Apple's iPhone 5: 2 million preorders, 24 hours and a unique upgrade cycle

Apple's iPhone 5: 2 million preorders, 24 hours and a unique upgrade cycle

Summary: Apple's preorders for the iPhone 5 are off the charts, but what remains to be seen is whether the company's new normal for product launches is condensed to 6 months or less.

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Apple said it landed 2 million iPhone 5 preorders in just 24 hours and handily topped previous records for the device. Meanwhile, Apple is seeing iPhone 5 demand outstrip supply. More importantly, the iPhone 5's preorders may be highlighting a fundamentally different upgrade cycle for Apple's iconic device.

Simply put, Apple's new normal for the iPhone upgrade cycle may include the following:

  • Short bursts of intense demand;
  • A shorter upgrade cycle window;
  • And pressure for Apple to fill the product and revenue void as customers wait for the next latest greatest device after 6 months or so.

Apple's iPhone 5 has been billed as the greatest consumer electronics upgrade off all time. The iPhone 5 has a better chip, larger screen and more importantly works with 4G LTE networks. That 4G boost is the biggest reason Apple will enjoy a powerful upgrade cycle. Tack on international coverage and carrier agreements and Apple will rock the iPhone 5 sales.

More: AT&T: iPhone 5 'most successful iPhone launch ever' | Apple's iPhone 5 upgrade cycle secured with global LTE, 4G support 

Today it's all roses for iPhone 5 demand. Piper Jaffray analyst Gene Munster said in a research note:

We believe that while the media bubble around the iPhone 5 has met the phone launch with mixed opinion, the reality is that when actual consumers have the product in hand, we believe they will be impressed. We view the iPhone 5 as the Rolex of smartphones in terms of quality and build, while the majority of other phones are dominated by lesser quality plastic and feel more like Timexes. Why would someone by a Timex when they can have a Rolex for the same price? Additionally, we believe that consumer sentiment around the iPhone 5 is significantly better than it was for iPhone 4S despite the lack of excitement by the tech media. We remain confident in our 6-10 million unit estimate for iPhone 5 for the remainder of September and 49 million iPhone estimate for December.

I agree with Munster's take. My focus for this iPhone upgrade cycle revolves around duration. What remains to be seen is how long the iPhone 5 upgrade cycle will last. Apple's September and December quarters are largely set. What happens to iPhone demand in February and beyond remains to be seen.

Let's assume that iPhone 5 demand normalizes beginning in February. Apple's iPhone 6---and all the leaks that'll go with it---won't show up until September or October 2013. The conundrum for Apple is finding a new upgrade cycle to fill that void. My hunch is that the iPhone 6 waiting game will start earlier each year.

iPhone 5's global impact: iPhone 5 plans for Telstra, Optus, Vodafone revealed | Apple iPhone 5: UK prices revealed | iPhone 5, meet Europe: Where 4G really means 3G, LTE is scarce | Will Australia's 4G pass the iPhone 5 test? | iPhone 5 launch piles 4G pressure back on Ofcom | iPhone 5 faces bleak outlook in China | iPhone 5 to first hit Singapore, Hong Kong, Japan in Asia | Brits to get iPhone 5 with 4G on EE's new network | iPhone 5 works on Telstra, Optus 4G networks

Customers with expiring contracts will stretch their phones out a few months for the next iPhone. As a result, you'll get a pop of pent-up demand and then slower growth. Sure, Apple will fill that demand void with the iPad. However, the waiting game starts earlier for Apple's next-gen tablet too. The likely cadence for Apple product demand goes like this:

  • New announcement from Apple.
  • Demand surge from customers waiting as well as Apple faithful. 
  • A compressed upgrade cycle of 6 months maximum.
  • A waiting game and lull that becomes intensified by product leaks (Apple can't keep secrets anymore).
  • New Apple launch. 
  • Rinse and repeat. 

That's why in the grand scheme of things Apple needs another product. To date, the iTV chatter has been on and off. Apple has iPhone, iPad and Mac upgrade cycles to ride through its fiscal year. The company may ultimately find that it needs one more big product category to keep the machine humming and ultimately translate into a $1 trillion market capitalization.

More iPhone 5: All ZDNet iPhone coverage | All CNET iPhone coverage | Apple announces iPhone 5: What you need to know | Apple's iPhone 5: Winners and losers | Apple's iPhone 5 event: By the numbers | Apple unveils the iPhone 5: photos | iPhone 5 has enterprise potential, but disappointing overall | Apple's era of secrecy is over I miss Apple's reality distortion field

Topics: Mobility, Apple, iPhone, Smartphones

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137 comments
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  • Kudos Apple

    You did what you set out to do although as proven by Jimmy Kimmel, you could have slapped a "5" sticker over the "4S" and sold 2 million phones. Still, this is what companies aspire to, being able to profit fantastically well without having to put any effort in. Apple has reached that mark so a big kudos from me to you.

    Now, who wants to bet that following my post, we will see a ton of immaturity from astroturfers hired by the market leader, much of it directed towards a company with less than 5% marketshare?
    toddbottom3
    • Market Leader? Is that not android? As for less than 5% I'm assuming

      you mean at this point MS right? I'm well on record for wishing them well in the mobile space. As for Apple's efforts to create the iPhone 5 considering the improvements I have to think that it took some effort at least. This includes hardware and a new OS. So yeah I think Apple made at least some effort:)

      Pagan jim
      James Quinn
      • Effort?

        Yes, the iPhone 5 seems to be better than the 4S, but not better than at least half a dozen other smartphones that are currently out on the market and other coming out next month like the Galaxy Note II with it's S-Pen built-in. toddbottom3 was referring to the effort Apple is not putting in to retake the lead in mobile design.

        Apple is afraid to change their "winning" formula. Except that when you do that for too long, you get left behind. Apple is very close to that. It's just shameful that their users don't call them on the carpet for it.
        laequis
        • Define Better

          Your idea of better clearly differs from about 2 million other people. If you like something else better, go buy it. No one is stopping you. In the meantime Apple is going to do what they do, which is make products that lots of people will pay a premium for.
          matthew_maurice
          • Just drove by burgerking on my way to work...

            and there was a line at the drive thru and at the counter. Clearly burger king makes the best food in the world. Someone alert the french laundry that they have been outclassed.
            mrefuman
          • Using your logic

            Windows must really suck. Oh wait t does lol. Name a Microsoft product that people are willing to line up, in the millions to get? You can't, because people only buy Windows, because it's forced on them.
            Troll Hunter J
          • Forced!

            Yes, people have guns put to their head and it is outlawed to buy a Mac or install Linux.

            I guess people are forced to buy Android phones too right?
            Emacho
          • Because masses purchase, doesn't make it better

            People purchased iPods over every other MP3 player 10x over. When infact they were horrible compared to what was on the market. They have a lack of format support, low battery life, few features, lack of radios, lack of customization. And they were overpriced for their capacities. Were they better? No, not at all.
            Jimster480
          • Only in your demented world.

            From the lack of thought put into your post, you sound like someone that bought one of the 50 Zune's sold.
            Troll Hunter J
          • Hunter you're wrong

            they sold almost five hundred! Im still trying to put my hand on one...
            theo_durcan
          • Insulting the guy above, does not disprove his point.

            Now, come up with a better answer, or retort, and more insults won't win the argument.

            The person above you is right, and the number of gadgets sold is not proof that a device is better than another.
            adornoe
          • I think you'll find...

            ...it's called a joke.

            Get it?
            mattmuir
          • So, where is the post with the joke?

            n/t
            adornoe
      • Android

        The interesting thing about Android is that Google makes $0 from its sales. They give away free to the OEMs. Here's one company that does not seem to make any money from ANY of their "products". Does that mean the search, Docs, Android are not "products"? If you define produt as being something that you sell (meaning, there is a puchase and sale associated with it), then none of what 90%+ of Google's "customers" see are products. The only product may be "advertising". (Or information collection and sale). While their stuff is very good, it makes me, personally, very nervous using anything they make. (Except maybe Google Earth, even if I never login). It just doesn't sit right with me.

        So, if you have an Android phone, how, exactly, are you contributing to Google's bottom line?
        hforman@...
    • Congratulations for being the vehicle in fulfilling

      the third piece of my prediction on the iPhone 5. Just for review, the prediction was:

      1. Tech pundits will be tremendously underwhelmed.
      2. The device will break sales records
      3. Intelligence of buyers breaking said sales records will be insulted.
      baggins_z
      • These predictions are pretty easy to make considering Vista

        Those 3 predictions were already made and fulfilled when MS released Vista so you really aren't going out on a limb here.
        toddbottom3
        • I see you're still struggling with the concept

          of Microsoft mandated OEM bundling of an operating system with freely made consumer purchasing choices.
          baggins_z
          • That went away a long time ago.

            Around 1998. Time for a new argument.
            ye
          • Apparently you don't grasp it either?

            There is a difference between going to Walmart, and buying a junk computer, and waiting in a line to buy an in-demand item.
            Troll Hunter J
          • 'In demand' is not the same as quality,

            and, though the iPhone is good quality, it's not really superior to others that are on the market right now.
            adornoe