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The Apple Inc. iPhone SE May Be a Hit

By Ashraf Eassa - Apr 11, 2016 at 10:15AM

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Early signs bode well for the iDevice maker's newest iPhone.

Image credit: Apple. 

Though declared a "flop" by some, it would appear that Apple's (AAPL 3.28%) newest member of the iPhone family, which essentially jams an iPhone 6/6s hybrid into the body of an iPhone 5s, is doing fairly well in the marketplace.

Analyst Amit Daryanani with RBC Capital (via Barron's) observes that the iPhone SE "currently has 1-3 weeks lead time in Apple online store." In the United States, the analyst notes, the lead times appear to be in the range of 2-3 weeks, while in China -- a region that Daryanani thinks Apple prioritized initial iPhone SE stock in -- the lead times are two weeks.

The conclusion that the analyst gleaned from this? The iPhone SE "is selling well" or, as he points out, "at least demand is outstripping supply."

"On track" for 15-million units shipped?
The analyst believes that Apple is "on track" to ship around 15 million units of the iPhone SE this year -- a figure that DigiTimes says Apple's supply chain vendors are expecting for the year. Per the analyst, 15 million unit shipments should mean $6.8 billion in revenue and a 23-cent per share boost relative to consensus estimates in profit.

Not bad for a product that's largely a mish-mash of previous generation iPhones!

Keep an ear out on the coming earnings call
The purpose of the iPhone SE is, at least from a financial standpoint, to try to stimulate demand for iPhone ahead of the launch of the iPhone 7/7 Plus flagships in September. The SE can serve to accomplish this by offering a great value at relatively low price points as well as by catering to the apparently non-trivial demand for 4-inch smartphones with up-to-date internals.

The financial impact that sales of the SE will have on Apple's results won't show up in the results that the iDevice maker will report on April 25, it should be felt in the following quarter for which Apple will give guidance.

What if the iPhone SE is a hit? A dud?
If the iPhone SE really does turn out to be a "hit" then I would expect Apple, like any well-run technology company, to continue to iterate and build on the 4-inch iPhone form factor in coming years.

The pace of that iteration will probably be dependent on a number of factors. The questions that I see Apple management asking themselves when planning the future of the 4-inch iPhone are the following:

  1. How good are the sales numbers of the iPhone SE? The better the sales of the device, the more quickly Apple is likely to be bothered to put out enhanced versions.
  2. Is the iPhone SE cannibalizing larger screen iPhone sales to a significant degree? The cannibalization is obviously there to some extent, but is it enough to offset the potential volume upside from a competitive, lower-cost 4-inch product? The more "incremental" in nature the iPhone SE sales are, the more likely Apple is to iterate the line. 

If the SE turns out to be a total "dud" though (something that I view as unlikely given that this product is likely to make Apple a substantial amount of money for relatively little incremental work), it would likely be the end of the 4-inch class iPhone.


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