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China's No Line Head-fake. Apple On-track to Sell 50 Million iPhones.

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In the midst of concerns that there weren’t any lines at Apple’s China stores when the iPhone 5 went on sale last Friday Apple announced that it had sold over 2 million iPhone 5s in three days.

Apple® today announced it has sold over two million of its new iPhone® 5 in China, just three days after its launch on December 14. iPhone 5 will be available in more than 100 countries by the end of December, making it the fastest iPhone rollout ever.”

The shares were down $37 after AT&T’s CEO made comments on December 5 that it was on track to sell 26 million smartphones for the year after selling 6.4 million in October and November and 16.7 million in the first nine months.  If AT&T sells the same percentage of iPhones that it did in last years December quarter it will sell 7.5 million in this December quarter.  This makes some sense since it was able to sell the iPhone 5 in September vs. last year when it started selling the 4S in October.  However, I do think it is a bit on the conservative side since it would translate to selling the same number of smartphones in December that it did on average for October and November.

I have updated my model from my December 3 note to reflect 7.5 million iPhones sold by AT&T, 5.5 million for Verizon and 2 million for Sprint (all of which I believe can be beat).  To hit a total of 50 million iPhones the rest of the carriers will need to sell 35 million iPhones, which I also believe they can.  To do this they need to double September quarter’s sales of 17.6 million which compares to last years sequential unit growth of 88%.  While doubling is a higher hurdle I believe it can be achieved since the iPhone 5 has been launched in more countries than the 4S.  Note that the two million iPhone 5’s sold in China in three days equates to 11 points of sequential growth by itself.

While this doesn’t negate the recent concerns about component orders being cut for the March quarter it appears that the iPhone is having very strong demand and could exceed my 50 million estimate.

iPhone 4S iPhone 5
Apple Sept '11 Dec '11 Sept. '12 Dec. '12
iPhones (mil. Units) 17.1 37.0 26.9 50.0
  Units Q/Q (mil.) 19.9 23.1
  Q/Q % (16)% 117% 3% 86%
  Y/Y % 57% 35%
iPhone 4S iPhone 5
Sept '11 Dec '11 Sept. '12 Dec. '12
AT&T (mil. units) 2.7 7.6 4.7 7.5
  Units Q/Q (mil.) 4.9 2.8
  % of Apple 16% 21% 17% 15%
  Q/Q % (25)% 181% 27% 60%
  Y/Y % 74% (1)%
Verizon (mil. units) 2.0 4.3 3.1 5.5
  Units Q/Q (mil.) 2.3 2.4
  % of Apple 12% 12% 12% 11%
  Q/Q % (13)% 115% 15% 77%
  Y/Y % 55% 28%
Sprint 0.0 1.8 1.5 2.0
  Units Q/Q (mil.) 1.8 0.5
  % of Apple 5% 6% 4%
  Q/Q % 2% 33%
  Y/Y % 11%
Remaining Carriers 12.4 23.3 17.6 35.0
  Units Q/Q (mil.) 10.9 17.4
  % of Apple 73% 63% 65% 70%
  Q/Q % (14)% 88% (3)% 99%
  Y/Y % 42% 50%

Disclosure: My family and I own Apple shares.

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