There were a large number concerns weighing on Apple’s shares on Wednesday ranging from margin requirements being raised at a clearing house, a DigiTimes article suggesting a 20% quarter over quarter decline in component orders for the March quarter, technical or chart patterns indicating further weakness, not paying a special dividend, tax gain selling and China Mobile carrying the new Nokia Lumia smartphone. However, I believe the biggest concern was AT&T’s comments that it will sell 26 million smartphones for the year.
After you subtract the 16.7 million smartphones that it has activated for the first three quarters and the 6.4 million smartphones that it sold in October and November it appears that AT&T will sell just about the same number of smartphones in the December quarter that it did last year. (note I am interchanging activations and units sold as they even out over time, but can cause distortions within a quarter).
If you assume that iPhones make up the same 81% of AT&T’s smartphone sales as they did last year AT&T’s iPhone sales will come in around 7.5 million or about the same as last years 7.6 million for the December quarter. Given that Apple sold 37 million iPhones in the December 2011 quarter and I am expecting 50 million iPhones this quarter (and I believe the Street is around 43 to 53 million) having a carrier that accounted for 17.5% of iPhone sales last quarter having no growth is a concern.
The biggest factor that could make up this shortfall will be international sales, especially in China. Apple has launched the iPhone 5 in more countries than it did the 4S last year and there will be some sales by China Telecom and China Unicom starting on December 14 vs. last year when these two carriers didn’t launch until the March quarter.
While 50 million iPhone sales may not be achieved I will continue to monitor for additional data points and with the pullback of the shares to $539 a lot of the downside risk has been priced in.
One item from the AT&T spokesperson that seems to have flown under the radar was the strength of the tablet market. "I can't fathom how many tablets will be under the Christmas tree," he said. While this was not iPad specific I believe it is another indication of strong iPad sales to go along with the current one week lead time on Apple’s website (it had been at two weeks until a day ago).
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