iPhone 8 Posts Weak Initial Sales, Pressuring iPhone X
October 26 2017 - 5:59AM
Dow Jones News
By Tripp Mickle
Apple Inc.'s iPhone 8 posted the weakest sales of any of the
company's new smartphones in recent years, according to estimates
by two market research firms, raising the stakes for the
higher-priced iPhone X as advance orders start on Friday.
In the U.S., Apple's largest market, the iPhone 8 and its larger
8 Plus version accounted for 16% of all iPhone sales in the
September quarter, according to Consumer Intelligence Research
Partners LLC. By comparison, the iPhone 7 and 7 Plus accounted for
43% during the same period last year and the iPhone 6s and 6s Plus
accounted for 24% during the same period in 2015. Other signs
indicate similar underperformance globally.
Soft iPhone 8 sales stem partly from confusion over the trio of
phones Apple is releasing this year -- and could reflect buyers
waiting for the iPhone X, which boasts an edge-to-edge display and
facial-recognition technology. It ships Nov. 3 and starts at
$999.
The iPhone 8 and 8 Plus, which started shipping Sept. 22 and
start at $699 and $799, offer wireless charging, improved
processors and new camera capabilities over preceding models but
feature the same basic design.
Many consumers have decided the improvements in the iPhone 8 are
too incremental to justify the higher price tag and instead opted
to buy cheaper, older models or wait for the iPhone X, said Mike
Levin and Josh Lowitz, co-founders of Consumer Intelligence
Research Partners.
"They signaled to their customers: Don't buy the 8. Their
customers listened," Mr. Lowitz said.
Mr. Levin expects poor sales of the iPhone 8 to weigh on Apple's
quarterly results when it announces earnings Nov. 2. Sales of the
device may improve after consumers can compare it to the iPhone X
in stores, but he said Apple has "cornered themselves and really
have to deliver this (iPhone X) extremely well."
As of a month after it started shipping, the iPhone 8 and 8 Plus
combined accounted for 2.4% of iPhones in use world-wide, according
to market research firm Localytics, which analyzed data from more
than 70 million Apple devices. That was less than half the share
claimed by its predecessors, the iPhone 7 and 7 Plus, a month after
they started shipping, and the lowest for a new iPhone since at
least 2014, the firm said.
The iPhone 8 got less promotional support from resellers than
its predecessor. In the U.S., wireless carriers largely offered
discounts on the iPhone 8 with trade-ins of old devices rather than
the free iPhone 7 deals some offered for trade-ins last year,
according to Jefferies.
During a call with analysts last week, Rogers Communications
Inc. Chief Executive Joseph Natale said there was an "anemic
appetite for the iPhone 8" across the Canadian wireless carriers'
network and "lots of anticipation around the iPhone X."
Wall Street analysts have waived off tepid demand for the iPhone
8, saying weaker demand for it could benefit the company if it
sells more of the pricier iPhone X. Sales of more iPhone X would
boost average iPhone selling prices and potentially lift annual
revenue.
Still, Apple must prove consumers will embrace the iPhone X's
higher price tag -- and demonstrate that it can make enough of
them. The iPhone X -- which Apple is releasing six weeks later than
usual for a new iPhone -- has been dogged by production challenges,
including problems over the summer that delayed typical
manufacturing timetables by at least a month. It also had an
imbalance of components critical to its facial-recognition
hardware.
Production issues have stoked concern that iPhone X supplies
will fall short of demand until the March quarter, about a quarter
later than usual, said Gene Munster, who heads research at
venture-capital firm Loup Ventures. However, he and analysts don't
expect annual sales to suffer, so long as supply matches demand by
June.
He and other observers will be watching preorders for the iPhone
X, which begin Friday at 3 a.m. EST. If the shipment date for an
iPhone X order is within one-to-two weeks from the order date, that
would indicate weak demand, Mr. Munster said. He added that if it
slips to eight-to-12 weeks from the order date, that could indicate
strong demand or major production issues.
Apple Chief Executive Tim Cook is expected to speak about
preorder demand and iPhone X supply during a Nov. 2 call with
analysts, Mr. Munster said. More preorders of the iPhone X than the
iPhone 8 would be a good sign for investors, he added, but if Mr.
Cook doesn't say anything then investors "will fear the worst."
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
October 26, 2017 05:44 ET (09:44 GMT)
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