(AAPL) Apple’s iPhone4 Debut Sets Record

Apple Inc. (AAPL) announced that its fourth generation iPhone 4, released on June 24, 2010 in the U.S., Britain, France, Germany and Japan, sold a record 1.7 million in just three days after the launch, making it the most successful start in the company’s history in terms of single product sales.

In comparison, the previous models, iPhone 3GS and iPhone 3G, sold 1 million units over their first three days. The original iPhone launched in 2007 achieved 1 million in sales in approximately 74 days.

Apple’s iPhone 4 is a major upgrade from the previous models, available in both black and white colors. The new iPhone is only 9.3 mm thick (24% thinner than the iPhone 3GS) but weighs 3 grams more than the iPhone 3GS. The iPhone 4 is equipped with a 3-axis gyroscope and accelerometer enabling users to play games with greater ease.

Apple’s iPhone 4 has a 3.5-inch display with a native resolution of 960 by 640 pixels, also known as retina display. The iPhone 4 has a 5 mega pixel camera with LED flash and 5 times zoom on both the front and back of the device. Besides, the iPhone 4 also features 720p video recording capable of 30 frames a second.

The iPhone 4 was completely sold out in most of the stores in the U.S. within a very short time. Pre-orders amounting to more than 600,000 resulted in technical glitches that brought down the servers of Apple and AT&T Inc. (T), the exclusive iPhone carrier in the U.S.

Frenzied demand for the iPhone 4 has created supply problems for Apple, especially with the white version, which is expected to be available in late July 2010.

International distribution is expected to expand to 88 countries by September 2010. We believe that despite a supply constraint for the white model, iPhone will remain a strong revenue earner for Apple, going forward.

The iPhone has transformed Apple into one of the world’s leading mobile phone companies. According to Reuters, Apple has sold more than 50 million iPhones since the device debuted in 2007. The company sold more than 20 million iPhones in fiscal 2009.

Apple’s iPhone, however, faces tough competition from Nokia Corporation (NOK), Research in Motion Ltd. (RIMM) and Motorola Inc. (MOT). Verizon Wireless also provides tough competition by promoting smartphones based on android software from Google Inc. (GOOG).

However, Apple is expected to allow Verizon Wireless to sell iPhones from 2011, which will mitigate some competition in our view. The addition of a new carrier will definitely boost the company’s sale. We have an Outperform rating on a long-term basis, that is, in the next 6-to-12 months.

Apple currently has a Zacks #1 Rank (“Strong Buy”) rating for the next 1-3 months.

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