Next week, Apple (AAPL -0.69%) reports its fiscal fourth quarter earnings on Oct. 25. This week, carrier partner Verizon (VZ 1.53%) 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 (T -0.06%), 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 (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.
