Apple Inc. (AAPL) sold more than 1 million units of its
next-generation iPhone 3G S on its first weekend of sales, defying
those who had predicted it wouldn't reach the levels attained
during its predecessor's launch.
Apple also said 6 million customers downloaded its new iPhone
3.0 software in the first five days since its release.
"iPhone momentum is stronger than ever," Apple Chief Executive
Steve Jobs said in the company's press release. Over the weekend,
The Wall Street Journal reported that Jobs received a liver
transplant two months ago. The 54-year-old, who has been on medical
leave since January, is expected to return to work later this
month.
The first weekend for the iPhone 3G S basically matched the
launch last year of the iPhone 3G, a surprising development because
the latest iPhone was being released in fewer countries, eight
versus 21, and was perceived to offer fewer changes of
significance.
Nonetheless, the phone's strong performance - at a time when
consumers are generally being frugal in their spending - reflects
the increasing popularity for smart phones and the attraction of
the iPhone brand itself.
Analysts - who generally expected sales in the half-million
range - said the stronger-than-expected sales were due, in part, to
owners of the original iPhone from two years ago refreshing their
smart phone.
It wasn't known how many sales were to new customers or old
ones, and a representative from Apple wasn't available to
comment.
The iPhone sales news is helping Apple shares hold up better
Monday, in an otherwise dreary day for the market and as the stock
absorbs the latest Jobs' health news. Apple shares recently lost
1.9% to $136.82; in comparison, the S&P 500 fell 2.9% to
894.69.
Shares of AT&T Inc. (T) - the U.S. provider for the iPhone -
slipped only 2 cents to $24.02.
The sales news seems to be weighing on the iPhone's rivals.
Shares of Blackberry maker Research In Motion Ltd. (RIMM) fell 6.7%
to $67.88, while Palm Inc. (PALM) - maker of the newly released Pre
- dropped 6.7% to $13. Sprint Nextel Corp. (S), which provides
service for the Pre, fell 1.8% to $4.87.
Needham & Co. analyst Charles R. Wolf said part of iPhone's
attraction is the large offering of applications that boost the
phone's productivity. Apple's App Store includes more than 50,000
software programs, by far more than rivals.
"The iPhone literally is a computer now. It can make calls, but
the other stuff it can do is truly amazing."
Caris & Co. analyst Robert Cihra said Apple was able to post
strong sales in the tough environment because of continuing high
demand for smart phones.
"Even against the backdrop of a weak or declining cell-phone
market, the percent moving to smart phones is increasing," Cihra
said, adding that BlackBerry maker Research In Motion and Apple
have been able to take market share from other cell-phone
companies. "It's an increasing percent of the pie, even if the pie
isn't growing."
One group, though, likely not participating in the iPhone's
sales surge is business customers, as the vast majority of iPhone
users remain consumers.
The BlackBerry has long been the "gold standard" for
business-phone users, and analysts said Apple is still a long way
off from penetrating the market, though it has introduced some new
features that could appeal to the business user.
"With each revision of the operating system, they're adding more
business friendly features," Needham's Wolf said, adding that one
new feature is remote wipe, the ability to delete all the data off
a phone should it be lost.
That feature increases the security of the phone, which analysts
said is one of the main concerns enterprises have about the
iPhone.
"If you look at Apple historically, it hasn't been all that
successful ... in enterprise," Caris' Cihra said, adding that the
BlackBerry's strong security features appeal to businesses. "Just
to make any traction in enterprise, you have to make traction in
security, and Apple is just getting started."
In addition, even if corporations want to use the iPhone, it
likely will take a while for the company's information technology
to adopt standards for its use.
For the most part, analysts said, iPhone is "entering businesses
through the back door." Consumers buy the phone and then take it
with them to work, requesting IT support and using the phone for
work-related and personal purposes.
"The key point is that even in the business market, the owners
of the iPhone are going to use it outside business for personal
use," Needham's Wolf said. "The phone has over 50,000 applications,
and a lot of software companies are adding business-oriented
applications. Developers are smoothing the way into
enterprise."
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com;
(Tess Stynes contributed to this report.)