Verizon iPhone launch post mortem: Three lessons and some humble pie
No matter what sales numbers Apple or Verizon eventually boasts about, iPhone 4's launch on the carrier cannot be called a resounding success -- at least compared to others. Launch day got off with short customer lines, something Apple simply isn't accustomed to or was prepared for. The Apple fan club of bloggers and journalists fed the frenzy, raising expectations about Day 1 on Verizon. There was fizzle instead of pop yesterday.
In doing a post mortem, I see three things the Verizon iPhone launch reveals about Apple.
1. Apple botched launch preparations. Apple stores opened early, with loads of staff inside and lots of food and drinks ready for customers waiting in line. Except there were no big crowds. The company clearly overestimated in-store demand for the Verizon phone, something also indicated by customers receiving preorders early and actual orders starting a day earlier than planned. Sure, Verizon sold out preorders in just a couple of hours but never said how many. It's possible to view orders and delivery as Apple's well-oiled distribution channel working efficiently. Based on the lack of crowds, early demand is as likely, if not more likely, to have been considerably less than Apple anticipated.
2. Bloggers and journalists are overly obsessed with Apple -- to a fault. There is clearly pro-Apple bias, which I previously wrote about -- twice in March 2010 (here and here). Verizon iPhone Day 1 shows how bad is the problem, by how hype worked against Apple. Apple's handset has been called the "Jesus phone," for its popularity. Overly positive posts about the Verizon iPhone -- many making outrageous sales projections and switcher predictions -- essentially proclaimed the Second Coming of the Jesus phone on Jan. 10, 2011. The Apple fan club overly raised expectations, and even Apple executives may have been taken in by the hype when planning for launch day.
3. Apple's stock is nowhere as safe as Wall Street analysts lead investors to believe, and there is a whole lot of denial going about the rocky Verizon iPhone launch. Apple shares plunged suddenly yesterday, in what Apple 2.0 blogger Philip Elmer-DeWitt described as a "flash crash." He writes: "Except for the surprisingly short iPhone lines at Verizon stores Thursday, there didn't seem to be any news behind the sell off." What? Short lines wasn't reason enough in context of big sales expectations?
The big wave of news stories about the short lines started to crest between Noon and 1 p.m. ET, yesterday. For example, CNET posted images of short lines at 12:14 p.m. ET. Then right around 1 p.m. came several stories based on a Piper Jaffray quickie survey of 40 customers at Apple and Verizon stores: Only 8 percent of buyers were switching from AT&T. But the Apple fan club of bloggers had been writing about churn of 26 percent or more. The flash crash came soon after the 8-percent figure was reported. It's not rocket science to see a connection.
I've been complaining for more than 18 months that too much of Apple's share performance is about perception -- something the biased blog posts and news stories feed. Sure, there are good reasons to invest in Apple and believe in its future, that is based on performance. But there are clear indications that hype and rumors overly influence the share price. If the hype turns bad, then what of Apple shares?
Something else: How much can investors trust Wall Street analysts when they are infected by Apple hype and live in denial when expectations fall short of reality? For example, yesterday at Pioneer Press/TwinCities.com, Julio Ojeda-Zapata wrote about experiences at an "Apple Store with short lines." He wasn't alone: "Piper Jaffrey analyst Gene Munster was with me at the megamall, and he speculated that the Verizon-iPhone preorders may have had a great deal to [do] with the lack of queuing. Also, he said, it is a work day (past Apple-product launches have often occurred on a weekend)." Oh yeah? Apple offered preorders for iPhone 4 last summer and there were still massive lines. The other US iPhone launches occurred on weekdays. I hear denial talking. Do you?