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Apple Sells One Millionth iPhone but could lose $80,000,000

September 10, 2007 by Dr. Macenstein
Filed under: News, iPhone

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Posted by Dr. Macenstein

It looks like those iPhone price cuts were just the thing Apple needed to drive sales, as this weekend Apple’s iPhone reached the 1 million sold mark.

“One million iPhones in 74 days-it took almost two years to achieve this milestone with iPod,” said Steve Jobs, Apple’s CEO. “We can’t wait to get this revolutionary product into the hands of even more customers this holiday season.”

While reaching this milestone may seem like great news for Apple (and in most ways, it is) there is one downside to that number that is not mentioned in Apple’s press release â€“ namely, Steve jobs promised all iPhone buyers (pre-last week’s price drop announcement) that they would receive a $100 credit to the Apple Store.

Generously assuming that the $200 price drop brought in another 150,000 iPhones customers last week, and that maybe 50,000 folks who bought iPhones in the 2 weeks leading up to the price drop may have gone ahead and gotten their $200 back from Apple during their 14-day price protection policy, that still leaves 800,000 potential iPhone owners (myself included) that will be looking for $100 back from Apple. That adds up to a potential $80,000,000 hit Apple would have to take.

Now, of course, Apple knows not everyone will take advantage of the $100 store credit, and, in order to use it, you have to be buying something at the Apple store anyway, so odds are Apple will make some money off the credits to help lessen the hit, but still, that is a staggering number when you think about it, and it makes you wonder if Apple would have done better to hold off on the price drop a month or so and wait until they had a 16GB version of the iPhone out to justify the drop in price of the 8 GB version.

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Comments

5 Comments on Apple Sells One Millionth iPhone but could lose $80,000,000

RB on Mon, 10th Sep 2007 11:50 am

It’s not as big a hit as you would think. That is a $100 retail credit the actual cost to Apple would be much lower, depending on markup.

Clarke Barr on Mon, 10th Sep 2007 12:15 pm

That’s actually an interesting point. Will they disclose that final number in their next earnings report? I would be interested in seeing just how many people take them up on the credit.

DJ on Mon, 10th Sep 2007 1:42 pm

Gee, if only they had some math-type guys that could run the numbers and estimate the projected impact of this kind of store credit. Then they could make a reasonable decision about whether they should do it now or wait ’til later. I’ll bet there’s money to be made in a field like that…

mike on Mon, 10th Sep 2007 2:03 pm

you also have to remember that apple is spreading their iphone sales numbers over the 2 year contract life of the phones, i assume that they would spread out this loss with each phone as well. therefore even at it’s max of 80 mil, it’s really only 10 mil per quarter… a significantly smaller number, especially considering the increased revenue those redemptions will bring in to the apple store when they are spent!

it’s actually quite genius.

Hindsight on Mon, 10th Sep 2007 4:27 pm

Oh totally. Most people will end up spending money at the Apple store and in many cases 3x or more the $100. “Oh look honey, we just got $100 off on this iMac. Heck I may as well get the 24″ model.” You know that’s how it works. I’m guessing a lot of poor fools who bought I phone on their credit cards will pay another $599 in interest just on the iPhone adding to their already large balance.