Early iPhone sales draw scrutiny

11:04 AM, Sep 20, 2013   |    comments
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Alistair Barr

SAN FRANCISCO -- When Apple launches new products, Wall Street always watches closely. But this weekend, there's more on the line. 

With questions swirling about the company's strategy and rising competition, investors will be scrutinizing every data point more than usual -- including the length of every line outside Apple stores -- as two new iPhones go on sale today.

"This launch is more important than the past couple because of the fall in Apple's stock price," said Brian Colello, an equity analyst at Morningstar. "During virtually every other launch, the outlook for the company has been more optimistic."

When Apple launched iPhone 5 a year ago, the stock was trading above $700. Since then, it has slumped, and closed at $472.30 Thursday.

Since Steve Jobs introduced the iPhone in 2007, the device has taken the mobile phone market by storm. But rivals, led by Samsung, have begun to catch up, in part by making cheaper smartphones that run on Google's free Android system. That's sparked concern that iPhones are too pricey for developing markets. This was exacerbated by the unveiling of the iPhone 5c, a cheaper version of the iPhone 5s but still deemed too expensive for developing markets.

When Apple launched the iPhone 5 last year, the company sold 5 million units in the first weekend. This year, Apple is launching two phones and releasing them in more countries, including China, at the same time. This has Wall Street looking for a higher number from this weekend.

Citi research analyst Glen Yeung estimated that Apple will sell about 7.75 million units of the iPhone 5s and 5c combined over the weekend.

Morningstar's Colello and Will Power of RW Baird are looking for 7 million; Gene Munster of Piper Jaffray forecasts 5 million to 6 million. That range "may be viewed by some as a disappointment, given that it will include China as a launch country for the first time," Munster wrote to investors. "Demand is ... slightly below where demand was for the iPhone 5."

Colello considers sales of 7 million this weekend a baseline that Apple must meet to avoid raising concern about early supplies or customer demand. Last year, Apple sold 5 million iPhone 5 units during the first weekend, but this did not include China. When the device reached that country later in the year, Apple sold 2 million more units during the initial weekend -- for a total of 7 million, according to the Morningstar analyst.

This year, Apple took pre-orders for the iPhone 5c, but did not release pre-order numbers, as it did for previous launches. "The non-disclosure is a mild negative for now, but we prefer to gain further insight into initial demand for Apple's higher-end iPhone 5s before rushing to judgment," Colello said. Apple did not make the iPhone 5s available for pre-order, so the first indications of demand will come this weekend.

During last year's iPhone 5 launch, Apple stores in the U.S. largely sold out by midday Saturday.

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