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7/24/07 Apple whacked by iPhone worries
Posted: Jul 24, 2007

Apple whacked by iPhone worries

One day before the company is due to report earnings, its shares slide after AT&T says fewer iPhones than expected were activated in the second quarter.

By Elizabeth Strott

High expectations can produce big disappointments.

That's what is happening to Apple today, after AT&T reported that only 146,000 iPhones were activated in the second quarter.

Shares of Apple were down $3.75, or 2.6%, to $139.95 at midday on the news, which one analyst called a "reality check" for Apple. Shares had been down as much as $7.15 earlier this morning.

Apple watchers should get more clarity on iPhone action once the company reports its fiscal third-quarter results tomorrow after the market close. But for now, the AT&T report is giving some investors a case of the jitters.The iPhone was introduced June 29, leaving only two days in the second quarter, and in Apple's fiscal third quarter, for the iPhone to take off. But analysts had forecast between 200,000 and 500,000 activations in those two days.

Pacific Crest analyst Andy Hargreaves said the activation number was low. "It doesn't mean it's a failure, but it's making investors stop and re-evaluate some of the numbers," he said today.

"The reaction is pretty appropriate. Expectations certainly were for a lot more than 150,000 units. Even though it's just two-day sales, it's a reality check,"
Hargreaves added.

There is still some margin for error due to Web sales and resales over the Internet, Hargreaves said, but the 146,000 is a good proxy for determining total sales of the iPhone.

Another analyst agreed, although he cautioned that the shares, and iPhone sales, had room to recover.