The astonishing first-week sales of the iPhone were hailed as evidence that the so-called Jesus Phone had usurped all others, vindicating the loyalty (aka fandom) of the Apple faithful and fulfilling Jobs' pledge to revolutionise the cellphone industry.  But as expectations for the handset have been boosted high, disappointing activation numbers reported by AT&T have proved a reality check for Apple and investors alike.

Currently second-quarter activations are being pegged at 146,000, against healthy analyst predictions of 200,000 to 500,000, and while there could be some margin of error in there due to internet sales and resales it's believed to be an accurate figure ahead of Apple's third-quarter results which will be released tomorrow.

As a response, the Apple share price dropped $3.75 (2.6 percent) to $139.95 at midday, although this was in fact a turnaround from a $7.15 fall earlier in the day. 

"It doesn't mean it's a failure, but it's making investors stop and re-evaluate some of the numbers" Andy Hargreaves, Pacific Crest analyst

It looks as though promising but honest reviews - which highlighted the iPhone's lack of picture messaging, 3G and relatively high costs, among other things - were enough to make mainstream consumers wary of slapping down $500+ for the iconic handset.  No doubt analysts are seeing initial sales as the Apple-faithful and early-adopters keen to get their hands on the latest new gadget, while the general public are perhaps more likely to wait for a second-generation version with some of the flaws ironed out.

Nonetheless, it's been a lucrative few weeks for both Apple and AT&T, with both riding a wave of rising profits.  Whether demand is low or merely experiencing a standard post-rush lull, the future for each company looks bright; the same might not be true for how much trust people will place in analyst predictions.

[via MSN Money]