Investors are now less than two weeks from Apple's (NASDAQ:AAPL) fiscal third-quarter earnings release, which is slated for July 22. Last quarter, Apple reported a bona fide iPhone blowout. The 43.7 million units absolutely crushed the Street consensus of 38 million. For the current June quarter, the Street is expecting around 35 million iPhones sold. Can Apple deliver two blowouts in a row?
Last month, Morgan Stanley analyst Katy Huberty released a research note that suggested Apple could be trending toward 39 million iPhones sold. She based her estimate on her firm's proprietary AlphaWise Smartphone Tracker, which has proved fairly accurate with gauging demand in part by cross-referencing web search trends. Apple has posted figures higher than AlphaWise's models in four out of the past five quarters.
More importantly, what are some of the underlying factors that could help drive an iPhone blowout?
Another BRIC in the wall
Apple continues to make progress in growing its share of emerging markets. Last quarter, Tim Cook said the iPhone's strength was broad-based and that the company established a new all-time record for total iPhone sales in BRIC countries. Finally partnering with China Mobile (NYSE:CHL) drove sales to an all-time record in Greater China.
Within China, Apple continues to enjoy the China Mobile tailwind. The iPhone launched on China Mobile on Jan. 17. For the June quarter, the device will have been on sale for a full quarter. Additionally, 4G adoption (which is being driven in large part by the iPhone) is accelerating. China Mobile had 8.1 million 4G customers at the end of May, representing 1% penetration after four months.
In contrast, when China Mobile launched 3G service back in 2009, it took 14 months to get above 1% penetration, and the carrier's subscriber base was much smaller back then (almost 540 million in March 2010). Smaller rivals have also launched 4G service: China Telecom in February and China Unicom in March. Now that all three of China's carriers began deploying 4G before the June quarter started, Apple will benefit from 4G adoption.
Another carrier headwind
China Mobile isn't the only carrier that could boost results. Apple also inked a partnership with NTT DoCoMo (NYSE:DCM) last September. While that was several quarters ago, it takes time to fully meet pent-up demand within large subscriber bases. NTT DoCoMo is Japan's largest, with 63.1 million subscribers at last count.
The iPhone is incredibly popular in Japan. Apple grabbed 55% of the total smartphone market last quarter, as unit sales were up over 50%. NTT DoCoMo is certainly enjoying the iPhone. After bleeding subscribers for years to iPhone-carrying rivals Softbank and KDDI, the company immediately saw subscriber figures skyrocket.
Net additions aren't the only thing that NTT DoCoMo is improving on. Mobile network portability, or MNP, performance measures customer churn as customers switch carriers and keep their phone numbers.
All of this goes to show that the iPhone is doing extremely well on Japan's largest carrier. As the iPhone continues to proliferate within NTT DoCoMo's subscriber base, which is only just now beginning, Apple further strengthens its lock on the Japanese market.
Making iPhones more affordable
The iPhone 5c has underperformed Apple's internal expectations, as Tim Cook conceded in January when discussing product mix, it still represents Apple's strategic foray into more affordable price points. To that end, Apple launched a discounted 8 GB model in March targeting numerous international markets.
In markets like India, the new model was 11% cheaper. On top of that, Apple even relaunched the aging iPhone 4 in India, also going for low price points with an 8 GB model.
Two in a row?
Overall, Apple still has a lot of tailwinds that can help boost iPhone sales in the June quarter, despite being a relatively slow time seasonally. The March quarter's blowout was a pleasant surprise for investors. Can Apple do it again?