Quarter-Billion Dollar Baby

iPhone Enjoys Halo of Big Sales on Opening Weekend

By
DANIEL ARNALL<br>ABC News Business Unit
July 2, 2007, 11:02 PM ET
3 min read

July 2, 2007 — -- Some people are jokingly calling it the "Jesus Phone."

Apple's much-touted entry into the mobile phone market -- the iPhone -- has been hyped so much, many people believe the cell is perfect, and spectacular weekend sales of the device aren't tarnishing its reputation as a market changer.

"According to rough estimates we believe Apple sold 500K units over the weekend," wrote Gene Munster, a technology analyst for Piper Jaffray, in a research note. Neither Apple nor AT&T were willing to release sales figures.

Munster had originally guessed that the iPhone would sell around 200,000 units during the first two days, a key period as it falls in the second quarter with results publicly reported on July 25 with Apple's official earnings report.

"After three days of using the iPhone and testing its features, we are generally impressed," wrote Munster. "The setup process involved some hiccups, but the touchscreen, keyboard and battery life are better than we expected. We believe mobile consumers are looking for an easy-to-use smartphone, and Apple delivered."

According to Muster's unscientific "survey" of more than 250 people at three Apple launch events in New York, San Francisco and Minneapolis, conversion is a big part of the iPhone's early gospel. More than half (52 percent) of the people Munster's team talked to had contracts with carriers other than AT&T.

That could mean redemption for AT&T, which locked up exclusivity for the device sight unseen more than two years ago; the company will add new subscribers despite some harsh reviews for its data network and iPhone sign-up process.

Over the weekend, there were anecdotal reports that the iTunes-based phone activation process wasn't working in some cases. Sources at AT&T tell ABC News the problems were due mostly to the volume of customers who signed up and ported numbers from competitors' networks.

A source familiar with AT&T says the sign-up error rate for the user-directed "provisioning" process was around 2 percent during the weekend. Most technology products, especially new products, have a user error rate of above 10 percent out of the box, analysts say.

This is also the first time consumers were allowed to activate their own phones in the comfort of their homes and offices. Most of the time, people with new phones will sit around at a store for 10 to 15 minutes watching a service rep activate the phone for them.

Some other verses from Munster's postlaunch parable on the iPhone:

  • 95 percent of the people who were buying iPhones said they were opting for the more expensive 8GB model, which retails for $599.
  • About one in 10 people who lined up for the launch events said they were just looking and didn't plan to buy the phone.
  • Most of the people on lines last Friday were Mac aficionados, with three quarters reporting that they owned Mac computers. That's unusual in that Mac currently has just 5 percent of the overall computer market.
  • More than a third of the buyers said they were ditching a Motorola handset in favor of the new phone. Mike Walkley, Piper Jaffray's wireless analyst, was expecting Motorola to take a hit in market share from the iPhone as AT&T is Motorola's largest customer.
  • Many analysts were wondering if BlackBerry users would try out the new Apple smartphone in droves. Munster's quick, unscientific look didn't find a lot of BlackBerry users on line last week -- just 6 percent said they owned one of the devices.