The Great AT&T and Apple iFiasco of 2008

Yesterday morning, I took an early lunch at 11am to go see if the iPhone was worth getting, and if the line was short, so I walked the block from my office to the Chelsea AT&T store. A quick calculation of about 30 people in front of me, at least 6 salespeople, at 15 minutes per transaction (on average from what was being said on the webs) meant that I'd be taken care of in between 1 and 1.5 hours. I waited 37 minutes and was the 16th person in line, when an AT&T employee came out to announce that only 5 iPhones were left, all 8GB. I turned and went right back to my office.

I had been stymied, like the 100 people behind me (and 11 in front).

Over the course of the day, my RSS feeds on the tech sites and blogs I frequent started revealing the story (mostly on CNet's excellent coverage): Apple and AT&T (but mostly Apple) had completely screwed up what was poised to be a summer blockbuster of major proportions, and during a recession, no less. When I left to go back to the office, there were approximately 100 people behind me. Let's do a quick tally of how much was lost, at minimum, before Noon yesterday, for a single AT&T store's gross profits on the day: 111 x $199 (8GB iPhone) + $36 (activation fee) = $26,085. That obviously does not include the people who would have joined the line at Noon. Let's say this happened roughly equally around the country at all the AT&T stores (according to CNet, there's 1,800), that would mean an extremely conservative loss of approximately $46,935,000. In one day. Before Lunch.

On top of that, when I called to see if the other local AT&T stores had iPhones in stock, both told me that they were out and that all the AT&T stores were out and might, or might not, be restocked on Saturday, Monday, or the week after. That doesn't sound very good for AT&T or Apple.

On Wall Street, AT&T stock lost over .58% by the end of the day. Apple was down 2.28%.

Now for Apple's story: it is clear that they did not follow proper Business Process Engineering standards. Nor did they follow proper business procedures.

If I'm an Apple or AT&T executive, based on last year's successful iPhone launch, I would prepare, at minimum, to handle at least as much as last year (about 700,000 iPhones sold from 7/1-7/3 last year). Then I would also plan to handle at least that many concurrently at the moment I made the software upgrade available. Why would they not do something like the following: Day 1, release iPhone 3G in the North American market; Day 8, release software upgrade for iPhone 1 on Apple's Web site (or through automatic update) for the same market; Day 15: Release to Western/Eastern Markets in a phased manner (Europe first day, then Asia, then Australia, then South America, etc.); Day 22, release software upgrade to the rest of the world.

I haven't yet seen the bad sales figures for Apple, nor do I know what they predicted they would do. I can be fairly certain that they will fall far short of expectations for this opening weekend due to this iDebacle. We'll see how low things go when the markets open on Monday. I don't know what the total loss will be when all is said and done, but it will be in the high millions, no doubt, when taking into account lost revenue from the iPhones that weren't sold, the AT&T high rate data plans that weren't started (and compounded by the fact that people will continue to make money for their competitors while using their old phones!) and iPhone apps that won't be bought now, later, or never. This is without even mentioning what will happen to the Apple brand and can't-miss aura.

I wonder if AT&T is secretly happy: the next iPhone might have more telecomm partners (which is what usually happens to exclusive deals in the industry after 1 or 2 years--see Q, Motorola), and perhaps won't sell quite as many as they might have, had they been successful on this launch. Conspiracy theory, anyone? Hmm...