Monday, February 21, 2011

Verizon iPhone Sales

There's been a ton of speculation about the level of iPhone sales on Verizon thus far. So I'm going to throw my hat in the ring to come up with a decent analysis estimating sales:

Chitika Insights has a great tool showing the hits it gets on its ad network from iPhones using a cellular data connection. It shows the percentage from AT&T and Verizon is currently distributed at 93.5% AT&T and 6.5% Verizon. While this is great information, we have to know the current active pool of iPhones in the US in order to get a sales estimate. AT&T does not release how many active iPhones are on their network. However, they do release their activation numbers each quarter with their results. The past eight quarters, iPhone activations on AT&T are stated below (it is important to use AT&T activations and not Apple's iPhone sales which are worldwide):

2010 Q4: 4.1 million
2010 Q3: 5.2 million
2010 Q2: 3.2 million
2010 Q1: 2.7 million
2009 Q4: 3.1 million
2009 Q3: 3.2 million
2009 Q2: 2.4 million
2009 Q1: 1.6 million

2 Year Total: 25.5 million

Of course some of these phones were returned, canceled, or replaced (by a newer model). I could not find any information to say otherwise, so I'm going to assume that AT&T counts gross activations, as opposed to net activations which would already subtract the returned phones from the total activated. So how many iPhones are returned? As some may remember, during Apple's media event on the iPhone 4 antenna issue, Steve Jobs revealed that early on, 6% of iPhone 3GSs were returned, while 1.7% of iPhone 4s were returned. Assuming return rates stayed constant, I'm going to discount the sales of iPhone 3G (2009 Q1 & Q2) and iPhone 3GS (2009 Q3-2010 Q2) by 6% and the sales of the iPhone 4 (2010 Q3-Present) by 1.7%. I am aware that the previous model phone was sold during these periods, but I am assuming that the new model sales were far larger than the older models. These adjustments bring my new 2 Year Total to 24.37 million iPhones.

Then there is the difficult task of figuring out how many iPhone 4 purchases were made by customers who had already purchased an iPhone in the prior 6 quarter period. While 77% of first day iPhone 4 purchasers were reported to be existing iPhone owners, those numbers drastically fell as the product moved from early adopters into maturity. In addition, the vast majority of upgrades were coming from iPhones purchased before the 2 Year period we are studying, meaning it would not effect our data. We can also assume that many of those replacing a iPhone 3GS or 2009 Q1 or Q2 purchased iPhone 3G would sell their existing hardware or pass it on to a friend or family member. Therefore, I will assume that these customers have a negligible effect on our analysis. I also am not counting iPhones sold in the current quarter (2011 Q1) considering many are replacing iPhones counted in our analysis.

Finally, to lessen the concern of investors, AT&T announced that 90% of its iPhone customers are under contract. For analysis purposes, however, this provides us with the little tidbit that 10% of its iPhone customers are out-of-contract, or purchased their iPhone more than 2 Years ago. We're not counting these customers yet, so lets add 10% (or 2.437 million iPhones) to our active count to get 26.807 million iPhones. This will be our estimate for the total active iPhone users on AT&T at the end of 2010.

With the AT&T iPhone users now representing 93.5% of the US market, this would imply a certain number of Verizon iPhones sold. BUT WAIT! Boy Genius Report, while foolishly extrapolating local retail data to say the Verizon iPhone is barely outselling the AT&T iPhone, points to a statistical gem: 14% of Verizon purchasers are switching from AT&T iPhones. This approximate number has been echoed in several studies and must be considered in our analysis as we are using a percentage of the total active iPhones on AT&T and Verizon. After considering this in our algebra, we get a total of 1.84 million Verizon iPhones active as of February 21st with 825,000 on launch day, February 11th (calculated from the 3% Verizon iPhone Market share recorded on February 11th). Not a bad first couple weeks, considering analysts estimates call for 9-10 million in all of 2011. A new iPhone over the summer would definitely make that a strong possibility

No comments:

Post a Comment