For Apple, Good is Not Good Enough

Verizon (NYSE:VZ) saw more customers drawn to its enhanced wireless network called 4G LTE in the first quarter, and the company’s quarterly results –  released on Thursday — showed that the added boost pushed revenue above analysts’ expectations. Hidden within the earnings report was one concerning fact; Verizon Wireless, the wireless carrier subsidiary it jointly owns with Vodafone (NASDAQ:VOD), activated just 7.2 million smartphones in its first quarter, a figure well below the 9.8 million activated in the fourth.

But for Apple (NASDAQ:AAPL), that drop is not too concerning, at least not at first glance. While still posing a slight decline from the 63.3 percent share the company’s flagship smartphone commanded last quarter, iPhone activations accounted for 55.6 percent of Verizon’s total, which is still an impressive number.

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With industry experts’ commentary and analysis increasingly focused on iPhone shipments, Verizon’s smartphone sales provide a case study for consumer demand for the devices in the United States. Strong competition in the smartphone market between Apple’s iOS and Google’s (NASDAQ:GOOG) Android have given these numbers special importance to analysts, but after Cirrus Logic (NASDAQ:CRUS), which is widely believed to make analog and audio chips for the iPhone and iPad, announced a weaker-than-expected forecast on Wednesday, Apple’s iPhone has been put under the microscope…

From Verizon’s numbers, analysts were able to calculate that the wireless carrier sold four million iPhones. Of those phones, about half were 4G LTE devices, meaning the iPhone 5, according to comments made by the company’s Chief Financial Officer Fran Shammo during the earnings call, as reported by AllThingsD. That means that Verizon activated one million fewer iPhone 5 units and two million fewer Apple handsets overall than it activated between September and December 2012. But, as the publication noted, the previous quarter was unique; it was not only the holiday quarter, but it was the quarter in which the iPhone 5 debuted and Apple cut the price of its legacy iPhones. Also, given that there was an intermediary involved, Verizon, all the blame cannot be put on the iPhone itself.

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So, while the iPhone’s share of sales at Verizon did decrease 33 percent sequentially, they still accounted for more than half of all handsets the carrier sold. Furthermore, as Asymco’s Horace Dediu said on Twitter, iPhone shipments increased 25 percent on a year-over-year basis, and according to Topeka Capital’s Brian White, the the penetration rate of the iPhone remains above average. But still, shares of Apple continued to etch out new lows, adding to Wednesday’s losses. In afternoon trading on Thursday, shares dropped as low as $391.96.

One point to keep in mind as Apple prepares to report its quarterly earnings, wrote AllThingsD’s John Paczkowski, is that the market has already been disappointed by record-breaking but lower-than-expected iPhone sales from Verizon.

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