iPhone 5's Disappointing Sales Are 50% Below Expectations

Piper Jaffray analyst Gene Munster had predicted that Apple's

latest smartphone would sell as many as 10 million units. In the "worst-case scenario," Munster believed that Apple would sell

.

His words were followed by a number of

from analysts that believed the iPhone 5 would go above and beyond its predecessors. Technically, Apple accomplished that goal last weekend, selling more than

to eager consumers all over the world. "Demand for iPhone 5 has been incredible and we are working hard to get an iPhone 5 into the hands of every customer who wants one as quickly as possible," Tim Cook, Apple's CEO, said in a

. "While we have sold out of our initial supply, stores continue to receive iPhone 5 shipments regularly and customers can continue to order online and receive an estimated delivery date. We appreciate everyone's patience and are working hard to build enough iPhone 5s for everyone." Apple did not break down the number of units sold per nation. The company also chose not to say if its sales figures included pre-orders and iPhones sold that have not yet been shipped. Based on Cook's comments, it sounds like they are both included. Even so, this is still a huge accomplishment. Investors do not seem to agree. In pre-market trading, Apple shares declined two percent. The company has recovered since that time and seems to be headed upward, but as of this writing the stock is still down more than seven percent. Did investors overreact? That depends on the reason

they abandoned the stock this morning. Munster's iPhone 5 sales prediction has been reiterated throughout the press for weeks. If investors truly believed that Apple had the potential to sell 10 million iPhones last weekend, then it is easy to see why they would be disappointed by sales that reached only half that amount. When announcing their predictions for iPhone sales, analysts neglected to include two key elements --

and market saturation. It is unclear if Apple had the ability to produce 10 million units in time for the device's launch. For the sake of argument, let's suppose that the company did not have that ability. In that scenario, how could Apple ever sell 10 million iPhones? It is not physically possible. Higher pre-sales could have allowed Apple to announce a larger number. However, there are millions of people who still like to buy things in person. That is the whole purpose of the Apple Store. Without it and other retailers, consumers may buy everything online. For now, some iPhone 5 shoppers are inevitably waiting for retailers to get their next shipment. Domestically, there are some signs that the market is becoming over-saturated. Despite the

on Friday, Apple Stores did not immediately sell out of every iPhone in stock. This is a significant step down from the iPad 2, which sold out immediately and experienced a massive shortage worldwide. If investors are reacting to this news (and

reports of iPhone 5 sales and availability), they might be making the right decision. If, however, they are abandoning Apple because they expected the company to sell 10 million units this weekend, then they might as well get out of the stock market. Analyst predictions are just that -- predictions. They are not a solid measure of sales estimates.