Verizon activated 6.2 million iPhones in the December quarter, which was 63% of its 9.8 million smartphone activations. Android devices made up the bulk of the remaining 3.6 million smartphones. This was above my upper end projection of 6 million by 200,000 when Verizon announced on January 8 that it had activated a higher mix of iPhones than a year ago and nicely above my original projection of 5.5 million.
There was some negative news in that Verizon said that only about half of its iPhone activations were iPhone 5’s. This has a downward impact on Apple’s revenue and from my perspective an unknown impact on margins. My assumption would be that while the 4 and 4S have lower component costs they would not make up for the lower revenue. However Scott Craig from BoA Merrill Lynch estimates that the 4 and 4S have higher margins at 56% vs. 44% for the 5. Mitigating some of this I believe will be a higher mix of iPhone 5’s sold internationally since those markets received the 4 and 4S later than the US.
I assume that to determine how many iPhones were sold for Verizon deduct 5% for “hand me down” phones that get activated. That would mean that there were 5.9 million iPhone sales for the Verizon network.
Verizon has accounted for 8.7% of iPhone sales (March 2012 quarter) to a high of 11.2% in the March 2011 quarter, the first quarter that Verizon sold the iPhone. My iPhone estimate has been 50.5 million, which would mean that Verizon would be responsible for 11.7% of the iPhones.
If Verizon sold the same percentage of iPhones that it has at its high point of 11.2% (theoretically on the conservative side since a higher Verizon mix means fewer sold by other carriers) Apple would have sold 52.6 million iPhones.
| iPhone 4S | iPhone 5 | ||||
| Verizon (mil.) | Sept '11 | Dec '11 | Sept. '12 | Dec. '12 | |
| iPhones | 2.0 | 4.2 | 3.1 | 6.2 | |
| Total | 5.6 | 7.7 | 6.8 | 9.8 | |
| % iPhones | 36% | 55% | 46% | 63% | |
| Change | 19% | 18% | |||
| 5% Hand me downs | 0.1 | 0.2 | 0.2 | 0.3 | |
| iPhone sales | 1.9 | 4.0 | 2.9 | 5.9 | |
| iPhone sales | 17.1 | 37.0 | 26.9 | 50.5 | |
| % of iPhone sales | 11.1% | 10.8% | 10.9% | 11.7% | |
| Proj. iPhone sales | 52.6 | ||||
| % of iPhone sales | 11.2% |
In my posting on how Apple could have generated $60 billion in revenue my 50/50 case of half of the upside from iPhones and half from iPads Apple would have needed to sell 52.8 million iPhones.
Since the iPhone estimate is 200,000 short to my $60 billion scenario the iPad will need to have sold about 27.2 million units at a $475 average selling price. The Street is projecting 23 million units and I am at 23.75 million. It would be a stretch but given the demand for the iPad Mini Apple may reach $60 billion in revenue. The demand was probably there so the biggest gating factor was their supplier’s ability to build them.
Disclosure: My family and I own Apple shares
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