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Apple's iPhone 5 Launch in China: One Reason for Optimism


Sometimes, no news really is good news.

MINYANVILLE ORIGINAL An integral part of the cult of Apple (NASDAQ:AAPL) is the long lines of people who camp out in front of Apple stores in order to buy a new gadget as quickly as possible. It's a point of pride for the company that its products are in such high demand, but it's also been mocked furiously by Apple's competitors; a recent Samsung (PINK:SSNLF) ad depicted Apple superfans as blindly following an inferior product.

Despite the long lines - or perhaps because of them - Apple's products continue to spark a fervor that most companies only dream of. One of the drawbacks, however, is that the crowds of fans can sometimes get unruly; China is especially prone to this, with a near-riot breaking out during the launch of the iPhone 4S back in January.

For the launch of the iPhone 5, Apple worked hard to make sure it had just enough phones to satisfy the crowds but not so many that its finances were damaged by oversupply. This meant that the launch went much more smoothly... but because of a lack of high-profile kerfuffles, the event went off with a relatively low profile, which led to the general impression that the device was off to a slow start.

This is part of a larger trend of general pessimism about Apple's prospects. The company's stock is trading near its ten-month low, and some analysts are picking it to drop below $400 in the near future. But is the outlook for the tech giant really so bleak?

iPhone 5 sales in China have actually been pretty strong, with over 2 million units sold since the launch on Friday. Compare this with the chaotic iPhone 4S launch: phones in short supply, scalpers selling them at vastly inflated prices, and angry mobs pelting an Apple Store with hundreds of eggs. This hysteria, however, accompanied absolutely massive revenue, with Apple pulling in $12.4 billion in China in the first half of this fiscal year against $13.3 billion over the entirety of last year.

Early estimates for the iPhone 5 ignored its numbers and focused on the media firestorm that failed to take place. The fact is that iPhone 5 pre-orders in China are up 50% from iPhone 4S pre-orders, and the device looks set to smash its own sales records. Whether analysts will abandon their pessimism in the face of hard sales numbers is another story.

Nevertheless, Apple's outlook may be as strong as its performance in China suggests. The company is in pole position for its continuing fight against Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and others; it's losing the smartphone market share war, but it still leads the pack in terms of design and has a massive war chest to work with. Optimism would not be foolish.

The lack of incident over the iPhone 5 launch in China should be encouraging. Apple has always sparked excitement, but the company has pursued that excitement with a relentless product launch schedule at the cost of innovation and consumer confidence. Apple's ability to throw itself a harmonious party in China shows a new maturity; not merely content to make a huge amount of money at the cost of a ruckus, the company is buckling down and getting it right.
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