As Early iPhone Numbers Dissapoint, Engadget & Others Turn Up the Spin Machine

The iPhone.

No single device in the history of gadgets had received this much hype in the tech news world. No device had been covered so thoroughly from rumor stage to announcement to pre-release to first day sales, and if you count Gizmodo and Engadget, has been covered this much after its release. Lay on top of that the thousands of news stories from various media, and fawning “reviews“, and you have a device that should have sold well over a million units in the first weekend of release, right?

Well, no.

Early number released from AT&T showed that early “activation” numbers were well below what expectations (hype) had pegged them as being. Reports had it around 500,000 and even more, but the numbers was really 146,000 who bought AND activated the phones.

Now I know the retort would be that there were more who bought the device but had trouble activating it. True, AT&T had some SNAFUs with the activation process, but if the actual activation number is 146,000 and the projections were up to 500,000 to 600,000, you cannot tell me seriously that hundreds of thousands of people are just sitting there with this thing in a box. You cant even use this as an mp3 player unless you activate it. If you reasonably add a tiny number of people that have not activated it + people that bought it to resell + hackers who bought it to exploit it, you cannot get to 500,000. You couldn’t get to 400,000.

And to toss just a little more salt on Carthage, here is a quote from an article from:

“We have noticed decent inventories [of the iPhone] at stores, and thin demand at best,” analyst Ittai Kidron of CIBC World Markets wrote in a report Tuesday. “In fact, most Apple store visitors were not looking at the device and only a very small subset bought it.”

Really? If we were to go by the type of reporting from our “favorite” tech news blogs, this was suppose to be flying off the shelves like crazy 24/7. By now, everyone was suppose to have one, and the cell phone industry was suppose to have fled in fear of the great Apple juggernaut. Even some Apple fanatics saw Apple creating their own wireless company just to handle the demand.

Now before some people’s head explode, AT&Ts numbers are only from the last 2 days of the Quarter. Yes sales did not hit zero after then, but again, as the article said “thin demand at best”. So it is highly unlikely that they doubled the opening days numbers in the less than a months time after its release.

Possible, not likely. $600.00 + fees is a lot for the average consumer to stomach no matter how “pretty” the UI is.

Now that the hype machine has been turned off for the most part, and people just sick of hearing about Paris Hilton and the iPhone, it is not a surprise that sales thinned out.

Now let’s check how the Apple faithful reacted to this news.

Engadget got the ball rolling with a headline that even shocked some of their readers:
“AT&T profits soar, iPhone largely to thank”

Basically Engadget also called those who said the iPhones numbers were not impressive a “tough crowd”.

Nah, they are just people with millions tied into results. They don’t have time for pom-poms and waving “We Love Apple” banners. They fell for the hype and ramped up Apple’s stock much to the sheer delight of the Apple friendly media whom pasted the story all over as proof of Apple’s popularity. apparently they dont get that stock speculation does not equal personal love.

Engadget readers, however, were to have none of this spin:

“THIS ARTICLE IS FLAWED and degrades the credibility Engadget.

The bulk of the rise in net sales and income for AT&T comes from the acquisition of BellSouth for $67B. They merely combined the two numbers of both companies which yielded the increase. That is why this announcement is a “dissapointment” taking into account the expenses of acquiring BellSouth and has absolutely nothing to do with the iPhone.

I thought Engadget writers had a bit more credibility when it came to finance. Any editors reading this, I would make a retraction or serious revisions to this article. “

“Very true, the iPhone sales are a VERY insignificant portion of profits (especially considering it was 2 days of sales on ~$60, which as pointed out by Gil is not even $10mill) and has ZERO to do with AT&T’s profits for Q2, not to mention the lower than talked about number of iPhones sold would be seen as more a detriment to expected profits based on iPhone than anything else.”

“wow. what a bias this writer has. these were very much disappointing numbers – not because of wall streets high expectations so much, but from the fact that EVERYONE (media, wall street, investment firms, engadget?) had them pegged at 500k+ for the first weekend. it is, however, worth nothing that activations has nothing to do with actual sales of iphones and therefore the first “day and a half” of activations doesnt really tell the whole story.

lets put a bit more quality into the posts, k? thanks.”

“This has to be the most Apple-biased article written for this site ever. The iPhone had little or nothing to do with AT&T’s Q2 profit. For one, there were a MILLIONS IN MARKETING COSTS that went into the launch of the iPhone by AT&T. As part of their exclusive arrangement with Apple, they were solely on the hook for those costs. Second, only the activation fee is reported as income at the time of the sale. Monthly subscriber income is reported in the month and quarter in which it is billed. I’m guessing that AT&T’s profit margin on the actual hardware was little, nothing or even a loss, again based on the exclusive they have with Apple. Overall revenue from equipment sales were DOWN 7.4% for Q2 in the wireless segment:”

“The title of this article is crap and misleading.

If you listened to AT&T’s earnings conference call this morning you would know that they activated 146,000 iPhones and said 40% of that number were new customers. If you do the math, the iPhone had very, very, very, very, very little impact on the 1.5 new customers AT&T Wireless in Q2. Only 58,400 make up the 1.5 million new customers added.

You people on these blogs need to do a little research before you post crap like this.”
Many of the Apple rapid response team mad a gallant effort to buck each other up, as their emotional attachment to Apple is legendary, and a news item like this just knocked the wind out of them.

Yikes! The crowd is not amused…

Engadget has yet to offer “clarification” for their posting.

The prevailing hope is that Apple, which does its shareholder meeting the day after AT&T, will somehow report something wildly better than this. I guess I’m not sure if Apple will report figure for only the previous quarter, or will it try to stop the bleeding by working in figures from this current one.

That is basically what the tech blogs sites are waiting for. A ray of hope that they can get the Apple celebration train back on track.

All those months of free advertising which has totally tanked their credibility depend on it.


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