In what seems like a big boost to Apple (NASDAQ:AAPL), Verizon (NYSE:VZ) recently announced the sale of 6.2 million iPhones in its holiday quarter. This accounted for a much bigger contribution (63%) to the carrier’s total smartphone sales of 9.8 million during the quarter than the historical average of about 50% and 56% during the previous holiday quarter. A big reason for this may have been the sales of the iPhone 4 which was available for free for the first time at Verizon as well as the 4S which was discounted by $100. A shift in iPhone mix towards Verizon could have also been due to the introduction of LTE in the iPhone 5, causing customers to potentially prefer the carrier for its better LTE coverage over the rest. While the overall iPhone sales came in ahead of our expectations, the iPhone 5 mix still remains a worry going into the earnings release later today.
New iPhone estimate
Earlier, we estimated Apple’s iPhone sales based on the 9.8 million smartphone sales guidance Verizon had provided for the quarter. (see Verizon’s Q4 Smartphone Sales Imply Another Big Holiday Season For Apple) Now that we have Verizon’s actual iPhone sales figure, we find that Apple is likely to have sold more than our previous estimate of 50 million. Considering that Verizon has accounted for 12%, 9%, 10%, and 12% of Apple’s iPhone shipments over the last four quarters and that the carrier’s iPhone sales this quarter have surprised on the upside, we assume that Verizon’s contribution to Apple’s total iPhone sales is towards the higher end of that spectrum, i.e. 12%. This brings our new iPhone sales estimate to over 51 million for the December quarter.
This still leaves a significant scope for upside if Verizon’s contribution to iPhone sales turns out to be lower than 12% due to the fast iPhone 5 rollout. For example, Apple’s holiday quarter sales in 2012 will include those in China as against the iPhone 4S rollout when China received the iPhone after December. There is however a good chance that Verizon’s good showing with the iPhone this quarter may have caused it to account for a bigger proportion of Apple’s iPhone sales, implying a downside to our estimates.
iPhone 5 mix a concern
However, Verizon’s results were not all good news for Apple. The latest iPhone 5 accounted for only about a half of all the iPhone sales at Verizon. While we have no historical data to compare this against since neither Apple nor Verizon provide their iPhone sales breakdown by quarter, AT&T said last year that most of the iPhones it had sold during the 2011 holiday quarter were the then-latest iPhone 4S. This adds to the ongoing speculation that sales of the latest iPhone 5 have been less than satisfactory and fuels concerns that customers haven’t found enough innovation in the latest model to warrant a purchase. However, while this might be the case in the U.S., iPhone 5 sales in the outside markets are likely to have compensated for the same to an extent.
All eyes will therefore be on the earnings call later today when Apple declares the iPhone sales data. While iPhone unit sales may set new records, the average selling price of the iPhones sold will be a closely watched metric . If iPhone 5 sales mix turns out better than anticipated, that will get reflected in better ASPs and vice versa.