Is the iPhone 5 Really Underperforming?

The iPhone 5 is not selling as quickly as investors expected. Is it too early to worry, or has Apple finally had a flop?

iPhone 5 Pre-orders
One reason post-release growth has been stagnant is that the iPhone 5 was Apple’s biggest smartphone release to date. Compared to 4 million units sold by the end of the first weekend of 4S sales, the iPhone 5 has sold 5 million units in the same time frame. Some estimates pin the total number of pre-orders for the iPhone 5 at twice the number for the iPhone 4. As more consumers become early adopters, fewer remain to drive growth after the initial release.

Imperfect Reviews
For the second time in a row, an iPhone release has been marred by some less than glowing reviews. While major features like screen size, network speed, and processing power are all significantly better in the iPhone 5, one feature isn’t. For the 4S, it was Siri. For the iPhone 5, Apple replaced Google Maps with its own version that many considered to be an inferior app, prompting Apple CEO Tim Cook to release a rare apology and even urge customers to use competing apps until Apple Maps was improved.

Stiff Competition
For the first time in history, Apple has to compete with highly praised and popular smartphones from other manufacturers. Although it was released back in late May, the Samsung Galaxy S3 sold over 9 million pre-orders while receiving universal acclaim. The iPhone 5 has several technical advantages over the S3, but the S3 offers a few compelling reasons of its own to switch to the Android market.

A Silver Lining
Investors and Apple are eagerly anticipating the expansion of foreign markets. With 3G network penetration set to explode in the next decade in China, Apple will see hundreds of millions of potential customers enter the market. With smartphone manufacturers saturating current markets, China and India will drive future growth.

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