After nearly four years of wondering how the iPhone would sell for a carrier other than AT&T (NYSE: T), investors in the U.S. finally got a hint last week. Verizon Wireless (NYSE: VZ) began accepting preorders for the Apple Inc. (NASDAQ: AAPL) iPhone 4 last Thursday at 3 A.M. EST. The preorders were sold out by 5 A.M. It is not too surprising to see that the preorders were filled quickly, but considering that preorders were only open to existing, qualified Verizon customers, the sell out is strong evidence that demand for the new smartphone may be even greater than previously estimated.
How many iPhones did Verizon sell through the preorder program exactly? The company hasn’t revealed specific data, but on Friday RBC Capital analyst Mike Abramsky said in a note to investors it was likely only 100,000 preorders were taken. This would put the CDMA iPhone 4’s early success on par with the Google (NASDAQ: GOOG) Android-powered Motorola (NYSE: MMI) Droid released in December 2009, or even the Chinese iPhone 4 release in September of last year. Abramsky might be underestimating Apple’s preparedness for what’s proving to be a product release whose hype is actually equaled by consumer anticipation. Citing her contacts at component makers in Apple’s supply chain, Concord Securities’ Ming-Chi Kuo said that Apple has prepared as many as 2 million CDMA iPhones to accommodate Verizon preorders and day one sales.
The Cupertino, Calif., company clearly learned its lesson from the GSM iPhone 4’s release on AT&T’s network last June. 1.5 million iPhone 4s were sold on its day of release and not all preorders were accommodated for weeks. Like the iPad, supply was constrained until August. With the chances good that Apple and Verizon have already sold 2 million iPhones, just how big will this release be?
Piper Jaffray analyst Gene Munster said at the beginning of January that Verizon will likely sell 2.5 million CDMA iPhones total during the handheld’s first release wave, and 9 million iPhones across 2011. He also cautioned that those sales may not translate to as big an influx of new subscribers as possible because 6.5 million of those total sales would be existing AT&T iPhone users switching to Verizon. Munster also advised that his estimates might be “conservative.” Even before last week’s impressive preorders, other groups were predicting higher numbers than Munster. Research group iSuppli estimated 12.5 million iPhone sales for Verizon in 2011, a number echoed by Kaufman Bros. analyst Shaw Wu following the official announcement of the CDMA iPhone in mid-January.
William Power of RW Baird & Co., meanwhile, told the Wall Street Journal that a survey he conducted among 1,000 smartphone users with AT&T, Verizon, Sprint (NYSE: S), and T-Mobile USA suggested that, under the right circumstances, Apple and Verizon could sell as many as 25 million CDMA iPhone 4s. Power was quick to say that this figure was only a “directional” figure and not a prediction, but based on last week’s preorders, Apple may have a shot at hitting that lofty sales goal. It all depends on how strong Apple’s supply chain is and, ultimately, how the fifth generation iPhone expected to release in late spring will effect CDMA iPhone sales.
If a 4G iPhone is exclusive to AT&T, will prospective Verizon customers stop buying the CDMA iPhone to wait for the improved model? We’ll know by June.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.
