Two iPhone Sales Trends You May Have Missed
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Apple (NASDAQ: AAPL) will report its first quarter financials in late January, and obviously, iPhone 5 sales will be important (See: Will the iPhone 5 Give Apple Another Earnings Record?). Now it can be said with near-absolute certainty that every analyst under the sun is expecting the iPad Mini to cannibalize the company's larger tablet models to an extent, but some may have not expected that older "legacy" iPhones would cut into sales of the iPhone 5.
As originally reported by AllThingsD earlier this week, a research report from Consumer Intelligence Research Partners shows that "by some metrics, the iPhone 5 underperformed compared to its predecessor, the iPhone 4S." More specifically, "the iPhone 5 accounted for 68 percent of total iPhone sales during its first month at market — significantly less than the iPhone 4S, which accounted for 90 percent of all iPhone sales during its first month of retail availability."
In October 2011 after Apple's iPhone 4S launched, just 7% of smartphone sales were derived from the previous version (iPhone 4), while the remaining 3% was attributed to sales of the iPhone 3GS. This time around, however, the immediate predecessor iPhone 4S is still snatching up 23% of sales, and the iPhone 4 (remarkably) still accounts for 9% of Apple's smartphone revenue.
While this data doesn't necessarily mean that Apple's iPhone 5 is a disappointment, it should tell investors that the company's Q1 financials don't depend as heavily on sales of its newest smartphone as most analysts originally thought. As AllThings D's John Paczkowski put so ardently, "Apple is wisely expanding its addressable market [...] [b]ut those lower-priced models will inevitably grow their share [...] that might limit not only the number of full-priced iPhones Apple can sell, but revenue and profits, too."
Interestingly, this report comes on the same day that Canaccord Genuity (via CNET) boosted its first quarter iPhone sales estimate by close to 5%, as the investment bank now expects Apple to sell 47.5 million of the devices by the end of the period. In essence, this may mean that although the tech giant's 'smartphone pie' is becoming more diversified, it is still growing, which is most important from an investment standpoint. It's worth noting that in the first quarter of 2012, Apple sold 37 million iPhones in total.
In comparison to other players in this space, Apple fanboys would have you believe that the Cupertino-based tech giant is easily the world's largest smartphone provider, and that when God cries, his tears are made of iPhones. As market share data tells us, however, this is simply not the case.
According to a new report by comScore MobiLens (originally reported by AppleInsider), Apple held approximately 17.8% of the mobile OEM (original equipment manufacturer) market at the end of October, second to only Samsung Electronics' mammoth 26.3% share. In the period between July and October, Apple's market share in this arena improved by 1.5 percentage points to place it above LG Display (NYSE: LPL), which currently holds 17.6% of the market.
While the report doesn't indicate the exact drivers behind this growth -- the largest experienced by any member of the top five by a full eight-tenths of a percentage point -- we can speculate that the iPhone 5 played a role. As we already discussed (see iPhones Cutting Into iPhone 5 Sales), Apple's iPhone 5 makes up a smaller percentage of its overall smartphone revenue, but this base is expected to grow by 25-30% YOY by the end of the quarter.
Coupled with the fact that Apple now offers its "legacy" phones at lower-than-usual discounts, and we can now see why the tech giant's market share may be improving. While it's likely that margins will continue to be squeezed in the short term, investors can't argue with growth, especially at the stock's current valuation.
Aside from LG, other players in the smartphone space are Google (NASDAQ: GOOG), Research in Motion (NASDAQ: BBRY), and Microsoft (NASDAQ: MSFT). In terms of market share amongst smartphone platforms (not to be confused with OEMs), Google held 53.6% of this market at the end of October, ahead of Apple (34.3%), RIM (7.8%), and Microsoft (3.2%). Between July and October, Google and Apple saw percentage point gains of 1.4 and 0.9, while RIM and Microsoft saw their shares decline by 1.7% and 0.4% respectively.
Getting to the valuation, you’re probably aware that shares of Apple are cheap, but you may not know just how inexpensive they are at the moment. At a current market price near $540, shares trade at a PEG of 0.63, which is far below the likes of Google (1.38) and Microsoft (1.45). RIM, meanwhile, is expected to continue to struggle with profitability through the 2013 calendar year.
Regardless of if it pays a special dividend (see Will Apple Pay a Special Dividend?), the Cupertino-based tech giant offers a decent projected yield of 1.8%, which is below that of Microsoft (3.5%), but above Google and RIM – both of which don’t pay a dividend at the moment.
This article is written by Jake Mann and edited by Meena Krishnamsetty. Meena has long positions in Apple, Google, and Microsoft. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!