IPhone 4S Sales May Reach 4 Million on Debut

By Adam Satariano and Sarah Gill - Oct 14, 2011 8:01 AM GMT+0700

Apple Inc. (AAPL) is poised to sell as many as 4 million units of its new iPhone 4S this weekend as customers around the world clamor for one of the last products developed under Steve Jobs.

The device, available today in the U.S., Australia, Canada, France, Germany, Japan and U.K., is projected to outperform last year’s introduction of the iPhone 4, which topped 1.7 million units in its introductory weekend. For the iPhone 4S, most estimates range from 2 million to 3 million, with Yankee Group analyst Carl Howe predicting sales of as much as 4 million.

The release represents the end of Apple’s era under Jobs, who died this month after an eight-year battle with cancer. The iPhone 4S has received mostly positive reviews for its voice- recognition software, speedier processor and improved camera. The device also provides Apple with fresh ammunition in its fight against Google Inc. (GOOG)’s Android software, which will appear on a host of new smartphones in the year-end holiday season.

“It’s going to easily outpace any previous launch,” said Charlie Wolf, an analyst at Needham & Co. in New York. It helps that the iPhone is available on the three largest U.S. carriers for the first time, which will bring in new buyers, he said.

Apple also has released an update to its iOS mobile operating system, which customers can download to their existing devices. The software comes with 200 new features and a Web storage service for synchronizing photos, documents, music and other files across different Apple gadgets.

Google Competition

While the iPhone is the best-selling single smartphone, all of the devices running Google’s Android operating system account for more of the industry’s sales. HTC Corp., Samsung Electronics Co., Motorola Mobility Holdings Inc. and other manufacturers have adopted the software. Google offers Android for free and then makes money on mobile advertising and services. That revenue now accounts for $2.5 billion a year, the company said yesterday when it released quarterly results.

Apple’s shares have jumped more than 10 percent this week, boosted by speculation that the iPhone 4S will be a hit. The stock closed at $408.43 yesterday, making Apple the world’s most valuable business. Its market capitalization now stands at $378.7 billion, compared with $371.3 billion for the second- ranking company, Exxon Mobil Corp. (XOM)

About 25 customers were lined up outside Apple’s Midtown Manhattan store at lunch yesterday. In Tokyo, about 80 people were lined up a day before the debut. Jobs’s admirers have turned storefronts into makeshift memorials, adding a solemn tone to the frenzy that accompanies the company’s product releases. Jobs co-founded Apple and returned to the company after a 12-year absence, rescuing it from near-bankruptcy.

Sell Out

“They are going to sell out,” said Yankee Group’s Howe, who is based in Boston.

High demand for the new iOS 5 software contributed to glitches at Apple even before the iPhone 4S went on sale. Customers downloading it to their older phones overwhelmed the company’s servers, making it harder to upgrade.

Apple hasn’t said how many people were affected. The wait time to get a call back from an Apple support representative via the company’s Express Lane service is much longer than usual. Typically, an Apple rep will call back within a few hours. Now, the earliest appointments aren’t for days.

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment.

The iPhone 4S will go on sale later this month in 22 additional countries, including Ireland, Italy, Mexico and Spain. Apple didn’t say when it will be available in China, a country Chief Executive Officer Tim Cook has said will be critical for the company’s future growth.

Rush of Preorders

Apple said earlier this week that it had received more than 1 million preorders for the iPhone 4S. The three U.S. carriers selling the device -- AT&T Inc. (T), Verizon Wireless and Sprint Nextel Corp. (S) -- sold out as well. The demand puts Apple on pace to sell a record number of iPhones in the quarter ending in December, according to the analysts’ reports. Gene Munster, of Piper Jaffray Cos., estimates that Apple could sell more than 25 million iPhones this quarter.

The iPhone, first introduced in 2007, has become Apple’s top moneymaker, accounting for almost half its total revenue. Sales from the new model won’t be part of the fourth-quarter financial results Apple is due to release on Oct. 18. Even so, profit rose about 60 percent in the period to $6.9 billion on sales of $29.5 billion, according to the average of analysts’ estimates compiled by Bloomberg.

The release of the iPhone 4S, along with new Android models, should mean that smartphone users account for the majority of U.S. mobile-phone customers for the first time, said Roger Entner, an analyst at Recon Analytics LLC in Dedham, Massachusetts.

Apple controlled 19.1 percent of the smartphone market in the second quarter, according to research firm IDC, ahead of Samsung, Nokia Oyj and Research In Motion Ltd. (RIMM)

Few companies can build excitement around a new product the way Apple can, Yankee Group’s Howe said.

“This is what they are good at,” he said. “They know how to make a big launch weekend.”

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

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net