IPhone 3G S Lines Shorter, Apple Stock Watchers Say

Apple’s new iPhone went on sale this morning, to a bit less hoopla and somewhat shorter lines than some expect for new Apple products, the Associated Press reports. (Although there seems to be some disagreement amongst analysts, below.)

In fairness, the iPhone 3G S isn’t really a revolutionary jump from previous incarnations of the popular smart phone. Buyers can opt for an older 3G model, whose price Apple halved to $99, and many current iPhone customers have simply upgraded to the new OS 3.0.

As The Journal’s Walt Mossberg wrote in his review of the 3G S, it pretty much looks the same as previous iPhones, but offers more speed, more memory, more battery life and a few new features, including video recording and a better camera for still photos.

Still, analysts that follow Apple stock are deeply interested in how the new 3G S — which costs at least $199 — seems to be faring on its first day in the market. Here’s a smattering of their recent notes:
Hudson Square Research: “In our survey of 9 retail stores, we found more new customers to the iPhone than we initially expected. In some cases, we found 30% to 40% of the people in line were first-time iPhone buyers. With respect to changing carriers, our findings were mixed. We believe this is a positive sign for the device, particularly since the 3G S is not that different than its predecessor. Overall, as we anticipated, the turn-out is smaller than last year.”

Morgan Keegan: “We stopped by our Apple Store this morning and counted about 40 people in the line compared to the 300+ that were in line at the same time last year. The crowd was about as early adopter in appearance as one could imagine…with less countries getting the iPhone 3G S on day 1 and less incentive to upgrade, we believe that 500k-600k devices sold this weekend is a reasonable expectation vs. the 1mm+ sold last year in the first weekend.”

Piper Jaffray: “In 2008, Apple introduced the iPhone 3G at $199, a 50% reduction from the previous model, which drove demand up significantly. Most customers will be able to purchase the new iPhone 3G S for $199 (the same price as the previous model). As such, the change in value proposition for the iPhone 3G S is not as meaningful as it was for the iPhone 3G, leading to less of a surge in units at launch. Moreover, the iPhone 3G was available in 21 countries at launch vs. the iPhone 3G S which will sell into 8 countries at launch (then over 70 more throughout the summer).”

Scotia Capital: “Although we believe the iPhone 3GS is an improvement over its predecessor and that the US$99 iPhone 3G will have some appeal to AT&T’s subscribers, we see three reasons why iPhone sales may not be as strong as some investors expect … These are: (1) iPhone penetration rates at AT&T are likely slowing: (2) the US$99 iPhone 3G is not likely to change the value proposition enough to appeal to the majority of non-iPhone subscribers, and (3) the upgrade cycle by existing iPhone owners is expected to be muted.

Article by By Matt Phillips - WSJ - http://blogs.wsj.com/digits/2009/06/19/iphone-3g-s-lines-shorter-apple-stock-watchers-say/