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Apple's iPhone Misses Sales Targets

Scott Moritz

While the much-hyped phone helped AT&T (T Quote) take a big bite out of its competitors' business, industry observers say effects are far from deadly.

Analysts estimate somewhere between 200,000 and 700,000 iPhones have been sold since the debut blitz started Friday evening. And about half of the sales came by winning customers from Sprint (S Quote), Verizon Wireless -- co-owned by Verizon (VZ Quote) and Vodafone (VOD Quote) -- and T-Mobile, the U.S. unit of Deutche Telekom (DT Quote).

The sales goal -- or so-called whisper number -- both internally at Apple and on Wall Street was a nice round 1 million phones.

Missing this hugely ambitious target is hardly a failure, but competitors in the wireless sector are certainly breathing a little easier.

"There's a lot of rejoicing at Sprint, Verizon and T-Mobile," says IAG Research's Roger Entner. "By not selling out, it is still a solid success, but it also proved that not everyone in the country is willing to drop $600 on a new phone."

"For the other carriers, it's not a game changer. It's business as usual again," says Entner.

Sprint shares are up 60 cents, or nearly 3% since the iPhone's debut, and Verizon is up about $1, or 2% in that same time period, as investors buy into a mini-relief rally.

Had Apple sold out of the iPhone on its debut, thirst for the phone would be seen as unquenched and potentially unknowable, say observers. But since only about three-quarters of the magical allotment were sold, "We now know that demand was less than a million," says Entner.

Based on the early sales estimates, analysts predict that AT&T could take about 2.6 million customers from its rivals. But that assumption is built on current demand, which could be unsustainable.

All the hoopla around the iPhone's launch and the well-staged sales kick off helped create a lot of pent-up demand.

"What we saw the first day were the diehards who wanted the phone, no matter what," says Entner. "Now we have the rational buyers. And these people are looking much harder to see if the phone is worth $600."