## Tuesday, April 29, 2008

### Predicting the iPhone sales before 2009

The best way to predict iPhone sales is by looking  at the history of the iPod sales and picking out the one year which best describes the iPhone  momentum and applying the figures to the  what is know so far.

These are the iPod sales for every full year since its introduction:

The most obvious trend is the amount of sales of the last quarter  being  much greater compared to any of the other 3 quarters.  We all know this is due to the holyday season.  Because we have some sales figures of the iPhone already we can see its sales per quarter to be following the same momentum.

Note that iPhone was not on sale during Q2 and was selling for only 3 DAYS during Q3.

Since Apple seams  to be happy with this trend each year, we can assume they plan the same situation for the iPhone sales in 2008.  Because we have the results from the first quarter – 2008 Q2, we can use two methods to calculate the other 3 quarters:

1.       Average iPod quarter sales increase compared to the same quarter the previous year.

2.       Average iPod quarter sales increase compared to the Q2 of the same year.

If we use the average data from the 6 consecutive iPod sales years and we apply it to the iPhone based on the known 2008 Q2 sales, we get the following results.

Method 1.

If this scenario manifests we will see a total of 18,245,636. That’s over 18 million iPhones or 80% above Apple’s goal.

Method 2.

If this scenario manifests we will see a total of 18,901,934 . That’s close to 19 million iPhones or 90% above Apple’s goal, however very close to the 20 million they have reportedly ordered so far. (10 million  last year and 3+7 million this year)

There is actually a simpler  and more accurate way to use the iPod’s sales figure to foretell the iPhone 2008 sales performance. That is to measure the iPhone grouth and use only the most similar iPod year to predict the iPhone sales. The best way to do that is to compare the results of all strong Q1s to the following Q2s. If a naturally low Q2 it shows an increase then the rest of the year will likely be very successful and see a phenomenal growth compared to the previous year.

Here are the iPod Q1Y and Q2(Y+1) results

It is particularly interesting to see that  in 2004 and 2005 the naturally low second quarter has shown better results than the naturally strong first quarter of the previous year.  What this has resulted is in tremendous iPod sales increase during 2004 and 2005.

Now lets look at the only available such statistic for the iPhone

On first glance, it would seam that iPhone is likely to perform better but similarly than the iPod performed in 2003, 2006, 2007 and likely in 2008 . However  Apple has said that they will account for all iPhones sold after 6th of March as part of the Second quarter - Q3.

This is the key to the Pandora box.  Apple has reported only January's and February's iPhone sales for Q2!

What this means is that iPhone sales could have been 1/3 more had Apple reported the March iPhone sales as part of the first quarter – Q2.

Futher, the golden age of iPhone unlocking started around the middle of March when the Zibri unlocking solution allowed for one click - 4 minutes uncloking that anyone can do. It was probably another week or 2 before this started to affect iPhone sales around the world.

So not only did we miss to see the impact of the March 6 announcement on iPhone sales, but also most of the effects of effortless illegal unlocking.  It will therefore be fare to say that had Apple reported all sales until the 1st of April the first quarter result would have been at least 50% better.

Now the  2008 iPhone sales potential look so much more like iPod one from 2004 and 2005.

We just estimated probable iPhone Q2 sales as 2.5 million iPhones. What will the sales look like during the next 3 quarters if we assume the average increase as seen in the iPod in 2004 and 2005.

In total if the above logic happens to be true, Apple could potentially sale up to 42,857,089 iphones by the end of 2008.

Yes that almost 43 milion iPhones.

Well, I hope that Apple orders some more than the 20 milion iPhones they have already ordered so far, case they will run out of stock very fast indeed.

There are a few developments in the around the iPhone that are likely to help achive these phenomenal sales.

-          Worldwide Widespread availability of a reasonably prices Unlocked iPhone (<500\$)>

-          Availability of a carrier specific but very affordable iPhone with contract (<300\$),>

-          Official introduction in countries such as Australia, China, India, Switzerland, Austria, Ilaty and others before the year is up.

-         The  200,000 + registered developers for the iPhone Platform trough the SDK, developing many games and apps after June, 08

-          KPCB's 100,000,000 iFund for the iPhone platform stimulating developers, bussinesess and people to invest in the iPhone platform.

-          Successful performance of the enterprise update of the iPhone its adoption by 1/3 of fortunes top 500 companies that has shown interest so far.

-          The 45 new international stores Apple is planning by the end of the year selling officialy unlocked phones. (Locked phones only sold in the carrier stores)

-          Introduction of a 3G/GPS version  of the iPhone to initially complement and then replace the current model.

However to calculate the end sales a much more simple approach may be used. Approach that is more in line with Apple current optimism of the sales. Optimism that they will slightly exceed the projected 10 million sales.

I gues it all depends on how aggressive Apple wants to be in sales and how much they have learned from the global illegal unlocking about the actual demand for the iPhone and the bussiness model they should be pursuing.

The worst thing that  now can happen to Apple is not that iPhone will not be successful but that they will greatly underestimate demand. Thus likely losing a very good chance to climb their market share higher than their the most optimistic projections. Something like the Amazon Kindle wifi digital book.

Data used:

iPhone Sales: http://en.wikipedia.org/wiki/Image:Iphone_sales.svg