iPhone 5 – Pre order sleight of hand

 

 

 

 

 

 

 

  • There has been much ado made of the fact that pre-orders for the new iPhone 5 have sold out 20 times faster than the iPhone 4S.
  • However no one has asked the question: How many iPhone 5s does Apple have on hand to ship on September 21st?
  • If that number is much lower than the year before and demand remains the same then of course it will sell out faster.
  • The iPhone 5 sold out 60 minutes after ordering went live which looks staggering compared to 22 hours for the iPhone 4S and 20 hours for the iPhone 4. (http://techcrunch.com/2012/09/14/iphone-5-pre-order-sells-out-20x-faster-than-4-and-4s-further-highlighting-apples-dominance/)
  • But how many iPhones does Apple have?
  • My guess is far fewer than last time.
  • This is because the supply chain has ramped up production much later this year than last due to the problem with the yield on producing in-cell touch screens.
  • Typically, the supply chain starts to move in July with August running at a very high level, but this year, nothing really started to move before the second half of August.
  • So back of the envelope would suggest that Apple had the supply chain running flat out for 2 weeks instead of the more normal 6.
  • Taking this to its logical conclusion one would expect that Apple has around 1/3 of the inventory on hand this year compared to last and therefore with demand remaining the same it should have sold out in 3 hours or so.
  • 3 hours is still a great result but not quite the mind blowing 60 minutes that has the commentators, fan base and the stock jumping up and down like mad.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.