Apple Sells 9 Million IPhones in Debut Weekend

Sept. 23 (Bloomberg) -- John Sculley, former chief executive officer of Apple Inc., talks about the weekend debut sales performance of Apple's new iPhone 5s and 5c models. Sculley, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses the potential impact of the Affordable Care Act on business. (Source: Bloomberg)

Apple Inc. (AAPL) sold a record 9 million iPhones in the weekend debut of two new models, as the company included China in the rollout and consumers snapped up handsets with more colorful options and a fingerprint reader.

Sales almost doubled from the previous record even amid supply constraints for the iPhone 5s, the higher-end version of the two smartphones, Apple said in a statement today. The results also led Apple to say that quarterly revenue and gross margin will be at the top end of a prior forecast.

“While we’ve sold out of our initial supply of iPhone 5s, stores continue to receive new iPhone shipments regularly,” Chief Executive Officer Tim Cook said in the statement. “We appreciate everyone’s patience and are working hard to build enough new iPhones for everyone.”

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Apple’s shares rose 5 percent, the biggest jump since July, as the sales exceeded even the loftiest analysts’ projections of less than 8 million. The iPhone is Apple’s most important product, accounting for half of revenue. The company has seen sales and profit growth slow and has ceded share of the $280 billion smartphone market to Samsung Electronics Co. (005930) and other rivals.

Staff members of the Apple store welcome customers who have waited for long hours, including some for 10 days, before the flagship store on Tokyo's Ginza main boulevard on September 20, 2013, Photograph: AFLO/NipponNews/Corbis Close

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Staff members of the Apple store welcome customers who have waited for long hours, including some for 10 days, before the flagship store on Tokyo's Ginza main boulevard on September 20, 2013, Photograph: AFLO/NipponNews/Corbis

“The rumors of Apple’s demise are severely exaggerated,” said Laurence Balter, an analyst at Oracle Investment Research in Fox Island, Washington, whose clients are Apple investors. “Those numbers blew away anything I could have imagined and just show that they are still producing the best-quality phones in the industry.”

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The results underscore how Apple has upended the global technology industry since the iPhone’s 2007 debut. Based on $581 for each iPhone sale -- about what Apple made on average last quarter -- the company probably generated $5.2 billion in sales in three days. By comparison, BlackBerry Ltd. (BBRY), whose phones were once the smartphone standard, reached a tentative agreement to sell itself to a buyout group for $4.7 billion after losing ground to Apple and others.

Apple, which for the first time introduced two phones instead of one, began sales Sept. 20 in the U.S., Australia, Canada, China, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore and the U.K.

It’s the first time Apple rolled out its flagship product in China on the same day as elsewhere, abandoning the usual three-month delay, as the company seeks to lure new customers in the world’s largest mobile-phone market. About 15 percent of weekend iPhone sales came from China, said Gene Munster, an analyst at Piper Jaffray Cos.

Photographer: David Paul Morris/Bloomberg

An employee carries Apple Inc. iPhone 5c and 5s devices during the launch at the company's new store in Palo Alto, California, on Sept. 20, 2013. Close

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Photographer: David Paul Morris/Bloomberg

An employee carries Apple Inc. iPhone 5c and 5s devices during the launch at the company's new store in Palo Alto, California, on Sept. 20, 2013.

IPhone 5s

The phones were also available for the first time on NTT DoCoMo Inc. (9437), Japan’s largest wireless network. Apple didn’t break out iPhone sales by model or region.

The iPhone 5s proved most popular with the initial rush of customers. In a Piper Jaffray survey of 416 people waiting in line, 95 percent were going to buy that model, which has an improved camera, fingerprint reader and faster processor. It comes in three color variations -- black/gray, white/silver and white/gold -- and costs $199 to $399 in the U.S. with a two-year wireless contract. On EBay Inc. (EBAY)’s website, gold models were selling for well over $1,000.

The less-expensive 5c model is a reconfigured version of last year’s iPhone with a plastic casing that comes in five colors -- pink, green, yellow, blue and white. It starts at $99 with a contract.

Of the 9 million Apple said were purchased during the weekend, about 3.5 million were iPhone 5c models that the company sold to global wireless carriers, according to Munster.

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The cheaper version will attract owners of devices that run Google Inc.’s Android software, according to Benedict Evans, an analyst at Enders Analysis in London.

“The 5c customer is under contract with an Android phone and will steadily feed into sales over the next year,” Evans wrote in an e-mail.

In a separate filing, Apple said it expects total revenue for the current quarter to be near the high end of its forecast of $34 billion to $37 billion. Gross margin, the portion of sales remaining after deducting product costs, will be near the high end of a range of 36 percent to 37 percent.

Apple rose 5 percent to $490.64 at the close in New York. The shares have declined 7.8 percent this year, compared with a 19 percent gain for the Standard & Poor’s 500 Index.

Many analysts, including Brian Marshall of ISI Group and Ben Reitzes of Barclays Plc, said Apple may now surpass estimates for quarterly profit of $7 billion, or $7.67 a share, on sales of $36.2 billion.

Software Upgrade

Apple also said its new iOS 7 mobile software for the iPhone and iPad had been downloaded on more than 200 million devices since Sept. 18, double the number from last year’s upgrade. As part of the new system, 11 million people used Apple’s new iTunes Radio, an Internet-radio service included with iOS 7. Pandora Media Inc. (P)’s shares declined 10 percent.

Shoppers lined up at Apple Stores in New York, Munich, Tokyo and other cities, with some waiting for days to get their hands on the new models. The gold version emerged as the hottest seller, and AT&T Inc. (T), Sprint Corp. (S), T-Mobile US Inc. (TMUS) and Verizon Wireless won’t be able to ship gold iPhones until October, while the others are available this month, Apple said on its website. By 5:15 a.m. today at Apple’s flagship Fifth Avenue store, a line of customers stretched for three blocks.

Sales and profit growth have decelerated at Apple in the absence of major new product categories, and the company is counting on the new iPhone designs to lure new customers.

Analysts’ estimates varied on iPhone sales over the debut weekend because of limited iPhone 5s supplies. Piper Jaffray’s Munster had predicted sales of 5 million to 6 million, while Citigroup Inc.’s Glen Yeung anticipated as many as 7.75 million.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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