Apple iPhone Q2 Sales fall to 26M, market share falls to 16%, but this is normal sales pattern

So then we have Apple's turn in Q2 results of Smartphone Bloodbath, year three: Digital Jamboree. We expected the iPhone sales to fall from the level it had in Q1 (and remember, these are calendar quarters, not fiscal quarters, so Q2 is obviously the April-June calendar quarter). I expected iPhone sales to come in somewhere in the 30s, but the iPhone only sold 26 million units in Q2. Somewhat disappointing yes, but in terms of pattern, while the sales declines at RIM, HTC and Nokia are all severe causes for distress, over at Apple the 26% decline from Q1 sales is not a cause for alarm. This is normal for Apple, as it only makes one annual product release and after that new product sales peaks, we get flat and even declining sales into the last quarter(s) before the next iPhone. I have been writing for a long while now, that Apple could avoid this see-saw sales pattern, if it released more iPhone models per year to balance out the sales (and also gain significantly more sales, market share and profits). 

26 million iPhones in Q1 gives a preliminary market share for the iPhone of 16% (down from 24% in Q1). But when we take the rolling 12 month period to cancel out the launch peak seasonal sales pattern, we still find Apple increasing its market share, although at very slow pace. The 12 month moving average market share for Apple is now 20% of global smartphone sales.

I would make a mild note of caution. The decline was far bigger in this Q2 than we've seen before. There are a few easy reasons why this is happening, but they suggest Apple may face tougher times ahead. First, obviously and very visibl, Samsung is on fire. The Galaxy S3 alone sold 10 million units in just two months from launch. Samsung is expected to sell about 50 million smartphones in Q2 and might even sell 52 million by which it would be twice the size of the iPhone. The Samsung surge is powered by a wide portfolio across very wide and strong distribution, with superphones like the Galaxy Beam (the one with the pico projector) to glamorous smartphones like the massive-screen Galaxy Note, to low-cost bada based smartphones that sell well in many markets in the Emerging World. Remember that two years ago, Samsung smartphones were one third the size of the iPhone, now they may be twice as big.

Samsung is the clearly visible reason why the iPhone is under pressure. The other reason is more subtle, but many carriers/operators with handset subsidies have been working to extend the time span of their contracts. AT&T in the USA for example has pushed its average contract length up by 2 months. We learned also from Britain that the median contract lengths are increasing, as reported in the annual telecoms report by the regulator, Ofcom. Apple has exceptional loyalty, and can rely on not bleeding much market share to rival brands. But as those contracts now become longer, it means that Apple's replacement sales suffer. We may well be seeing the early signs of a pattern here. I do expect for Q3 the iPhone sales to dip again from the current levels, until we get the new iPhone model launched. But that launch will then rocket the iPhone sales level to a whole new level once again. Apple is incredibly profitable, the iOS ecosystem with robust iPad sales only grows stronger, and there is the inevitable waiting for what will the next iPhone have. There are no major stumbles here, and the loyalty of the Apple users continues unmatched. This sales decline in Q2 is no cause for alarm. Only lets monitor these little signs, they may take some of the peak sales performance away from the iPhone going forward.

Comments

[Monster Beats]

iphone has become a necessity in our lives

[beats]

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