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34% of U.S. Smartphone Buyers Want Apple's iPhone; Is That Good?

A new survey by Piper Jaffray released this week said that more than one third of U.S. consumers looking to buy a smartphone within the next three months would buy an iPhone. While that percentage seems good on the surface, should Apple (NASDAQ: AAPL  ) investors be pleased with that? Not exactly, but in the end it may not matter much anyway.

Moving in the wrong direction
The survey is one the investment firm does on a regular basis and consists of more than 1,000 potential smartphone buyers. Here's how the percentages have changed since the iPhone 5s debuted:

These numbers are moving in the wrong direction. Source: Piper Jaffray

We see that since the iPhone 5s release, demand for the device, according to this survey, has dropped from 38% of potential U.S. smartphone buyers to 29%, and demand for the 5c has gone from 12% to just 5%. All in all, we've gone from a potential demand of 50% to 34%.

Having more consumer demand is obviously better than having less, but these numbers don't paint the entire picture.

Does this even matter?
There are few things to point out from this data. The first being that the Apple's iPhone debuted in September of last year, while its top competitor, the Samsung Galaxy S5, came to market in April of this year. That's clearly going to hurt some of the iPhone demand considering that Samsung makes great devices that are comparable to the iPhone, and even better in some aspects.

In addition to this, the survey only covered the iPhone 5s and 5c, not the 4S or any inquiry about consumers wanting a new, bigger iPhone 6. So what we have is a snapshot of potential demand over the next three months for two of Apple's models -- and not much more.

This is helpful in assessing the current demand trend for the iPhone, but it's not great at forecasting the overall demand for iPhones. The data is neither accounting for the factors we just mentioned, nor is it taking into account the historical up and down trends of iPhone sales over the course of a year.

Foolish thoughts
Apple is coming off a very strong iPhone quarter, selling nearly 44 million units in fiscal Q2. So any slight decrease the survey showed during the first three months of this year didn't really affect Apple when we consider actual sales. While the survey shows demand for the 5s is still relatively strong, the real question is whether or not consumers will hold off on buying the 5s or the 5c as they anticipate a newer iPhone.

Over the past two years, Apple's fiscal Q3 and Q4 – which proceed the iPhone's usual fall launch -- have experienced the lowest iPhone sales.

Check out the fiscal Q3 and Q4 drops in 2012 and 2013 in the cart below:

Source: Statista

If the past two years are any indicator, investors will see a drop in iPhone sales over the next two quarters, followed by a huge uptick in the fiscal fourth quarter when the new iPhone goes on sale. So while the intent to buy an iPhone is probably waning, it's pretty much on par with the iPhone's current purchase cycle. And it certainly isn't any indicator of well a new iPhone 6 may or may not do in the fiscal fourth quarter. 

Admittedly, looking at previous quarterly iPhone sales doesn't mean future quarters will follow suite. But they are a better indicator than survey results, considering that they take into account actual iPhone sales, release date schedules, and holiday sales. So investors worrying that iPhone demand isn't as high as it was in the fall of last year likely need to wait a few more months to see that demand surface once again. 

Apple's cooking up something new
The iPhone is Apple's main breadwinner right now, but the company is always looking for its next unexplored area of growth. While Apple and other tech companies may soon be entering a new device segment, there's one small company that's making it all possibleABI Research expects 485 million of these new devices to be sold each year, and savvy investors can get it on it now.To find out which company is helping to power the next big thing in tech, just click here.


Read/Post Comments (5) | Recommend This Article (1)

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 May 21, 2014, at 9:38 PM, marv08 wrote:

    You mentioned some valid points why this data point may be a bit misleading, but there are even more:

    - The survey is US only, the US is one of the regions with the highest upticks in demand during the holiday season, other areas have different peaks and some rolled out the new models significantly later.

    - The survey is about percentages, not numbers. 9% less demand in May versus December is not 9% less buyers, as December sees much more sales. In the same vein, 54% Android demand in May may actually represent less sales than the 43% in December.

    - We are already two months into the next quarter. The number of people who do no longer intend a purchase may include x number who made a purchase in the meantime...

    Anyhow, 34% intentional buyers for 9 months old devices in the highest price group is by no means bad; many competing devices see discounts after less than a quarter. And Samsung would kill for 34% Galaxy S5 demand, even at the opening weekend.

  • Report this Comment On May 21, 2014, at 9:52 PM, melegross wrote:

    Not so sure about how "great" Samsung devices are. So let's see;

    The fingerprint sensor doesn't work too well, and there's no security on the other end.

    The gyroscope works poorly.

    Many features don't work well, or worse, don't work at all.

    It's constantly described as flimsy.

    I could go on, but what's the point?

    Meanwhile, there's likely more pent up demand for the 6 than for other years, because this should be a bigger phone, and now this year, for the first time, interest in larger phones is significant.

  • Report this Comment On May 21, 2014, at 9:53 PM, aeosfool wrote:

    The missing number is how it compares to last year at this time...was it 30%, 40% etc.,,not how it campared to the last two quarters right after the 5S and 5C were introduced. My guess it would be a normal pattern to decrease now but this report doesn't give you this vital information.

    Even if we had last years comparable number, it wouldn't likely be as helpful as usual as there is great anticipation of a larger phone this time which is probably resulting in lower demand for the current smaller phones. Last year, there wasn't such a need to wait as the new iphone was likely going to be a minor upgrade with the phone the same size as the previous year...and thus less incentive to wait if you were entitled to an upgrade before the new iphone was released.

  • Report this Comment On May 22, 2014, at 12:58 AM, clarey wrote:

    Chris Neiger's question, whether iPhone customers will hold off on 5s and 5c purchases while awaiting the 6, can only be labeled DUMB. Of course they will. My wife, who is hot for an iPhone, is waiting for 6. Anyone ready and financially able will wait for the 6. Why buy what will soon be an obsolete phone when a new, more sophisticated phone is just over the horizon?

  • Report this Comment On May 22, 2014, at 7:35 AM, jdmeck wrote:

    Another stupid story putting two specific iPhones against generic android. Wise up or get lost.

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Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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