The iPhone Has Its Best Ever Quarter At Verizon, But There's A Big Asterisk On It
And it's a mixed bag for investors, though overall it's positive for Apple.
Verizon said it sold 9.8 million smartphones, of which 6.2 million were iPhones. The rest were Android phones.
That means the iPhone was 63% of smartphone sales at Verizon. This is the biggest mix of iPhones ever. A year ago, in the fourth quarter of 2011, the iPhone was 56% of smartphone sales. (For the other three quarters this year, iPhone was 49% of Verizon's smartphone sales.)
For the last month we've been beaten over the head with stories about weak iPhone demand. Well, this suggests, in the U.S. at least, iPhone demand is very strong.
That's the good news. Here's the bad news.
Verizon's CFO said that almost half of the iPhones activated ran on LTE. Only one iPhone runs on LTE — the iPhone 5. This means that Apple only sold 3.1 million iPhone 5s. The rest are iPhone 4s and iPhone 4Ss. Apple's revenue and profits on those phones are much smaller. There is a lot of concern about Apple's EPS and its margin this quarter. Soft iPhone 5 sales aren't going to do much to allay those concerns.
Also, it's important to note that this is the U.S., where Apple is the strongest. We can't get a good read on international iPhone sales based on one data point from Verizon.
However, overall, this is good for Apple because it shows that the iPhone franchise remains strong in the U.S.