Monday, October 22, 2007

AT&T : An iPhone Sales Anchor

A recent poll show customers planning on switching to the AT&T (T) network has not been this low since 2006. Since one can only buy an iPhone on this network, isn't that bad news for Apple's (AAPL) US iPhone sales>?

The survey show those planning to switch to the AT&T network peaked in June, just prior to the release of the iPhone and fell off a cliff in October.

The explanations for this are obvious. The folks who were going to by the phone no matter what the cost where the reason for the run-up in June. Since that pent up demand was satisfied, we are now into the people who will by the phone based not just because it is an Apple product, but because of value considerations. Those consideration are only two things, the cost of the product and the cost of switching plans. Apple has slightly relieved the first dropping the price from initially insane $599 to a slightly more reasonable $399. While,this angered those folks who paid the $599, Apple did try to kiss and make up by refunding these folks $100.

If you remember back in early May I said that the iPhone would not gain mass acceptance chiefly because of the price and the fact that it is available only on one network, AT&T. The #1 complaint among Apple users? The painfully slow AT&T network.

With Apple devotees not happy with AT&T and the number of current cell user planning to switch to AT&T dropping like a stone, that all adds up to US iPhone demand falling fast also. Worse is the fact that those planning to switch to Verizon (VZ) is on the rise. Could this mean that with Verizon unveiling its iPhone competitor in time for the holidays, people are choosing the network over the phone? It is a little early to tell for sure but that is what it looks like initially.

Apple has sold 1.3 million units to date so far which puts it about 40% behind the pace (2.5 million per quarter) it needs to be at to sell the 10 million unit goal CEO Jobs set before the launch. I know a few folks who have the phone and like it but lament the network it is on. The problem for Apple is word is getting around and my guess is folks who may be buyers are sitting back waiting for another price drop OR, the phone to be available on other networks before making the purchase.

Will this kill Apple? No. Mac sales are taking off and the is not viable competition to the iPod. It will show that Apple is not perfect and that may scare a few folks. Apple releases earning tonight after the bell so we will know so enough. No skin off my back either way but it will be interesting to watch

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