John Paczkowski

Recent Posts by John Paczkowski

77 Percent of Early iPhone 4 Sales Were Upgrades

Apple’s new iPhone 4 is proving to be one hell of a brand-loyalty generator. According to Piper Jaffray (PJC) analyst Gene Munster, 77 percent of iPhone 4 sales Thursday were upgrades purchased by existing iPhone owners. Compare that with 56 percent in 2009 and 38 percent in 2008, and you’ve got quite the trend.

“Apple is effectively building a recurring revenue stream, where iPhone users pay on average $200 year to stay current with the latest phone,” Munster wrote in a note to clients this morning. “While its true that iPhone 4 is a more significant feature upgrade compared to the 3GS, and we expect this upgrade rate to decline next year, Apple has in three years built brand loyalty in the phone market that compels users to upgrade to the latest version and wait in line for one to six hours to pick up their iPhone.”

And Apple (AAPL) is not the sole beneficiary of that loyalty. Its carrier partners, particularly those with iPhone-exclusivity deals, are benefiting as well, though the upside seems to decline with every new launch. Munster says 16 percent of the new U.S. iPhone buyers he surveyed this year were switching carriers to AT&T (T), down significantly from 28 percent last year. This suggests two things:

  • Most people willing to leave another carrier specifically to get the iPhone have already done so.
  • Apple needs another carrier partner in the U.S. to further maximize iPhone sales.

The latter point is, of course, obvious. As I’ve noted here before, adding a second U.S. carrier, like Verizon (VZ), would essentially double Apple’s addressable consumer base. As recently as last week, analysts were predicting such a move would spike iPhone sales by nine million in 2011. Given this and the new switcher metric Munster cited today, I think it’s pretty clear where we’re headed.

So, how many iPhones is the analyst calling for Apple to sell this weekend?

“While we think Apple will sell between 1.0m to 1.5m iPhones in the first three days (including preorders), the actual number is largely irrelevant,” Munster wrote. “Apple is tapping into the global consumer spending sweet spot, mobile, and as a result iPhone numbers are going higher in the coming years.”

Click on table to enlarge:


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