Gloss coming off iPhone amid slow sales

Stan Beer
Wednesday, 25 July 2007 16:34

Business IT - Technology

The airwaves are literally buzzing with reports that sales of the iPhone may not be meeting the lofty pre-launch expectations of the market. The reports have led to a slide in the company's share price.

After AT&T released figures showing that just 146,000 subscribers had activated their new iPhones in the first two days of sales at trhe end of June, Apple's share price slid 6.1%. While there have been reports that the lower than expected number could be partially attributed to activation problems, suggestions have been made that initial sales have been disappointing and tapered off now that the hype has died down.

According to a report on Apple Insider and a number of other news sources, analyst firm CIBC World Markets has issued a research note suggesting that sales had declined in the past 10 days, with plenty of iPhones on shelves and little interest being shown in the new device by visitors to Apple stores.

While AT&T is reported to be claiming that iPhone is selling fine, suggestions are being made by analysts and market watchers that AT&T is part of the problem. One of the big bugbears for would-be iPhone users is the slow data rate of 2.5G Edge network. The iPhone is after all an Internet device.

As a result of the less than enthusiastic take-up, CIBC has predicted that the Apple will release a 3G version of the iPhone by November. That of course begs the question of what happens to iPhone owners tied for the next two years to the EDGE network. Such talk could also put a damper on iPhone sales until November.

Apple can take heart from the fact that early iPod sales were nothing to write home about. However, with the iPod, Apple didn't have to contend with a different mobile phone carrier in each market that it launched. Nor did it have to contend with giant incumbent players like Nokia and Motorola, among others.

Despite all of this, as well as reports of the iPhone being easy to hack, anecdotal reports from iPhone owners about how much they love their new device continue to filter through. Even the security expert who demonstrated an exploit for the iPhone's Safari browser said he couldn't bear to part with his iPhone.

On July 29, one month will have elapsed since the iPhone went on sale in the US. The July sales figures should go a long way to revealing whether Steve Jobs' target of 10 million iPhones sold in the first year can be achieved. With all the pre-launch hype surrounding the iPhone, if Apple is well ahead of sales targets by the end of this month, then the company may have to do some soul searching about its sales model - something that hasn't happened since the second incarnation of Jobs.