iPhone 5c models, just three days after the launch of the new iPhones on September 20.”
In 2014, for the iPhone 6, the standard first weekend sales press release went out:
“Apple® today announced it has sold over 10 million new iPhone® 6 and iPhone 6 Plus models, a new record, just three days after the launch on September 19.”
In 2015, for the iPhone 6s launch, Apple put out a press release after the first weekend of sales. It opened with the same formula:
“Apple® today announced it has sold more than 13 million new iPhone® 6s and iPhone 6s Plus models, a new record, just three days after launch.”
Apple Will Sit This Year Out With the iPhone 7 Launch
An Apple spokesperson told Reuters that the company will not be publishing launch weekend sales when the iPhone 7 hits store on Sept. 16. This begs the question: why break with the long-standing tradition?
Here’s Apple’s explanation for the move:
“These initial sales will be governed by supply, not demand, and we have decided that it is no longer a representative metric for our investors and customers.”
In other words, due to limited supply (there have been reports that some components suffered manufacturing defects that have affected iPhone 7 launch availability), Apple is certain the iPhone 7 will sell out on launch weekend. Not only that, but it feels it would be able to sell many more new iPhones than it will have available, therefore any launch weekend sales numbers would be artificially low.
That makes sense, but here’s the thing. Previous new iPhone sales have also suffered from launch shortages. Some customers waited months to get their hands on an iPhone 6. A shortage of iPhone 5 units due to manufacturing issues with its display cut into that smartphone’s launch weekend sales.
Having full warehouses for launch weekends is always a challenge, and not just for Apple. Any time a manufacturer ramps up production of a new device — often requiring assembly of components supplied by dozens of third parties — it takes time before all the bugs are ironed out and the production line is humming.
So why is Apple using the supply shortage leads to sellout excuse to skip its annual tradition of releasing new iPhone opening weekend sales numbers?
It doesn’t take a conspiracy theorist to speculate that perhaps the company is worried that already flat iPhone sales combined with an incrementally updated iPhone 7 and potential backlash over its decision to eliminate the headphone jack are going to combine for tepid sales.
A press release stating iPhone 7 launch weekend sales failed to beat last year’s numbers — even with any marketing speak about selling out — would not be pretty for AAPL.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.