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Is the iPhone Finally Apple Inc. (AAPL)’s Greatest Product?

Apple Inc. (AAPL)Depending on how you measure success, you may have already considered the iPhone to be Apple Inc. (NASDAQ:AAPL)‘s greatest product. The device revolutionized the smartphone industry, and has grown to comprise over half of the business with $86.7 billion in trailing-12-month sales. The iPod fell by the wayside in terms of revenue long ago, an inevitable victim to self-cannibalization.

If you were to measure a product’s success based on cumulative unit sales, though, only now might the iPhone have earned that title.

Through the end of the first quarter, Apple Inc. (NASDAQ:AAPL) had sold a lifetime total of 374.6 million iPods and 356.3 million iPhones. Including its second-quarter results, the iPhone has likely already surpassed the iPod in lifetime unit sales for the first time ever — investors just won’t find out until earnings on July 23.

Source: SEC filings. Calendar quarters shown through Q1 2013.

Analysts estimate that Apple Inc. (NASDAQ:AAPL) sold close to 27 million iPhones in the second quarter, which would put its lifetime total around 383 million. iPod unit sales have fallen to well below 10 million during non-holiday quarters, and at the current rate Apple should sell around 6 million iPods, which would put its cumulative total a little under 381 million.

This quarter might very well mark a milestone for Apple Inc. (NASDAQ:AAPL) where the iPhone becomes its all-time best-selling product in total units.

What’s more is that the iPad is off to an even stronger early start than the iPhone. The tablet still lags the other product categories, with 140.5 million in cumulative lifetime sales through March, but it took off much faster after launch than both the iPhone and iPod.

Source: SEC filings.

Apple Inc. (NASDAQ:AAPL) investors have focused so intently on the iPhone business and the high-end saturation that’s affecting it that they’ve arguably lost sight of the iPad’s future potential.

There are several important reasons why the tablet market may currently be more appealing to Apple than the smartphone market. The overall lack of subsidies means that consumers are more willing to pay for innovative features. For the same reason, Apple Inc. (NASDAQ:AAPL) also doesn’t need to rely so heavily on third-party carrier retail stores for distribution and marketing. It’s also younger, which implies more growth potential going forward. The flip side is that average selling prices and gross margins are lower.

It’s quite likely that one day in the foreseeable future the iPad will become Apple’s greatest product.

The article Is the iPhone Finally Apple’s Greatest Product? originally appeared on and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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