iPhone supply issues could make Apple disappoint on Wall Street
While demand for the iPhone remains high, Apple's apparent inability to keep up with supply during the last quarter could lead to lower-than-expected revenue reported on Monday.
At Apple's September media event, the iPhone maker suggested roughly 3.5 million phones were sold in the quarter with three weeks remaining, Yair Reiner, analyst with Oppenheimer, said in a note to investors Friday. But some analysts believe Apple will have sold more than twice that in the September quarter. While recent surveys suggest the supply issue has been mostly resolved, Reiner believes that bottleneck period could lead to slight disappointment in the company's fourth-quarter fiscal year revenue.
But outstanding demand for the iPhone has an upside for the holiday season, provided Apple can keep up with demand. Reiner recommended that investors "keep some powder dry" to buy shares after Apple reports its earnings Monday afternoon, rather than before.
"With demand for the iPhone apparently outstripping supply, December could be a substantial catch-up quarter, both in terms of sell-through and channel replenishment," he said. "Barring any additional component or manufacturing disruptions, we believe our 8M unit assumption for F1Q10 could prove conserfative, especially given the iPhone's expanding carrier footprint."
Apple's iPhone supply issues were also noted Thursday by Piper Jaffray analyst Gene Munster. The handset maker has had trouble keeping the iPhone 3GS in stock, in particular. Overseas, wireless carrier 3 Italia has said though it is selling 20,000 iPhones per month, it could double those numbers if the supply were available.
Like others, Reiner expects a record quarter for Mac sales, with Apple shipping between 2.7 million and 2.8 million units. But the potential to exceed those numbers, he said, is limited, because rumors of new MacBooks and iMacs likely delayed some purchases. Reiner expects the company's first quarter of the 2010 fiscal year to be "significantly more impressive" than the concluded September quarter.
Previously, Oppenheimer predicted that new accounting rules from the Financial Accounting Standards Board would boost Apple's shares as iPhone revenue is realized up-front. In that report, Reiner predicted that Apple would continue to "surprise to the upside" for investors.
Given the strong future potential, Reiner has maintained his outperform rating for Apple despite iPhone supply concerns. Oppenheimer has a price target of $210 for AAPL stock.
At Apple's September media event, the iPhone maker suggested roughly 3.5 million phones were sold in the quarter with three weeks remaining, Yair Reiner, analyst with Oppenheimer, said in a note to investors Friday. But some analysts believe Apple will have sold more than twice that in the September quarter. While recent surveys suggest the supply issue has been mostly resolved, Reiner believes that bottleneck period could lead to slight disappointment in the company's fourth-quarter fiscal year revenue.
But outstanding demand for the iPhone has an upside for the holiday season, provided Apple can keep up with demand. Reiner recommended that investors "keep some powder dry" to buy shares after Apple reports its earnings Monday afternoon, rather than before.
"With demand for the iPhone apparently outstripping supply, December could be a substantial catch-up quarter, both in terms of sell-through and channel replenishment," he said. "Barring any additional component or manufacturing disruptions, we believe our 8M unit assumption for F1Q10 could prove conserfative, especially given the iPhone's expanding carrier footprint."
Apple's iPhone supply issues were also noted Thursday by Piper Jaffray analyst Gene Munster. The handset maker has had trouble keeping the iPhone 3GS in stock, in particular. Overseas, wireless carrier 3 Italia has said though it is selling 20,000 iPhones per month, it could double those numbers if the supply were available.
Like others, Reiner expects a record quarter for Mac sales, with Apple shipping between 2.7 million and 2.8 million units. But the potential to exceed those numbers, he said, is limited, because rumors of new MacBooks and iMacs likely delayed some purchases. Reiner expects the company's first quarter of the 2010 fiscal year to be "significantly more impressive" than the concluded September quarter.
Previously, Oppenheimer predicted that new accounting rules from the Financial Accounting Standards Board would boost Apple's shares as iPhone revenue is realized up-front. In that report, Reiner predicted that Apple would continue to "surprise to the upside" for investors.
Given the strong future potential, Reiner has maintained his outperform rating for Apple despite iPhone supply concerns. Oppenheimer has a price target of $210 for AAPL stock.
Comments
Amazing this 3GS is. Apple couldn't keep up with the demand with its 3GS supply. I know I love mine and I have recommended it to 2 newbees that also bought in. My friends with their 3G phones want them too. Just goes to show you to give the people what they want and they will buy in droves- Video, better camera, faster speed and better battery, more storage, and yes MMS. And of course the App store keeps on growing.
And if you could actually freely tether your Internet connection it would be perfect
And if you could actually freely tether your Internet connection it would be perfect
I know , I know - just not trying to go there so early in the morning. Besides that's more of an AT&T thing- elsewhere has it already.
It would have been far worse to have met the demand by ramping up supply too quickly, with all the attendant compromise on quality.
This is disciplined execution on Apple's part. And if the market can't see that, no big deal in the short run.
Amazing this 3GS is. Apple couldn't keep up with the demand with its 3GS supply. I know I love mine and I have recommended it to 2 newbees that also bought in. My friends with their 3G phones want them too. Just goes to show you to give the people what they want and they will buy in droves- Video, better camera, faster speed and better battery, more storage, and yes MMS. And of course the App store keeps on growing.
Now this is the Teckstud I've come to know and love. You see, I guessed right ... this is your best post ever. Congratulations on both your 3GS and your post. It made my day!
Now this is the Teckstud I've come to know and love. You see, I guessed right ... this is your best post ever. Congratulations on both your 3GS and your post. It made my day!
Well I'm with you on that.
And if you could actually freely tether your Internet connection it would be perfect
with way the ATT network is right now, no it would not be perfect. it would be crap. cause all connections are one stream. so the more data being used, the more voice has issues. this is why they haven't done it yet, they know that the network could easily shitcan on them. wouldn't take but a small chunk of the folks to do it. especially in stressed areas like NYC (which just added like 25 more antennas and is still shit)
also, these analysts are funny. they act like Apple hasn't counted on the notion that there might be more iphones sold during the holidays so they are ramping up production so they can ship more to the stores over the next few weeks. but the stores don't have unlimited on site storage and can't foreseen a sudden rush on a model. so huh yeah they might run out of that 32 gb white you wanted to get Mr Analyst. So like you have to wait a day or get the black one and a white case.
Amazing this 3GS is. Apple couldn't keep up with the demand with its 3GS supply. I know I love mine and I have recommended it to 2 newbees that also bought in. My friends with their 3G phones want them too. Just goes to show you to give the people what they want and they will buy in droves- Video, better camera, faster speed and better battery, more storage, and yes MMS. And of course the App store keeps on growing.
Indeed the new features of the GS make it compelling like the compass, longer battery life, speed... not to mention the apps. I looked at the Pre and Android, they have some nice features, but nothing compelling. Both of these seemed slower and tended to hang-up. I did not like the user interface of the Android.
Apple still has to tie-in with the China Mobile GSM/EDGE network and a few others.
Tech, I like your posts but if a PHONE can "Literally Change Your Life". You need to take a serious look at your life.
Please tell me Quadra 610 slipped some Kool Aid in your coffee this morning.
"With demand for the iPhone apparently outstripping supply...
With this economy, I'm sure most business would love to have that problem!
It is hard to understand who would be disappointed by selling a product faster than it can be manufactured. Apples manufacturing process has historically been superior to there competition, so no issues there. Apple will almost certainly beat estimates across the board. The new accounting rules are the big wild card. I am looking forward to seeing the effect of that change. Will apple bring all deferred revenue into this qtr or will/can they hold some back as backlog? These are the unknowns that I would focus on. As a manufacturer myself I would love to be in the position of not being able to keep up with demand, it is by far better than the alternative.
It's a relatively good problem to have, but still a problem. In the bad old days, Apple had a terrible time accurately forecasting demand, which left them with both too little and too much product. This mess was straightened out after Jobs returned. In fact cleaning up forecasting and inventory was one of the the company's first impressive accomplishments during the late '90s, and in part led to the turn-around. The cause appears to be different this time (and maybe out of Apple's control), but still serves to show that an inability to meet demand is nearly as bad as having excess product on the shelves. Either way, it's money left on the table -- and in business, you never want to do that.
With this economy, I'm sure most business would love to have that problem!
I think that is actually the problem; their contractors and suppliers might have a hard time ramping up with credit and issues with demand (and maybe cash flow) from other customers. Just speculation, but it doesn't seem like apple is doing it to manage interest levels now.
Surprised there is any retreat in share price today: with Google's performance it would make sense that Apple (with higher growth and lower multiplier) would be very attractive. I doubt there will be a great buying opportunity after the earnings release though.
Tech, I like your posts but if a PHONE can "Literally Change Your Life". You need to take a serious look at your life.
Please tell me Quadra 610 slipped some Kool Aid in your coffee this morning.
NO Kool-aid but:
1,) No longer need to buy NY Times or borrow the office paper as the NY Times App gives me all of it right at my fingertips.
2.) No longer need to carry another camera around as the pics and video this takes are excellent and I can send them instantly.
3.) Can access all my emails from alll my accounts instantly. (This could have been accomplished with any smart phone granted).
4.) Can watch full length movies on it with a decent sized screen on Amtrak from NY to DC (which I frequently use)
No longer need to lug around a laptop as much.
So yes it has changed my life.
Surprised there is any retreat in share price today: with Google's performance it would make sense that Apple (with higher growth and lower multiplier) would be very attractive. I doubt there will be a great buying opportunity after the earnings release though.
Markets down across the board today on weak results from GE and B of A.
In Europe supply is low since the introduction in june. At the iPod event early september Apple said problems were being resolved, but there are still no signs that they have grips on it. What is the problem? Demand in China? Problems with flash memory? I know lots of people that are so disappointed en so tired of waiting that they bougth another smartphone or are at least considering that. And that's too bad.
I know of a few people that bought another smartphone. Either they didn't know about the iPhone, but mainly because their wireless service didn't sell them.
I don't know of anyone that got so disappointed or got so tired of waiting the bought another smartphone.
However, I do have a friend that was think about it, but their kids beat the shit out of him.