July 4, 2007

iPhone Weekend One: 700,000 Sold, $200million+ Profit For Apple

Duncan Riley

95 comments »

iphonemoney.jpg

After speculation earlier in the week that Apple had sold between 400-500,000 iPhones, the actual new sales figures for the iPhone are even wilder than earlier figures: Apple and AT&T moved 700,000 iPhones to the close of business Sunday.According to MacNN, Apple is said to have sold out of iPhones in 95 of 164 stores and AT&T has nearly depleted its entire stock. The report quotes American Technology Research predicting that the iPhone would likely be AT&T’s fastest ever selling product and that the iPhone could rank among the fastest selling consumer electronics devices of all time.

Based on the cost of manufacturing an iPhone (see post July 2), Apple would have made a profit of between $200million and $266 million in 3 days (not including marketing costs), on sales somewhere between $350million and $420million, significantly more than earlier estimates of Apple having a $300million weekend.

Saying the iPhone has been successful at this point would be matter of stating the blatantly obvious.

Update: corrected reference to figures. The 700,000 figure may be another analyst figure according to a comment, although other places are reporting the 700,000 as the actual figure.

(image credit: Engadget)

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Comments

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  1. Smaran

    That’s one popular gadget, all right.

    Btw, I’ve submitted this to Digg.

  2. KindAndThoughtful

    Happy Fourth of July everyone!

  3. Rick Curran

    It would be interesting to know the R&D costs involved with the iPhone, this cost shouldn’t be ignored for the iPhone as it is one of the costs of construction too really. It wouldn’t exist without it.

  4. Kewtr

    I thought America was supposed to have lost its technical edge. My 360 and now this?

    I don’t even like Apple, but I do like a success, and it shows what we need to do to compete on a global scale. So well done in Cupertino or wherever in Apple this happened.

  5. Michael Long

    This is NOT confirmed. The MacNN article is based on a Bloomberg article, in which a Goldman Sachs analyst ESTIMATED that Apple has shipped 700,000 phones.

    IOW, you’re basically reporting rumors as facts. I expect better from you guys.

  6. Michael Long

    BTW, I’d estimate right at 300,000 myself.

  7. Duncan Riley

    Michael
    First line of the referenced post at MacNN:
    “Apple over the weekend sold more than 700,000 iPhones to rocket past analyst predictions”
    If they are wrong then so be it, I’ve amended the post to reflect your question about the figures, but to be fair, that quote reads like the figures are real, and I’m sure you wouldn’t disagree…and MacNN is usually a good source for Apple related news :-)

  8. Tux

    Also, the profit margins that you use and refer to in the previous post, is grossly amateurish, since it does not even include manufacturing costs, retailer margins (for AT&T), as well retail costs for apple. The real profit would be way lower than that, but still very ipressive for one weekend.

  9. Kristopher Tate

    The iPhone gets cooler when you develop web apps for it:

    I recently built an internal web app to interface with my entertainment system for the iPhone — check-out the video:

    http://www.youtube.com/watch?v=L6vp_zuxyMM

  10. Duncan Riley

    Tux
    true, but having said that I wouldn’t think that retailer margins for AT&T would be much at all, if anything. The model for phone companies has always been zero margin on the phone, profit from the plan. Perhaps I should have included AT&T’s new revenue: say half are new AT&T customers, 350,000, a minimum of $49.95 a month or something like that, and over two years….minimum of $419million over 2 years (based on the min plan)…which is pretty staggering for 3 days of sales.

  11. i-phone.cc

    those are a whole lotta numbers…lol, the evolution has begun - it’s begun.

  12. K.Kaviraj

    What ever …… Let it b IPHONE has real mind blowing features — but its always HATSOFF to the unique marketting strategy of Steve JOBBS !! :-) … without which I dout this phone mite hav sold soo mch …. ;-) …. Creating a big MARKET expectation based on the previous product’s HIT and making consumers feel that owning an IPHONE is a prestigious factor … is a real gud marketting strategy … so HATS OFF to Mr.JOBBS ;-)

  13. K.Kaviraj

    In my opinion …. as Mike told about the new product of Kevin rose - ” People love Kevin and for sure they will check out his new product ( the twitter killer) ” ……. ” People love ‘APPLE’ ( to be more precise “IPOD” ;-) ) …. and we hav Mr.JOBBS burning speech - which will evn make people buy any product for any price - both together is the primary factor for IPHONE’s hype ” …. :-)

  14. K.Kaviraj

    Heeeey .. there is somthing fishy …. the comment count on this page (13)…. and the comment count displayed on the top in figures (15 comments ») does not match … :-) ……

  15. K.Kaviraj

    cool .. I didnt count the top 2 … :-) …. sorry

  16. Alexander Wylar

    The comments of the authors are not counted

    http://techtheblog.blogspot.co.....phone.html

    Win an iPhone by leaving a comment.

  17. Thierry

    apple is not really in the electronics business
    to me it seems more like they are in the fashion business
    which is off course nice for them, but as it goes with all trends……

  18. Duncan Riley

    K. Kaviraj
    the count includes trackbacks.

  19. iclic

    It’s amazing!

  20. Bobby Andersen

    what happened to crunchgear - is it gone now that tc has taken over gadget coverage?

    i feel bad for crunchgear dudes.

  21. ContemplatingTech

    Neither Apple or ATT have released any numbers to market research firms (I work for one). If anyone is stating numbers, then they are strictly estimates. I’m also wondering if these estimates include apple.com sales. Apple reports seperate numbers for that. People also seem to be speculating as to Apple’s profit margin on the phone. It really isn’t as much as people are suggesting. Based on margins of previous items, they probably aren’t getting more than $100 per unit. I’ll try to give you guys a heads up on the numbers if I see them.

    Enjoy the holiday.

  22. Lakshmi Srinivas

    America has not lost its edge - certainly not in innovation, Marketing. Both of which translate essentially to high margins for a period of time, at least.

    Somebody said Apple is in the fashion business. That makes America a world leader in techno fashion.

  23. lemon

    Great!!! Unbeliveable

  24. Tim

    Unbelievable that so many customers buy a phone just because of the design. Finally they will only thing they do is to phone.

  25. Mac Money

    700,000 is just another guess, its really annoying that sites like MacNN are posting best guess as fact, then other sites start quoting it as real deal…

  26. Paul B

    Not sure about those figures. Didn’t your July 2 post say Apple were making margins of “20-50%.. (probably closer to 20%)”? So what you’re really wanting to say is..

    On sales of $350million..
    Est. Profit of $70m (20%) to $175m (50%)

    On sales of $420million..
    Est. Profit of $84m (20%) to $210m (50%)

    So the assumed profit is anywhere from $70m to $210m (based on what you’re saying) depending upon the number of iPhones sold and what margin you want to use?

    Just wondering how you came up with the “between $200million and $266 million” est profit figures?

    Either way to assume that with labour, marketing, etc. etc. you’d still be making 50% margin is rediculous, even 20% is ambitious.

  27. Jayesh

    (Per SJMN story) iSuppli took apart the iPhone and estimates the cost of manufacturing to be $265.83 for the $599 version - that translates to a 55% gross margin. Of course R&D and Marketing costs would reduce the overall margin but the 55% gross margin on an expensive consumer device is great!

  28. Mike W

    This is a ridiculously simple way of looking at it.

    To make the iPhone they had to:

    Have a massive team of engineers (probably paid well)
    Have computers for all those engineers
    Have a llarge building for all those engineers to work in
    Pay the power bill to run the building and the computers
    They had to pay for many different prototypes through the design process
    Had to pay testers (we hope!)
    Had to pay marketing and PR people
    Had to pay millions in advertising - online and offline
    Had to pay manufacturing costs and tooling setups (not cheap)
    Paid for shipping, distribution and logistics
    Paid a sales group to take an fulfill orders
    Leave margin for the dealers and their retail stores

    When I see articles on the internet that make statements like “they are selling it for $600 and it only costs $250 to make!!! What a rip off”. It just tells me those people have no understanding of business whatsoever. A 55% margin is not great. It’s pretty average. You need to factor in all costs and expenses.

  29. guia nueva york

    I hope that it arrive soon at Spain.

  30. Thomas M. Schmitz

    I would not want to be one of the Apple stores that did not sell out its stock. I bet Apple’s retail analyst will be scrutinizing their performance.

  31. Eric

    So lets see, 1.1 billion phones made last year / 700,000.

    Keep on truckin’ Apple, you’ve only scratched the surface.

  32. Ciprian

    hmm… is the iphone available for Europe? if the price is 599$ with a 2 year contract… what’s the price without a contract???

  33. Jazzy

    And that’s for US alone…

  34. Craig Hughes

    Just wait until this thing is rolled out globally… Then do the maths… Apple will be swimming in profit, R&D costs will be organic and component costs / man power will scale very nicely.

    Further, this is Apple’s first iphone - and much like the ipod there will be newer versions and refinements over time.

  35. hino2k

    The iPhone is going to be like Nintendo’s Wii. Apple is going to be making tons of money off of it because they will not be able to meet the demand for a long time.

  36. David Mackey

    I imagine Microsoft must be shaking in their boots a little bit. If Microsoft can’t innovate on the consumer end more, even if they do have better development tools…They’ll lose to Apple.

  37. don'tforget

    lets not forget earlier reports that apple negotiated revenue-sharing from service charges as well. talk about a cash cow. now if only i could dig up $500…..

  38. ZuneScene

    Noooooooo !

    At least it’s just a rumor, not REAL DATA. Maybe they sold only 300,000. Who knows.

  39. insight

    Hey Hino2k, your wrong, oh so very wrong haha! you notice how just over half of the US apple stores have stock left yea? that kinda means they’ve managed to keep on top of demand! Nintendo got caught short by their own success, twice in fact, whereas companies these days are waking up to the idea that having more than enough on day 1 is better than selling out cause that way their is more stock to sell therefore more money to be made. Look at the iPhone launch and also in a much more small scale the PS3 launch which is the most pre-ordered console ever and yet they still managed to have enough stock so people could walk off the streets and buy one on launch which means they have the ability to get more sales!

  40. james

    I’m getting lost in all that WOW! :) LOOOOL

  41. jf

    It’s amazing how quickly we forget that our friends at AT&T have agreed to participate in the governments illegal wiretap program. Hey, lets reward them with record sales !!!! Good job people !!!

  42. Bach

    You can get iPhone with out a 2 years contracts. You can get a pay as you go plan, usually for people with bad credit. The price of the iPhone is still the same $599 for the 8gig etc.

  43. Eric

    Thankfully, I’m one of those 700,000 who has an iPhone. It took about 4 days to activate, but it’s finally working :)

  44. Ramos

    Who needs a real iphone, when you can have one of these??
    http://www.frugal4life.com/?p=48
    It is cheap, and gives you the same “social status boost” as long as you don’t get found out.

  45. Graham Fair

    It costs as much as a PS3 and more than a Wii or an X360. Did it outsell (by total units sold) any, or all of these consoles?

    I can see it now - #1 at the box office: iPhone. iPhone the blockbuster. More iPhone movie opening weekend puns…

  46. Eneb

    The beginning of the end for the mouse and keyboard.

  47. kajj

    700 000 american idiots….

  48. A Non Emouse

    When (or if) Apple chooses to share sales figures, you’ll find they weren’t anywhere near 700,000. The basic math, using figures readily available, shows that pushing much over 500,000 in three days just wasn’t possible. My guess? 350,000 from Friday through Sunday.

  49. iphone fan

    Kajj, I can’t believe you’d call the people who have bought iphones idiots. Have you even tried one? It is incredible; I just brought it out to bars last night and people that hadn’t seen one before stopped drinking to check it out (and all were saying it’s worth the 600)
    Good luck to MSFT with that crappy Zune; talk about being a decade late LOL

  50. jose

    This success was expected. I think the iPhone was the most advertised tech-product on the web. Apple made a great campaign between internet users before the launch of this product.

  51. Eric

    For reference, how many Zunes has MS sold year to date? :-P

  52. Reg

    There’s also the opportunity cost.

    Apple had to second some of the Big Brains(TM) from Leopard development to ensure the iPhone software was top notch, thus delaying the next Mac OS X release.

    And (rumoredly) shifting back some products that depend on it and cannot be released before Leopard is.

    Fortunately, Apple’s product line seems quite strong regardless (14% marketshare for laptops), so things can only get better as Leopard gets back on track for an October release.

  53. Reg

    > For reference, how many Zunes has MS sold year to date?

    Reports from Microsoft are 1 million shipped.

    That doesn’t necessarily mean 1 million sold at a $249 pricepoint, and retailers who bought stock may not have offloaded them to customers yet, but it is impressive.

  54. apetrelli

    700,000 is the real number!

    CORRECTION: 700,000 may not be the real number, just another estimate.

    “Nothing to see here folks, move along.”

  55. chall

    Zune and iPhone, maybe not in the same league.

  56. Vasu says 1 2 3 4 5 6

    Great victory for APPLE
    http://www.reloaddd.blogspot.com

  57. Raj

    Duncan, come on! Anyone with any business sense applies all costs to determine a break-even point for a product before counting profits. Apple executives indicated that the iPhone was in development for 3 years. Apple’s R&D budget is on average 1.5B/year. Lets say a third of that budget was expended each year for the iPhone, iPod+itunes, and Mac (the three lines) - not counting Apple TV which is basically a torn down mac mini - we are talking about at least 1.5B in R&D spend over three years on the iPhone. A lot of iPhone advertising was Viral and blogs (aka FREE) but they did have a massive TV campaign which probably cost at least $25-$50M. Total Parts cost is a little more than 2 bills ($250) per iPhone, and manufacturing costs, Import costs, packaging, shipping and duties, based on my experience, should be around $75-$100 per handset.

    Lets assume there is NO retail markup since the iPhone is being sold ONLY in Apple Stores (ZERO Margin paid to self!) and ATT Stores (Assume zero margin to retail partner). Since 95% of models sold are the 8GB (based on surveys), we will ignore the lower price point ($499) for this exercise.

    The total GROSS profit per phone is about $275 (Revenue - Cost of Goods).
    Figuring in R&D Spend plus marketing, you’re looking at a break even point of 5.6 Million (5,600,000) iPhones! We’ve only sold a Tenth of that. When Jobs estimates 10 million iPhones in 18 months, he HAS to sell that many to recoup the massive investment put forth over the last several years.

    Lets start making business sense rather than writing a horribly inaccurate post that shows no sense of what “profit” means in GAAP

  58. Chris

    Raj, great detail.

    Based on the ipod sales figures it won’t take them long to get the costs back.

    The iphone will be way bigger than the ipod. What about all the ipod revenue lost from the features on the iphone??

    chris @ http://www.frostfirebuzz.com - new internet business news

  59. Ali

    Chris, I believe that the Ipod was milked for all its worth.
    Now the iphone is going to be the latest sensation. I would now like to see apple buyout sony and become a full blown consumer electronics company.

    Funny how only 4-5 years ago sony could’ve bought out apple and now its the other way round.

  60. jackie113

    CALL us ‘Naive’ but everything within us detects a flaw in the logic. We expect at some point the North American cell phone/internet communications will undergo an attack. Pershaps not the year 2007 but in these years to follow.

    http://www.mp4-converter.net/i.....to-iphone/

  61. jackman

    700000 ?…. more like the initial 1 million have sold since last night, only 2 apple stores still have any stock all other stores are sold out .

  62. beyondwww

    Wonderful! Congratulations Apple on this mind staggering sales figure. It would be really cool how Nokia the biggest mobile industry giant will react to this news???

    Beyondwww

  63. Concrete Stain

    yeah I think to say anything about numbers at this point;

    Is letting the tail wag the dog. Lets wait for Apple to announce numbers or profits for next quarter then say something about numbers, people can make numbers say what they want.

  64. Michael Long

    The first line in the MacNN article does say that. The Bloomberg link given as reference, however, says, “Shoppers MAY have taken home as many as 700,000 iPhones over the weekend, Goldman Sachs Group Inc. analyst David Bailey has ESTIMATED, twice his initial projection.”

  65. Dave Zatz

    “Apple would have made a profit of between $200million and $266 million in 3 days (not including marketing costs)”

    Sales figures were estimated. Hardware costs were estimated. Subtract R&D, continued development, manufacturing, customer support, packaging, shipping, millions of dollars in advertising, etc from profit. Basically, we have no idea other than Apple seemed to sell a ton of phones.

  66. Fabian

    I got one … and it is an amazing device. I hope they make their laptops like the iPhone.

  67. Tech Untangled

    These numbers seem to be taken out of context (or rather, taken in the wrong context). This is just the BOM. Other costs have to be added. On the plus side, Apple may be getting a piece of the monthly subscription fee pie. Overall, only apple knows the real profits. Here’s an article pointing out the inaccuracies.

    http://techuntangled.com/iphon.....bers-wrong

  68. Kenny H

    What people fail to realize is that Apple probably, in my opinion, gets a share of the AT&T revenue. If you recall, Verizon did not want to do the deal with Apple. I am pretty sure that Apple Stores get a share of the revenue when a customer switches over just as your local Cellular store gets paid when they get a customer for AT&T. I suspect the payment is around $300 per person plus some type of on-going share of revenues but I have no real basis for that number. I think I heard once that a store gets around $250 to sign a customer to a new contract.
    Why else would Apple go with an exclusive provider? If they are not getting more money, they would make it for any provider?
    As a side note, I own AAPL shares and options.

  69. Mobile Yellow Pages

    I wonder how many phones will be returned or simply DOA. The RMA dept. is probably bracing for the worst. I’m not wishing any ill on good ole apple, but it’s just a reality when you sell that many units that quickly.

    Has anyone done a comparison of a standard site vs. a .mobi site on an iphone? I’ve heard that the iphone has some access limitations.

  70. Thomas Prais

    GREAT PHONE, BAD MOVE

    Despite the buzz, I have a hard time seeing how this product strengthens Apple, which enjoys a reputation of . . . well, how to put this? Of not selling broken products. Apple prod is supposed to work out of the box, and work intuitively. Apple’s rep is that they work the bugs out of a product before they sell something. And while you learn to use Windows, Apple is intuitive.
    With iPhone, that all changes, doesn’t it? AT&T had activation problems, there’s already reports about bugs . . . and there even seems to be some security gaps, a new problem for Apple. It’s a neat phone, don’t get me wrong, but one that may provide little incentive for consumers to rush out and buy the next Apple intro.
    I’ve written more about Apple’s iPhone and brand at http://www.furniturestyle.com/.....entID=1119

  71. ContemplatingTech

    Eric -
    Zune sales are estimated to be just under 600,000 since its release in November.

  72. Computer Freaks

    Nice.. :D

  73. bruce

    That’s great, but, I don’t have money to buy one…gotta try and win it in a contest…haha.

  74. Chris

    where? which contest?

  75. Bruce

    sorry, its

    http://www.gazhoo.com/contest.aspx

  76. larsonst

    R&D, marketing and many other costs are amortized over the fiscal year as well as the product lifetime. Although it may have cost a $ gazillion (estimate) to develop, the profit for each phone will incrementally contribute to that cost. Therefore the profit estimate may not be as high as some say but you do not need to factor the entire cost of development against the first weekends sales either.
    Overall it looks to be a smashing successful launch for a product that will pay for it’s development costs many times over.

  77. Philip

    Headline says 700,000 sold, AT&T says 146,000 activated…

  78. go2

    iPhone users are glued to their devices…everywhere there is an iPhone to be found, there are at least a handful of people looking over the owner’s shoulder to see how it works. go2, a mobile, local search engine, has more than 350 mobile websites that have been enhanced for use over AT&T’s EDGE network, simplifying use and providing a dynamic experience. go2 sites are full screen, flashy and simple to navigate, with many single-click applications. With stylish looks and an ease of use, go2’s network of mobile sites (which includes go2 Movies, go2 Dining, go2 Golf and go2 Colleges) are quickly becoming a popular destination for iPhone users.