Apple (AAPL) Sells 5 Million iPhones, Falling Short of Expectations

Shares of Apple (AAPL: Charts, News) hit an all-time high above $700 last Friday, with investors eagerly anticipating the weekend release of its flagship iPhone 5. Over the weekend, Apple sold approximately five million units, coming in short of lofty expectations that it could sell between 8 to 10 million.

As a result, Apple's stock slumped over 1% on Tuesday after initial sales numbers were released. The iPhone comprises over 50% of Apple's annual revenues and more than 60% of its profits. Daily Chart
The iPhone 5 was launched in nine countries last week, and will go on sale in 22 additional countries this Friday. BTIG tech analyst Walter Piecyk noted that Wall Street is expecting approximately 50 million iPhones sold during the quarter. "We're at 45 million right now," Piecyk stated. "If they don't put up 50 million or more they could be in trouble." Apple told the press that demand for the iPhone 5 had already outweighed supply. However, it should be noted that Apple made the same claim after every major release of its iPad and iPhone lines. CEO Tim Cook stated, "We appreciate everyone's patience and are working hard to build enough iPhone 5s for everyone." Analysts believe that hefty subsidies paid by Verizon Wireless (VZ: Charts, News) and AT&T (T: Charts, News) could eventually backfire. Both telecom companies allow customers to upgrade to the iPhone 5 for $200, a third of its retail price of $600. The difference is slowly earned back through monthly fees. As a result, telecom providers have been pushing cheaper Android phones from Apple's primary rivals - Samsung, Sony, LG and HTC - to pay lower subsidies and earn faster profits. Telecom providers currently allow existing customers to upgrade their phones before the 2-year contract expires, but industry watchers believe this could change, disrupting the iPhone's dominance. Analysts also believe that Apple could increase its iPhone revenue with a cheaper, lower-spec model, to sell in Brazil, China, Mexico and other emerging markets, a strategy that Apple has repeatedly denied due to the risk of fragmenting and cannibalizing its own premium product line. Apple also caught negative press earlier this week, after a riot involving over 1,000 workers erupted at its Foxconn plant in China. Foxconn is a subsidiary of Apple's Taiwan-based manufacturing partner, Hon Hai Precision, and has been closely scrutinized by the media for allegedly substandard wages and working conditions, which was linked to a series of suicides between 2010 and 2012. Another noteworthy event was Apple upping the ante in its ongoing war with former partner Google (GOOG: Charts, News), whose Android operating system has been the biggest threat to Apple's dominance of the smartphone and tablet markets. In an announcement in early August, Apple removed Google Maps and Youtube from iOS 6, blocking the usage of two of Google's primary services on next generation iPhones and iPads. To replace Google Maps, Apple released its own Maps service bundled with iOS 6, which has been met with disastrous reviews due to path finding errors and technical glitches. Comedian Baratunde Thurston, a former digital director at satire website The Onion, notably tweeted, "What Apple has done with iOS 6 maps is like planning a mission to outer space and not talking to NASA." Although Google's YouTube application has been blocked, the website is still accessible through its Safari browser. This aggressive stance against Google has led some analysts to note that Apple may be placing the desires of the company above the needs of its end users. Although shares of Apple have taken a breather, the stock is still trading near all-time highs. Apple is still fundamentally attractive, trading at 13 times forward earnings with a 5-year PEG ratio of 0.69. Other News About AAPL Apple iOS 6 Maps Area Mess Apple's hasty attempt to dethrone Google Maps backfires. Foxconn Riots and the Revival of the U.S. Middle Class Foxconn causes more headaches for Apple. Other Stocks in the News Verizon to Pay More Than $510 Million to TiVo, ActiveVideo Verizon settles its lawsuits for half a billion. Discover Bank Ordered to Refund $200M to Consumers Discover Bank found guilty of overcharging customers. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. 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Published on Sep 25, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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