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Panic Drop

July 25th, 2007

The stock market can be skittish, especially with a successful stock that people think may be overvalued. Confidence dropped in Apple yesterday due to news from AT&T that “only” 146,000 iPhone activations were made in the Q2 of 2007; people had expected half a million. Doesn’t matter that the reaction is nonsensical, almost farcical; what matters is that people panicked. So the stock fell by $8.81, or 6.13% on the news.

Why “nonsensical”? Because people apparently did not realize that the 146,000 number represented only a short time, cut shorter by certain factors many did not take into account. There was the belief that at least 200,000 iPhones were sold in the first two days, maybe as many as 400,000, or some dared to think even half a million. So 146,000 is disappointing, right?

Well, not quite. There are three mitigating factors:

  • First of all, it was not two days of sales–it was slightly over one day, specifically 30 hours. Sales began at 6 pm on June 29th, and ended before midnight on the 30th. That represents a much shorter time in which to sell product, in terms of percentage.
  • Second, AT&T did not report on iPhone sales, they reported iPhone activations. That cuts the potential time frame shorter–not everyone activated their phones within minutes of purchase, and a delay of hours put many out of the time frame. Some iPhones were bought for resale, as gifts, etc.
  • And finally, AT&T famously had issues with activation in that first 30 hours, which meant that many couldn’t activate until after the end of Q2.

However, the market did what it did: it reacted, having nothing else to go on. Some misunderstood and sold short, some panicked and dropped out, and others took advantage of the situation, and it snowballed. You can bet that there was some pressure to drive the market down so that people could buy lower and take profit later. It certainly didn’t help that a telecom analyst chose that moment to release an undetailed report that inventory was “decent” and demand had seen a “significant decline”–something which should be a no-brainer when you have massive lines at a release; such lines never sustain themselves. As for inventory, they sold out virtually nationwide before they could restock–but then they restocked enough to satisfy the post-release demand. That analyst firm had no actual knowledge or numbers to work on; in effect, they were guessing.

The real tell will be when Apple makes its report, and we find out the actual sales numbers. Jobs may even quote sales beyond that initial 30 hours in order to calm those who can’t see beyond the “two days” number. Who knows, it could be bad news there, too. The point is, there is no real way to tell yet. Of course, people with itchy fingers try to anyway, and that’s how you get reactions like today’s. Personally, I’m not worried; I’m in it for the long haul, and even if there’s another $8 drop or two, I’m still way ahead, and those numbers will go up again, of that I am confident.

Update: A few more notes on the CIBC analysts’ announcement. First off, they measured demand apparently by having some of their people hang out at Apple Stores, looking at the number of iPhone boxes on display, and noting how many people at those stores seemed to be looking at or buying iPhones. A less-scientific measure of sales could not be imagined. They do not state how many stores they looked at, at which hours, for how long, or even if AT&T stores were also watched. They have zero knowledge of how many units were ordered online. And worst of all, CIBC includes a disclaimer that it “does and seeks to do business with companies covered in its research reports”–in other words, they could have a huge conflict of interest and bias in this. The fact that they waited until just after AT&T released activation figures to release this report raises serious questions–it could not have been better-timed to knock Apple shares tumbling down. They may or not be right, just as anyone guessing may or may not be right, but their credibility here is incredibly questionable.

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  1. Leonel
    July 25th, 2007 at 18:44 | #1

    I agree with you… and I find it kind of weird that the AT&T annoucment was made 1 day before the apple results.

  2. kizzyhugz
    July 26th, 2007 at 04:05 | #2

    REMEMBER THAT THE PHONES could not get activated because of the other Phone Companies not lettinng go the Number.. I have change my number in order to quickly activate mine that qweekend.

    READ!!!
    Apple
    Still Having iPhone Activation Problems?

    We feel your pain. Hell, some of us took almost 48 hours for our iPhones to activate (it was actually our previous provider’s fault, because they took their sweet time letting go of the number). AT&T’s even put out a press release yesterday saying they’ve solved all problems on their end and everything should be fine. Tell that to the business customers who had to wait until today to transfer their business account to a personal account to get their iPhones activated (business support only works M-F, apparently).

    How are you doing?

    Still having activation troubles with the iPhone?

    Yes, I’m still not activated!

    Nope, I was activated recently but I had to wait a day or two.

    Nope, I was activated pretty fast.

    skip to current results >
    Reply to this comment
    0 diggs
    by kizzyhugz 8 minutes ago
    over 6 hours on the phone with them and still have no clear answers. I wonder if I would not have called if they would ever contact me with an email or phone call to how to activate my phone. STILL the worst experience ever with a apple product and I’m a fanboy all the way but this has soured my taste a lot. I have no idea what I am supposed to do now. Go down to the 5th Ave Apple store and bitch out a manager and have them activate it on the spot?

    tyleromeo

    Read more…
    Still Having iPhone Activation Problems?
    Jul 2, 01:43 PM
    I would gladly wait a few days for activation if the stupid thing was available outside of the US… I dont understand why Canada is being delayed on this :/

    xipher

    Read more…
    Still Having iPhone Activation Problems?
    Jul 2, 01:20 PM
    I’d be a little pissed if I just dropped 6 bills ($599) on an 8GB iPhone only to wait another 2 days for it to activate. Guess I feel a little better about not spending my entire Friday waiting in line at the local Apple store.

    Promethh

    Read more…
    Still Having iPhone Activation Problems?
    Jul 2, 01:14 PM
    I bought my phone on Friday and got my phone activated with my Verizon number on Sunday morning.

    My suggestion is to keep calling AT&T to make sure the transfer goes through… At one point the actually told me I would have to get a new number which I actually did do, but quickly changed my mind and said HELL NO. Transfer my SHHH now please.

    I am a happier customer now :)

    gstylez

    Read more…
    Still Having iPhone Activation Problems?
    Jul 2, 01:09 PM
    my suggestion for those transferring there numbers… keep pushing/calling to speed things up. I did and finally got it activated with my number. AT&T actually activated my phone with a new number but then I quickly called them to make sure my Verizon number was transferred which they did. Keep calling until the get it right… don’t let them give you a new number.

    Got my phone on Friday and was Activated with my Verizon number Sunday Morning. I feel good now.

    gstylez

    Read more…
    Still Having iPhone Activation Problems?
    Jul 2, 01:06 PM
    No, “You guys are iFanboys” option?

    Havok154

    Read more…

  3. Me
    July 27th, 2007 at 01:21 | #3

    I’m a technological dinosaur. So, when I read the New York Times article, the distinction between activating and selling went over my head. Still, the article sure-as-hell conveyed to me that the I-phone was the new millenium’s Edsel. So was the Times misleading its readers on purpose?

  4. Luis
    July 27th, 2007 at 01:32 | #4

    What, this story? Or another one?

    There will always be naysayers… but I seriously doubt (short of a nasty unforeseen bug such as grenade-like exploding batteries or something) that the iPhone will be any less successful than the iPod. Not that I think they’ll take 70% of the cell phone market, but rather that the iPhone will become somewhat ubiquitous and be a best-seller, probably for quite some time to come. It’s not like this is just another model churned out or something, Apple pays excruciating scrutiny to the details, more than almost anyone out there… and it shows.

  5. Me
    July 27th, 2007 at 02:58 | #5

    No, it wasn’t that story, but it shared some of the same info. It had none of the modifiers this article has in the second half. Maybe it was updated.

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