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Is the iPhone's Success due to Apple's High Customer Loyalty Rate?

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Katy Huberty, a Morgan Stanley analyst who estimates that Apple sold 39 million iPhone units in the period, which is above the consensus stated that "Strong iPhone demand at the end of the product cycle speaks to high loyalty rate of the Apple ecosystem." In contrast Piper Jaffray is a little more conservative by forecasting Apple's iPhone sales will mark 14% year over year growth with between 35-36 million iPhones being sold. In a quickly maturing smartphone market where the likes of Samsung have dropped 24% in a single quarter due to heavy competition, some wonder how Apple will continue to stand out as the number one smartphone maker in the world.


Morgan Stanley's analyst smartly acknowledged "high loyalty rate" as one of the reasons Apple is bucking the downward trend in high end smartphone sales. This is a sore point with Samsung. They just can't fathom such customer loyalty, and more importantly, they're unable to replicate or copy it. The iSheep, as Samsung affectionately calls Apple's faithful, keep steadfast through thick or thin. To the faithful, Samsung's lack of class with plastic smartphone cases, displays that are oversaturated and their pathetically second class Android OS are unappealing. In general, Samsung is just a copycat Android machine.


Jae Shin, VP of Samsung's Knox mobile security business group thought that consumers were over Apple as being a leading brand. Shin stated back in June, in context to Apple having an impact on the market with a future smartwatch-like device, that strong branding may have been a factor in the beginning but that consumers had the know-how and the resources to make smarter decisions. Well Mr. Shin, your plunging sales this past quarter by over 24% made it abundantly clear that Samsung's philosophy isn't panning out; Customer loyalty still matters, big time.


CNET noted this morning, "how long can Apple's iPhone stay about the smartphone fray?" Their report further noted that "The continued strength of the iPhone represents an anomaly at a time when the smartphone business is maturing and there is a noticeable lack of excitement in the area. As demand for pricey devices wanes -- analysts say almost everyone who wants a smartphone in mature markets already has one -- the question arises: Can Apple stay above the fray? Or will it too succumb to the broader pressures of the market?"


There's no doubt that Apple's iPhone 6 has to hit a home run in order for Apple's successful streak to continue. And with a possible 5.5 inch model coming on stream either this fall or early next year, Apple intends to strike at one of Samsung's current strong sellers, their phablet line-up.


Yet the argument over the success of Apple's future iPhone's is for another day. Tomorrow, Apple will report on their Third Quarter results in a conference call. Most analysts expect to see steady iPhone growth, even though the smartphone market is supposed to be saturated. Even though the models Apple is selling are nine months old.


Analysts polled by Thomson Reuters expect Apple to post earnings of $1.23 a share and revenue of $37.9 billion for the period ended in June. In April, Apple projected sales of $36 billion to $38 billion.


Below is a list from Fortune, noting the individual analyst's estimates.




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