iPhone Sales: Not Dreadful, Not Spectacular Either

Jeff Matthews is getting a lot of blogosphere linkage for his piece saying that iPhone sales are much lower than the likes of Gene Munster would like to think. But here's how Matthews' logic works:

The 10,000-a-day consensus among Wall Street's Finest assumes that iPhone sales, which averaged 135,000 in the first two days after launch, collapsed the very next day to 10,000 a day, and stayed there through September 9.
That is, of course, unlikely.
Assuming a more gradual drop-off from the feeding frenzy of the first week's activity, iPhone sales could be half that rate or less.
Let’s, for example, assume sales averaged 135,000 for the first three days, then dropped in half every three days thereafter until settling out in the middle of July at whatever pace got them to 1 million on September 9th.
That would imply a 4,200 a day run-rate, which is less than half the consensus.

The problem is that yes, iPhone sales genuinely did collapse on the third day the unit was on sale. The iPhone went on sale Friday June 29, on which day pretty much every AT&T store in the country sold out of its quota, and a lot of the Apple stores did as well. The next day, Saturday June 30, was the day that the Apple stores sold out of their inventory. And the one datapoint which we know for sure is that between Friday and Saturday, 270,000 units were sold.

The third day was Sunday July 1. What are the chances that iPhone sales collapsed to 10,000 units on that day? Very high! Because everyone was sold out of iPhones at that point, and, it being a Sunday, no one was making any deliveries either.

Over the course of the following week, iPhone sales will have picked up, as deliveries started to get made to both AT&T and iPhone stores. And I'm sure that sales for much of July were volatile, driven as much by supply as by demand.

But the fact is that between July 1 and September 8, Apple managed to sell 730,000 iPhones. What that works out at on a per-day-in-September basis is not particularly interesting, really.

The key point is that Apple saw what happened to iPod sales when iPods came down in price. Consumers, it turns out, are reasonably price-sensitive when it comes to shelling out hundreds of dollars on electronic gizmos. And so Apple slashed the price of the iPhone in order to drive sales. Remember, too, that the amount Apple receives per iPhone has not fallen by 33%, since Apple also gets large payments from AT&T for every iPhone sold.

On the other hand, it's worth comparing iPhone sales in the US to sales of Nokia's ultra-high-end N95 phone, primarily in Europe. According to someone who knows such things, Nokia sold 1.4 million N95s in the second quarter, and is likely to sell over 2 million more in the third quarter. The much-vaunted figure of 1 million iPhones sold might sound impressive on its own, but by cellphone standards it's really nothing all that special.