) shareholders got the single most interesting piece of news
since the company's announcement that it
sold a whopping 9 million iPhone 5S and 5C
models on their opening weekend.
On its third-quarter earnings call, wireless carrier
) said it couldn't keep up with demand for the iPhone 5S, leaving
a lot of customers empty-handed.
While I'm sure that Verizon was frustrated by the situation, we
must remember that historically, product shortages can be quite
For example, the hard drive shortage that resulted from the
tragic 2011 Thailand floods drove price increases for
). Those stocks have performed astoundingly well despite anemic
demand for PCs.
Additionally, during the last big gaming-stock boom from
2006-2008, the best-performing stocks were
(OTCMKTS:NTDOY), both of which were experiencing regular
shortages of their hottest products. In Activision's case, that
and in Nintendo's, the Wii console.
We've also seen this happen in the semiconductor market. In
) gained technical advantages over
(INTC) in server and desktop processors, it saw big supply
shortages -- and the stock eventually went over $40.
At the end of the day, whether you're running a powerful
multinational consumer-electronics powerhouse or a hot dog stand,
if you're selling everything you can make, you're doing something
And from a purely financial perspective, remember that Apple has
already indicated that its September quarter revenues and gross
margins would come in at the high end of guidance, and slightly
But It Gets Tricky
Interestingly enough, Verizon's iPhone activations were actually
flat quarter-over-quarter. You'd think they'd be up on account of
the new iPhone models, right?
Not necessarily. The 5S and 5C launched on September 20, which is
fairly late in the quarter. Additionally, Verizon said that the
lower-end 5C did not sell as well as expected. So if Verizon had
more 5S units and fewer 5Cs, its iPhone numbers would likely have
been much better.
Ultimately, it's a wash -- it's hard to argue either way. We'll
have to see what
(T) says on its earnings report next week to get more color, but
for now, Verizon's iPhone numbers don't give much ammunition to
the bulls or bears.
The Branding Factor
Beyond Verizon's comments, there have been many recent news
reports indicating that the 5C is not a big hit, at least
relative to the 5S.
Analysis from Consumer Intelligence Research
indicates that the 5S has been outselling the 5C in the US by a
more than 2:1 ratio. And the rumor mill has been busy pushing out
the idea that Apple has cut back 5C orders with its manufacturing
Now why could this be happening? I emphasize the word
because there isn't much in the way of initial news here. For all
we know, the 5C could be doing just fine internationally.
But Apple may be finding itself in an interesting situation:
Customers may be opting for the 5S
of its higher price, not
The 5C, while less expensive, is not a cheap phone. It's plastic,
but it feels very, very nice in the hand and iOS 7 offers a
simply phenomenal interface.
But at the end of the day, a great many people buy Apple products
because of the idea that they're buying the best.
A shortage in the 5S as the 5C piles up on shelves may be
evidence of that.
Apple may be just too fancy to compete in the lower-priced end of
the smartphone market.
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