Did Verizon's Digits Give Any Juicy iPhone 5 Clues for Apple?

Next week, Apple (Nasdaq: AAPL  ) reports its fiscal fourth quarter earnings on Oct. 25. This week, carrier partner Verizon (NYSE: VZ  ) has just put up its own digits. All eyes will be on Apple's iPhone unit figures, since the company just launched its newest iPhone 5 just days before the fiscal quarter closed, and the device continues to see supply constraints that threaten its ability to meet investors' lofty expectations.

What kind of juicy iPhone clues can investors glean from Big Red's figures?

Some numbers games
Verizon said it activated 3.1 million iPhones during the quarter, 21% of which were the LTE-equipped iPhone 5. iPhone activations represented 46% of the total 6.8 million smartphones the carrier activated during the quarter. Google Android activations came in at 3.4 million, narrowly topping iPhones, which translates into 50% of smartphones.

Verizon has long been one of Android's carrier champions, so no surprises there. In comparison, at Apple's original carrier partner AT&T (NYSE: T  ) , which has yet to report earnings, the scales are tipped dramatically in favor of the iPhone. Ma Bell activated 3.7 million iPhones in the second quarter, 73% of total smartphone activations.

When it comes to iPhone 5 units specifically, that means Verizon sold approximately 650,000 of them. The most optimistic estimates are hoping for upwards of 10 million iPhone 5 units for the fourth quarter, although Apple doesn't disclose its product mix specifically, so investors won't know definitively if Apple hits this target. That being said, we can still piece together some of this iPhone 5 puzzle.

Last month, researcher comScore said that AT&T dominated iPhone 5 pre-orders on the weekend they began, with 68% of online orders. Verizon came in at 24%, while Sprint Nextel (NYSE: S  ) had an estimated 8% of the domestic pie.

Source: comScore.

Using these estimates and assuming they approximately held through the end of the month, that would imply about 1.8 million iPhone 5 units for AT&T and a little over 200,000 for Sprint. That would bring our domestic total to nearly 2.7 million iPhone 5 units between the three of them.

Just to cover all of our domestic bases, Leap Wireless (Nasdaq: LEAP  ) got the iPhone 5 on its pre-paid Cricket brand on Sept. 28, before the quarter closed, but its unit sales are so negligible that they wouldn't move the needle in any meaningful way. Total iPhone unit sales at Cricket were so small last quarter that Leap didn't even disclose them. Leap became the first domestic pre-paid iPhone carrier in June, and Sprint's pre-paid Virgin Mobile brand followed shortly thereafter.

That 2.7 million estimate represents a good chunk of the 10 million that investors are hoping for, and that suggests Apple would need to sell 7.3 million units internationally to reach that target. This has been the most aggressive international iPhone rollout in Apple's history, as CEO Tim Cook does what he does best: orchestrate a global supply chain.

Sources: SEC filings and court filings. Calendar quarters shown.

Overall international iPhone sales currently hover right around that 70% threshold, so this international mix is certainly within reach.

A game is still just a game
Of course, these are all estimates and numbers games and the reality of the situation is that there are supply constraints. The in-cell touch displays and heightened aluminum unibody standards are the most likely sources of any bottlenecks.

Supply distribution also varies widely by geography and carrier. For example, my local Apple store had some iPhone 5 inventory for Verizon and Sprint but was fresh out of the AT&T flavor. On top of that, we've already seen that using combined domestic carrier activations is at best a very rough approximation of actual domestic unit sales -- a discrepancy that can be as high as 1.7 million units.

Remember that 5 million of these are already in the bag, since Apple already announced it sold that many during launch weekend. All things considered, 10 million iPhone 5 units in nine days may be a bit of a stretch, but it's certainly doable.

The introduction of the iPhone 5 is an event Apple investors were looking forward to for months. The stakes are high and the opportunity is huge, so to help investors understand this epic Apple event, we've just released an exclusive update dedicated to the iPhone 5 launch. By picking up a copy of our premium research report on Apple, you'll learn everything you need to know about the launch, and receive ongoing guidance as key news hits. Claim your copy today by clicking here now.

Evan Niu, CFA, owns shares of Apple, AT&T, and Verizon Communications. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 20, 2012, at 5:31 PM, ztnjpv wrote:

    My comment may seem naive or foolish (small f) but I don't care:

    Apple isn't going anywhere anytime soon. The company is still growing and evolving and will continue to. So, whether the company meets Wall St.'s inference of how many iPhone 5's Apple sold at the very end of the quarter really doesn't make one bit of difference in the short, mid or long run. Add to that the factor of supply constraints and it really shouldn't be that alarming, IN REALITY, if Apple didn't sell enough of the phone before the fiscal quarter closed.

    I can't help but shake my head and role my eyes at the oversensitive paranoia of Wall St. and many investors in general. If Apple is in decline or risking not living up to its stock price, it's gonna take a heck of a lot more to make that judgment than a transient figure of iPhone sales in a short window with context from outside forces beyond Apple's control.

    If supply constraints make it so that not as many people jump to the newest iPhone because of availability issues at the launch, then we should expect to see it made up for in the next quarter. And if some decided to pass because the phone wasn't available when the "iron was hot" amid the pre-launch hoopla, then they'll come back for the next model....iPhone 5S anyone?

    Now, I know that none of this matters to the day to investor or trader but the fickle attitude based on the most minor of transient minutiae is laughable if not deserving of chicken little mockery.

  • Report this Comment On October 20, 2012, at 7:27 PM, AppleJack2013 wrote:

    1. You have to believe that Apple will be able to pick up the pace of iphones built. They will throw more cash at it. Foxconn said they are getting better and making more phones everyday. I believe they will look into fixing the chipping aluminum and future parts could have a coating that is more resistant. That would speed things up too.

    2. I would guess Apple sold 7 million in the fourth quarter but the question is how many older phones they sold also. Supposedly they are selling a good many of them as Verizon mentioned. Important point! When one sees the new iphone 5 they can now finally determine if it pays to upgrade. I will just leave it at there are many people who would even like the older phones better. Jim Cramer said he would not upgrade. He liked his old phone better. Maybe having the old Google maps or the shorter size is better. Maybe they felt both and were more used to the old size so the went from the 4 to the 4s rather than the 5.

    3. Christmas is coming and tablets will be all the rage. One factor is the ipad mini and how those numbers will play out.

    4. Apple could still be tight as far as satisfying demand but they will be less tight as time goes on. We will have bigger sales next quarter no matter what happens and that should mean higher stock price. The media bashing of Apple can only drive the stock down so far until the real numbers say otherwise. Collin McGillis will never have Apple as a buy no matter what. Same for Doug Kass. They could make $ 200 per share next year and they will not have Apple as a buy even if the stock price was $450 as Mike Paulenoff of Marketwatch predicted could happen with an emotional selloff if the stock hit his predicted target of 530.

    In closing I would like to say that Apple can drop more but it will eventually rally hard or have the biggest compression in p/e history. Andy Zaky says once you have compression Apple will rebound.

  • Report this Comment On October 21, 2012, at 7:35 PM, DaSportsGuy1 wrote:

    ZTNJPV - I completely agree with you ... On that note, due to the paranoia in the market when it comes to Apple, maybe that presents a good buying opportunity for APPL? The underlying company figures are incredibly stable, so whether there is bad news now, it really won't effect the stock in the long term (like you mentioned) ... What do you think?

  • Report this Comment On October 21, 2012, at 10:03 PM, ravens9111 wrote:

    I smell a big miss coming. Apple has fallen well below its 50dma and nearing its 200dma. I think smart money is betting on another miss this quarter, as can be seen by the charts. AAPL will probably move sideways until earnings and then the drop will come after hours when they report. The only way AAPL makes any significant move higher is if they crush estimates. Sorry, but I don't see that happening. Beating estimates, after they have been lowered, may just not be good enough.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2064641, ~/Articles/ArticleHandler.aspx, 11/28/2014 4:04:03 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement