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iPhone Sales Top Forecasts; AT&T Working On Activation Issues

Apple outpaced analyst estimates selling more than 500,000 iPhones atApple and AT&Tstores in the first weekend it was available, according to some projections, although about 2% of AT&T customers were dissatisfied with their iPhones due to delays in wireless network activation.

Half of the Apple stores on the U.S. West Coast sold out of the device - which combines a phone, Web browser, and music player - on the first day, according to a Los Angeles Times report that cited analyst Trip Chowdhry of Global Equities Research in San Francisco.

Of those contributing to heavy iPhone sales, 52% of customers surveyed by Piper Jaffray were new to AT&T's wireless network, according to CNBC's Jim Goldman.

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About 35% of the iPhone buyers were former Motorola users, 13% each were former Palm and Nokia users, and only 6% "came from the BlackBerry world" of Research in Motion, according to Piper Jaffray's research, Goldman said.

Some customers may have lost their excitement as quickly as Apple's iPhone were selling out as there were numerous reports that some experienced phone activation problems.

"It's a real buzz kill," said Brad Bargman of Ft. Lauderdale, Florida, adding that repeated calls to AT&T failed to get the device to work. "Now I'm soured on it a little bit."

However, AT&T said the situation improved by Sunday.

"We are working on any issues on an individual basis with customers who were impacted," said Michael Coe, a spokesman for AT&T, the Apple device's exclusive carrier. Nearly all customers have been able to activate their phones within five to eight minutes, he said.

Without activation, not even the phone's alarm clock works, leading some unhappy customers to joke that their inactive iPhones are little more than expensive paperweights.

AT&T attributed the problems to overloaded servers as large number of customers tried to activate their phones over the weekend. After being hit with the initial onslaught, AT&T made technical adjustments to its activation system so that new users wouldn't face the same delays, Coe said.

Customers with corporate accounts might also experience delays because AT&T needs authorization from the telecommunications manager at their company to switch them to an individual account, he said.

Rob Enderle, an industry analyst with The Enderle Group, said the activation problems probably won't hurt iPhone sales. "This kind of thing is not unusual when you have this number of people
trying to buy something all at once," Enderle said.

Apple iPhone
Apple iPhone

Depending on how the companies handle customer's complaints, it could in fact help, he said. If customers feel the company has treated them well, they are more likely to buy and recommend its products in the future.

"It doesn't matter whether your product breaks or not," Enderle said. "It matters how well you treat your customers."

The iPhone, which also serves as an iPod media player and a wireless Web device, went on sale Friday evening after months of anticipation. Thousands of people lined up in front of Apple and AT&T stores across the country to be among the first to get one.

Apple has been updating its Web site nightly to report which of its stores have iPhones in stock. Nearly all AT&T stores have sold out, Coe said.

Apple would not provide details about iPhone sales figures or customer activation problems, but a spokeswoman said the company was working hard to resolve any issues.

"There are a small percentage of iPhone customers who have had a less than perfect activation experience," said Apple spokeswoman Natalie Kerris.

Customers can activate the phones by logging on to Apple's iTunes software from their computers. Although many customers said they experienced no delays, others received a message saying activation "will take some additional time."

Many buyers said their troubles began when they tried to switch from their current cell phone provider to AT&T. The activation problem has affected both existing AT&T wireless customers and those signing up from another cell phone carrier, Coe said.

As of Sunday afternoon, eBay said more than 2,700 iPhones had been sold on the online auction site at an average price of $740.18. The iPhone retails for $499 for the 4-gigabyte version and $599 for the 8-gigabyte model.

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