It’s hard to keep your finger of the pulse of everything that’s transpiring in the Apple universe, so leave it to the iPhone 5 News Blog readers and commenters to keep me in line. Commenter Michael D. dropped us a line last night and had this to say:
Based upon Apple’s previous methodology, the only time they have allowed retailers to discount their products have been just before release of the next iteration. I saw that one of your posters had mentioned that Target and another store had discounted the 4S and I just noticed on bestbuy.com that there is a $50 savings on the iPhone 4. Coincidence? I hope not.
Michael D.’s missive is well-timed: there are numerous reports today that connect nicely with the rise of iPhone 4S discounts in the U.S. retail sphere: Apple Insider, for example, is reporting that: “Analyst Shaw Wu with Sterne Agee said in a note to investors on Tuesday that he has found in his checks with suppliers that Apple has reduced iPhone orders by between 20 and 25 percent from the 35.1 million units the company shipped in the March quarter.”
Similarly, PC Advisor had this to say about the downslope of 4S orders on Wall Street: “Some Wall Street analysts are ‘starting to panic’ over Apple’s revenues for the quarter, claims Jay Yarrow, in a story at BusinessInsider. ‘Analysts think Apple is due for a big come down,’ Yarrow insists. But it’s hard to see evidence of panic.”
So, here’s the situation: production orders for the 4S are way down, retailers are dropping the prices, and the iPhone 5 — whether because it is actually coming soon or is simply perceived to be coming soon — is directly impacting the sales and order figures for this quarter.
The big question is: do these developments point to the iPhone 5 actually coming soon, or are they only a result of the rumor mill?
One way to parse this out is to look back at last year’s news regarding iPhone 4 sales leading up to the eventual release of the iPhone 4S. On May 11th, 2011 — a month before the 2011 WWDC — the Blog was reporting on still-brisk sales for the iPhone 4. There were some signs of slumping sales this time last year, but you’ll recall that Apple had some special “sub-releases” of the iPhone 4 that extended it’s sales cycle: namely, the Verizon release, the white iPhone 4, and the unlocked iPhone 4. This year, the 4S hasn’t enjoyed any of those types of sales boosts.
It’s also worth noting that we began to see similar reports of retailers dropping prices and Apple cutting production orders in August of last year — not May: BestBuy began offering the iPhone 3GS for free on August 22nd, 2011, and this report from August 29th indicated that Apple was dropping prices and boosting display orders ahead of what we thought would be a Q4 iPhone 5 launch, which of course turned out to be the 4S.
However, in spite of these moves in lat August of last year, Charles Moore reported at the time that the delay was having little negative effect On global sales of the iPhone 4, and Wall Street was not nearly as “panicked” as they are this time around. Perhaps the reason for the May panic is that Wall Street believes that the iPhone 5 is not coming until fall, and a slump in 4S sales now means a lean summer, which could hurt Apple’s stock value.
It remains to be seen if the drop in the 4S’s price and Apple’s slashing of orders is indicative of a June iPhone 5 or not. Sure, we saw these things happening in August of last year — but the iPhone 4S didn’t come for quite a while longer into the fall. Similar reports are surfacing now, but the 2012 WWDC — which ostensibly would be Apple’s perfect launch event for a June announcement — is less than a month away.
Whether the iPhone 5 is slated for June or not, my feeling is that the slashing of prices and orders is reactive, not proactive. If retailers aren’t moving the 4S, they will do what they can to get people buying it again. And if retailers aren’t ordering as much iPhone 4S product from Apple, Apple will obviously cut production so that they don’t end up with sprawling warehouses filled with 4S units collecting dust.
But one thing is for sure: it is the iPhone 5′s fault. Regardless of what the sober tech media might say, users are holding out hope for the WWDC to reveal a “one more thing” moment. Whether it turns out to be the iPhone 5 or just some new Ivy Bridge-equipped Macs, I would imagine that 4S sales will be particularly flat for next four weeks or so.
Thanks to Michael D for the article suggestion!
By Michael Nace