Katy Hubert

What's driving iPhone 4 sales?

June 17, 2010: 6:09 AM ET

It's a potent mix of new customers and old, says a Morgan Stanley analyst

Photo: Apple Inc.

One of the unanswered questions about Apple's (AAPL) latest hit product is how many of the 600,000 iPhone 4s that were pre-sold on Tuesday were ordered by iPhone owners upgrading from their older models and how many by new customers who'd never owned an iPhone before.

Charles Golvin, a wireless analyst at Forrester Research, is a skeptic. "I doubt that a meaningful percentage of these buyers are new," he told the New York Times.

Morgan Stanley's Katy Huberty is more sanguine. In a note to clients issued Wednesday evening she cites a proprietary Morgan Stanley survey that suggests the upgrade rate will be more than 50%, but not that much more. Even 50% is considerably higher than the 18% upgrade rate found in a November 2008 survey and 25% since the launch of the original iPhone in 2007.

A loyal and growing installed base is a good thing for Apple, she argues. She estimates that if 30% of current iPhone owners upgrade this year, Apple will sell 42 million units in 2010. If 50% upgrade, it will sell 48 million. In her model, the iPhone installed base rises from about 30 million at the end of 2009 to 100 million by the end of 2011.

"We believe there are several key drivers of iPhone upgrades," she writes. And she ticks them off. In her words:

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