iPhone

Analysts drool over Apple iPhone 4 upgrade cycle

Apple's iPhone 4 is about to land and analysts are tripping over themselves to gauge the power of what's expected to be the company's strongest upgrade cycle ever.

This is a guest post from Larry Dignan of TechRepublic’s sister site ZDNet. You can follow Larry on his ZDNet blog Between the Lines, or subscribe to the RSS feed.

Apple's iPhone 4 is about to land and analysts are tripping over themselves to gauge the power of what's expected to be the company's strongest upgrade cycle ever.

As previously noted, analysts were upbeat about the iPhone upgrade cycle. After all, AT&T was pulling forward demand as it tries to lock in customers into new contracts before losing exclusivity. And Apple's phone is quite an overhaul. Piper Jaffray analyst Gene Munster came out with his initial prediction only to have Apple almost hit 60 percent of his target in a day. Toss in the fact that Apple had more than 600,000 preorders in one day and you get the sense this iPhone 4 rollout is going to be huge.

Wall Street analysts, an optimistic lot to start with, look uncharacteristically conservative with their predictions. Now they're scrambling to predict Apple's iPhone 4 units as well as the earnings and revenue growth that goes with it.

Barclays Capital analyst Ben Reitzes said in a research note that every 1 million iPhones represents revenue of $500 million and earnings of 25 cents a share. Not too shabby eh?

On Tuesday, Reitzes tried to rise above guessing the early iPhone 4 units sold. Reitzes was looking beyond the initial launch to the first quarter of 2011. Why? He said that he expects Apple to take its iPhone to CDMA networks, notably Verizon Wireless. Yes folks, the Verizon-iPhone chatter just won't die.

Reitzes said:

Our checks in the supply chain and within the industry indicate that production is likely to start in C4Q10 for a CDMA iPhone (possibly even dual band LTE) that can be used for Verizon (as well as other CDMA-based carriers) to be available beginning in C1Q11. The production schedule could also indicate that a CDMA iPhone could be sold in Asia at first (China Telecom possible), before calendar year-end, but we believe that Verizon would be the "main event" slated for C1Q11 or shortly thereafter. As a result of this possibility, we believe the iPhone 4 upgrade cycle is just beginning - and the velocity of this cycle could extend through C1H11, helping mute seasonal trends. While widely expected - we believe any shipments by Verizon would be positive given significant pent-up demand for the iPhone in the US among Verizon customers.

The big number: Verizon Wireless would sell about 9 million iPhones in 2011. If the iPhone arrives at Verizon, the upside to our unit estimates could be material - in the millions - if executed well.

What's really interesting is that Verizon would just be icing on the iPhone upgrade cake. There will be a six month running start to the CDMA iPhone. Here are some key comments about the iPhone 4 upgrade cycle:

Chris Whitmore, an analyst at Deutsche Bank, said:

Initial demand for the new iPhone is incredibly robust based on initial demand indicators including: pre-orders, search trends and supplier checks. The iPhone officially launches on Thursday July 24th and we anticipate another ‘Apple event' with long lines, heavy store traffic and stock outs. In addition, we believe iPhone orders have started strong internationally with UK shipments delayed unit 7/14 (similar to US lead time). We raise our iPhone unit estimate to 44M (vs. prior 41M) for CY10 and to 55M (vs. prior 50M) for CY11 due to: 1) strong upgrade demand of existing 3G and 3GS installed base, 2) more generous upgrade terms for existing customers from AT&T, 3) the significant feature upgrade and 4) anticipated strong international rollout through 2H10.

Jeffrey Fidacaro, an analyst at Susquehanna Financial Group, has the highest estimate for iPhone 4 upgrades in the current quarter:

Given the size of the iPhone 4 pre-order and our analysis of the expected upgrade cycle, particularly the remaining 3G users, we believe the full launch weekend of June 24-27 is shaping up to potentially be a 2 million-3 million iPhone event, about 2-3x higher than the one million units sold over the first three days for both the 3GS and 3G launches.

Note: Other analysts have pooh-poohed this high estimate because there will be limited supply. It's unlikely that Apple could sell 2 million to 3 million iPhone 4 units if it wanted to.

Munster said:

Apple announced that it received over 600k pre-orders for the iPhone 4, more than any single day pre-order volume ever. AT&T also indicated that pre-order sales were 10x higher for iPhone 4 than they were one year ago for the iPhone 3GS. We see this is as a positive indicator for the iPhone 4 launch and we have increased confidence in our upwardly revised June and Sept. quarter iPhone estimates (both at 9.5m units).

Related: All iPhone and Apple content.
13 comments
yobtaf
yobtaf

What no trash talk?

dcholish
dcholish

I actually like using the product and look forward to using it. I don't think of it as a tool to get my job done, I think of it as pleasure. If you could turn a chore into a pleasure, you are doing something right and that cannot be refuted. My limited Blackberry use felt like a major chore. I'm sure the Droid would provide me a similar pleasurable experience, but of course Apple did it 1st. PS. I love Google and Microsoft as well so I'm not trying to bash either.

yobtaf
yobtaf

You never fail me.

Vulpinemac
Vulpinemac

This article has been up almost all day now, and yet there's only 6 comments as of 5PM? I'm truly surprised.

tracy.walters
tracy.walters

...I don't consider myself an 'Apple Hater' .. my first personal pc was an Apple II. I've liked the products generally...I wish they were a bit easier to integrate to Active Directory. What I don't like is the general attitude of Steve Jobs, the Company itself, and Apple Fanbois "if it ain't Apple, it's crap' There is a place for almost all these products, and the consumer should be able to choose. I also don't like the way Steve Jobs abandons a product and everyone who bought into it at the drop of a hat, despite attestations to the contrary i.e. 'Apple ][ Forever!' and the NeXT. Jobs rapidly makes Apple equipment obsolete so you MUST buy his next cool new product...and he's a great salesmen. Probably a natural reaction on my part...I just don't like the salesmen attitude. I know I have the choice to buy it or not, and I excercise that choice personally. It's less of a choice when people within a corporation want it, and it's frustrating to sink a lot of time into supporting a product that doesn't play well on the network, forces you to open your security, and has users that generally want to avoid any kind of security on their systems. And a bit of an intangible, the Apple users (especially iPhone) walk around and try to convince everyone that their phone is best....so do the Android users. The Blackberry users just want a solid tool that helps them get their work done. At least that has been my experience. Let the flames begin!

andrewmillen
andrewmillen

No flames at all Tracy, in fact I concur. I also like their products generally, but in my case have never felt they represented good value for what you get. Obviously Apple have a vested bias towards their products but to advocate their chosen platform inclusions as 'the way of the future' strikes as presumptuous and smug. Apple's campaigning is targeted toward customers who choose emotionally, not rationally (which does not exclude rational people from also choosing the iphone based on its merits). But look at Jobs' presentation slide: "All new design" - (looks the same to me, once you put a case on it the stainless steel look disappears - sorry - being rational!) "Glass for scratch resistance" err... wouldn't you in any case get a $5 screen protector for your $500 investment? (sorry - being rational again...) "Thinnest" .. "Stainless steel" .. more pixels per inch than humans can process. Then look at the Ipad commercials ..."Ipad is beautiful" -- you can't argue that Apple is targetting an emotional demographic. Emotional customers will spend more on shiny new objects until the novelty wears off, by which time Apple needs to produce a shinier, newer object. This is happening now. The copycats and other competitors will produce equivalent or better products, but Apple have cleverly used hype and emotional marketing to suck in a huge customer base. Security? Corporate integration? huh? wazzat?

Vulpinemac
Vulpinemac

Let's see here-- 1) Apple II: Ran for more than ten years essentially unchanged, still selling, though not as strongly, five years after the Mac was introduced. 2) NeXt: Purchased by Apple to be the basis for a new Mac OS. NeXt became essentially the core of Carbon and OS X. It doesn't look like SJ abandoned projects. Let's look at some more. iMac: First released in '98 and, after numerous upgrades and redesigns, still one of Apple's best selling computers. iPod: Now over 9 years old and still selling strong. iPhone: Selling more and faster with each new iteration. Hmmm... Abandoning? AppleTV: A hobby, according to Steve, and still being sold despite apparently low numbers. And it does exactly what Apple claimed it would do--no less. Can Microsoft make a similar claim?

tracy.walters
tracy.walters

Vulpine, Jobs tried to kill Apple II multiple times, demand made him keep coming back, finally with the 'Apple II Forever' statement...a few month laters he killed it 'Forever' As to the NeXT ... I was on a government project where we bought a LOT of NeXT computers ... we had a verbal commitment from Jobs (that was our big mistake) that he was sticking with the NeXT (the Intel based version of the product had just come out, and we had made a significant investment in hardware). In less than six months he quit making NeXT hardware, and the OS soon followed. I don't really care if it became the 'Core' of something else, we had a huge investment in equipment that was suddenly orphaned. In my opinion, Jobs knew that when we were sitting at the table and saw us a handy way to unload remaining inventory. Tell me also, how's the Apple support for the pre Intel processors going? And yes, one of the great things about Microsoft is the compatibility, both to previous versions and older applications (XP mode on Windows 7 is a good example) But...I don't expect you to change your opinion...Jobs has spoken.

vdesilva
vdesilva

What is so amazing is that if a punter likes an product, and finds it easy to use, the IT and technologists find it impossible to support. I wonder why? The same is to happen in my organisation, 10,000 strong, till we asked our punters to buy what they wanted. Our technology purchase, maintenance and support bill dropped through a black hole.

adakar_sg
adakar_sg

Apple haters usually don't dislike the product itself (except ipad) but the vendor lock and censorship apple promotes.. Apple uses standard components from Taiwan as everyone else, so.. products are the same but the logo and limitations differ :) I'm personally amazed at what apple have done but at the same time discussed with what they are doing :)

benmcdevitt09
benmcdevitt09

im not an apple hater, i super dislike them. Windows runs more on how I think than trying to find and work things on apple. Iphone 4 looks awesome, but ill stick to my droid, I am verry happy about the not obnoxious price Tho! unlike the ipad

pcteky2
pcteky2

OSX works the way some people think, but that doesn't mean those people know what they are doing and for sure we don't want to emulate those people either.

Vulpinemac
Vulpinemac

... but what do I know? Microsoft has trained you to do your tasks in a certain way--to the point that you think that way. On the other hand, OSX tries to work the way everybody else thinks. But that's beside the point.

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