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Apple iPad production hit by 'manufacturing bottleneck' - report

post #1 of 87
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Availability of Apple's forthcoming iPad may be limited when it launches later this month, due to an "unspecified production problem" that could restrict the number of shipped units to just 300,000.

In a note to investors issued Monday, analyst Peter Misek with Canaccord Adams said the issues could limit the initial launch to be in the U.S. only. He also speculated that Apple could even delay the launch of the iPad by a month due to alleged production issues.

"The upcoming iPad launch may be somewhat limited as a manufacturing bottleneck has impacted production of Apple's newest device," Misek wrote. "An unspecified production problem at the iPad's manufacturer, Hon Hai Precision, will likely limit the launch region to the US and the number of units available to roughly 300K in the month of march, far lower than the company's initial estimate of 1,000K units."

"The delay in production ramp will likely impact Apple's April unit estimate of 800K as well. It is also possible that, given the limited number of units available in March, the launch will be delayed for a month."

Given the potential constraints, Misek believes Apple will sell 550,000 units in its third financial quarter of 2010, which ends in June. The lower numbers do not reflect lesser demand, but are simply due to the prospect of a production delay.

Misek believes that Apple will sell 1.2 million iPad units in its 2010 fiscal year after all production issues are alleviated. He has forecast sales of 3.5 million iPads in the company's 2011 fiscal year. Those predictions fall in the middle of Wall Street's expectations of between 1 million and 5 million iPad sales in the first calendar year.

"We believe that the only material impact from the iPad delay could come in the form of frustrated consumers and some modest loss of lustre for the company's product launch," he wrote.

Misek also checked with key global carriers and found that iPhone sales are currently higher than many had anticipated. The analyst has raised his forecast for handset sales in the current quarter to 7.9 million units, up from his previous prediction of 7.2 million iPhone sales. In the holiday quarter, Apple sold a record 8.7 million iPhones.

He also reduced his forecast for iPhone sales in Apple's fourth fiscal quarter of 2010 by 800,000, because he expects the multi-touch handset will not arrive on the Verizon network until Apple's 2011 fiscal year.

"While the end date of AT&T's iPhone exclusivity agreement is not publicly available, as we have previously stated, we believe there is a reasonable chance that a new iPhone capable running on Verizon's CDMA network is in the works," Misek wrote. He has shifted his predicted launch timeframe from the fourth financial quarter of 2010 to the first quarter of 2011.

Speculation of a Verizon-capable iPhone launching in June has quieted since Apple introduced the iPad in January. It was then that Apple revealed that only AT&T would provide a 3G data plan for the device in the U.S.

Only days before the iPad event, Apple executives defended AT&T, its exclusive partner for the iPhone, during their company's quarterly earnings conference call. Apple Chief Operating Officer Tim Cook called AT&T a "great partner," and said that multi-carrier deals are not necessarily inevitable in every market where the iPhone is available.

Canaccord Adams has maintained its 12-month price target of $250 for AAPL stock, and reiterated its buy rating.
post #2 of 87
What do you expect now that the Kids uh, er employees get recess AND lunch...
post #3 of 87
If there are only ~300,000 units, there are going to be a lot of unhappy people. I predict that there will be enough demand for around 1 million sold in the first week. Not good for product constrictions.
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post #4 of 87
Quote:
Originally Posted by AppleInsider View Post

Availability of Apple's forthcoming iPad may be limited when it launches later this month, ...

This is turning out to be just like the 3Gs launch.

It's almost guaranteed that no one outside of the USA will hold one of these things in their hands until Xmas 2010-11.

What happened to all those awards Apple won in recent years for managing their supply chain better than any other company? I know they are a much bigger company now, but they are screwing up big time over the last couple of years. They can't seem to produce a single product without delays and major flaws.
post #5 of 87
There seem to be several gaps in logic in his assessment. Firstly, that Verizon would impact total sales by ~10% two quarters out, yet preliminary numbers for this quarter are up 10%. Global unit growth should easily overshadow what Verizon would bring to the table, and if his estimates are based on rumors of unannounced products he is worse off than us...

The other major flaw is his price target. If he thinks that Apple's (historically) weakest quarter is almost on-par (down 15%) with its best quarter in iPhone sales, yet EPS forecasts are 64% lower. Apple also has the benefit of a significantly lower P/E ratio than historic, with a PEG of a mere 0.67 (based on consensus)!

Just letting the PEG trend toward unity should see AAPL much closer to $300 than $250, and as earnings surprises kick in we should see it much higher.

Do analysts just think they lose credibility if their price target is more than 20% growth?!
post #6 of 87
Quote:
Originally Posted by AppleInsider View Post

..." ... far lower than the company's initial estimate of 1,000K units."...

Isn't 1,000K also known as "1 Million"?

Why not just say a million?
post #7 of 87
Quote:
Originally Posted by Smiles77 View Post

If there are only ~300,000 units, there are going to be a lot of unhappy people. I predict that there will be enough demand for around 1 million sold in the first week. Not good for product constrictions.

Agreed... but it shouldn't have any financial impact if the forecast sales for FY2010 are just 1MM units total.

I'm half suspicious that Apple intended to limit supply initially so they can meet their stated release date for the WiFi version, but get the higher ASP when the 3G versions come out with improved availability.
post #8 of 87
Quote:
Originally Posted by Gazoobee View Post

They can't seem to produce a single product without delays and major flaws.

Isn't that a good reason to limit initial supply so you can fix the problems that may arise?

Apple's supply chain management is credited for limiting inventory more than maximizing production.
post #9 of 87
Limit the initial supply. Increase demand.
post #10 of 87
Quote:
It is also possible that, given the limited number of units available in March, the launch will be delayed for a month.


Emporer Jobs is most displeased with your apparent lack of progress.
post #11 of 87
Quote:
Originally Posted by Gazoobee View Post

Isn't 1,000K also known as "1 Million"?

Why not just say a million?

Different folks use different methods of grouping. I suppose you are one that hates it when someone uses the "," (comma) for the decimal delimiter also (as is done in a large part of the world outside the US)? If it is equivalent who cares - not everyone does it the way us "good old yanks" do it!
post #12 of 87
Quote:
Originally Posted by Tods View Post

It's not necessarily bad. What if it makes people want it more?

Depends what the manufacturing problem is.... Good luck to the 300,000 first run purchasers. I'll wait til I see something compelling, worked out manufacturing issues, and drop the price by $100.
post #13 of 87
I am a huge follower of the iPad, untill i saw the launch. Now i'm waiting to see what the competition brings (i.e. Google Chrome OS Netbook). Screw MS/HP products. If the "Chrome-Book" fails expectations, then it's iPad 2.0 for me. Just not compelling enought to wait in lines. They need to put some kind of wireless home/office networking into the OS. Just put the "Finder" in it already!
post #14 of 87
Quote:
Originally Posted by Gazoobee View Post

What happened to all those awards Apple won in recent years for managing their supply chain better than any other company? I know they are a much bigger company now, but they are screwing up big time over the last couple of years. They can't seem to produce a single product without delays and major flaws.

Scalng up can get you a better return per unit but it can also limit your product, too. This is known as Diseconomies of Scale We don't know where the problem lies. It might not even be directly related to any company Apple is in touch with. A vendor of a vendor of a vendor is having production issues of a component or even getting ahold of raw material to make the component. Whatever the issue, this is not likely to get better. I think we'll have to see other areas of Apple's product line expand to deal with this growth


Quote:
Originally Posted by aaarrrgggh View Post

I'm half suspicious that Apple intended to limit supply initially so they can meet their stated release date for the WiFi version, but get the higher ASP when the 3G versions come out with improved availability.

It wouldn't be a bad move. Better to have the news report that the supply is low than the channel are stuffed.

I also wonder about the release and then pull of the iPad SDK Beta 3 which had the video conferencing elements. Could Apple be testing the waters with this to see what the interest is? Could they have wanted to add it but the camera component was not ready and had no guarantee their would be enough supply so they favoured to potentially making us pleasantly surprised instead of woefully disappointed?
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #15 of 87
Time to hire some more kids... sorry, couldn't help myself...

Ten years ago, we had Steve Jobs, Bob Hope and Johnny Cash.  Today we have no Jobs, no Hope and no Cash.

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Ten years ago, we had Steve Jobs, Bob Hope and Johnny Cash.  Today we have no Jobs, no Hope and no Cash.

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post #16 of 87
Who didn't see that coming? Happens with every new product they release.
post #17 of 87
There are many reasons why this delay could exist. Besides the obvious, that there really is a manufacturing delay. There could also be, heaven forbid, last minute design issues. However it is more likely that this is a deliberate attempt to keep the initial prices high.

It has been reported by many resources that customers are not very happy with the initial price of $499. In fact, there were also demographics that depicted a drop in customer interest. Following this, an apple corporate executive is commented as stating that Apple would consider lowering the prices if the the economy deemed it necessary. Since that announcement there has been no further discussion of the matter and Apple is probably upset that it was even mentioned.

There is a well known business marketing tactic made successful by the Nintendo corporation with the release of the Wii. In the initial launch there was a lower than expected interest in the device due to the price. Studies showed that there would not be an interest by the consumer if the manufacturer kept the higher price they intended. That higher price was meant to be in line with the X-Box and other devices recently released and showing large profits, profits Nintendo desperately needed. It is speculated that in an effort to raise consumer confidence in the price they had a limited release and stated that there were manufacturing issues involved. With the limited release, demand for the product soared and as that demand became high enough, the price they intended to sell the device for became more than a possibility.

Manufacturing delays continued for a long time after the release. There is further speculation that Nintendo did so deliberately to increase the price even more. With their continued success at price hikes in the device, the tactic worked in the companies best interest.
This incredibly business move has been noted as a viable method of launching a new product. It is another speculation that other companies, Barnes and Noble Nook recently released, have tried to use the same tactic.

It would only seem appropriate that Apple would consider such a tactic considering the suggestion that they could sell the product for less than they are offering it initially. This tactic might also increase sales through the extra press and communications they receive, which in the end increase demand for a product that many are unsure of it's success. When we hear of manufacturing delays, they could be just that. On the other hand they could be something more entirely which leaves us to consider all the options when no concrete information is provided.
post #18 of 87
Quote:
Originally Posted by aaarrrgggh View Post

Isn't that a good reason to limit initial supply so you can fix the problems that may arise?

Apple's supply chain management is credited for limiting inventory more than maximizing production.

there's no details about this delay. what this problem could be. it could be a defect. or it could be that the factory was hit with a mass case of the swine flu and a third of the staff are now out and the rest can't work fast enough to make up the difference.

either way, it is also possible that this whole thing is bogus and there's no problem, no delay and Apple will have the units they asked (which may or may not be 1 million units) for by the as yet unannounced launch date. This could be part of the reason why they waited 60 days (for all we know they've had their FCC approval for weeks).

Quote:
Originally Posted by Rot'nApple View Post

Time to hire some more kids... sorry, couldn't help myself...

i know you were trying to be cute, but you could be onto something. What if this company was on that hit list and this claim of a delay is because the analyst figures things would be halted while they work out whatever Apple uncovered.

Also, I haven't seen anyone suggest that this delay is because Apple decided to put back the camera that was so clearly in the prototypes (if you believe the rumors and that repair guy in Kansas)
post #19 of 87
Quote:
Originally Posted by Quadra 610 View Post

Limit the initial supply. Increase demand.

Absolutely. Does anyone doubt that any new product from Apple or Nintendo won't have a restricted supply when they're released? Here come the reports of outrageous prices on e-bay.
post #20 of 87
Quote:
Originally Posted by Gazoobee View Post

Isn't 1,000K also known as "1 Million"?

Why not just say a million?

Probably because its a little easier to see the relationship between "300k and 1000k" than between "300k and 1 million".
post #21 of 87
All of the trolls are correct, it's apple's "fault", better to be like say M$ and release a product with a 16% failure rate and just force customers to return for repair, damn the quality checks in place!
post #22 of 87
What's the problem? Is there a shortage of child labor in the Apple factories? Or did the fact that the number of people who "definitely want" the iPad dropped after they found out what the product is make Jobs decide he needed to work harder on his Jedi mind control kills, and put production on the back burner?

Do. Not. Want. In fact, after the multiple iTunes debacles and the AT&T iPhone lock-in, I don't ever want ANY Apple product.
post #23 of 87
Actually the Xbox 360 has closer to a 60% failure rate. But who's counting?
post #24 of 87
How does this analyst know? It's just speculation. By publishing this report, the analyst helps his short hedge fund clients.

AAPL is the most manipulated stock of them all.
post #25 of 87
Quote:
Originally Posted by chrisf2573 View Post

T
It has been reported by many resources that customers are not very happy with the initial price of $499. In fact, there were also demographics that depicted a drop in customer interest.

While I don't disagree with the notion that Apple is going to drop the price. I find it ironic that the 10" kindle is almost $500. There really is no reason for Apple to drop the price yet.

Quote:
Originally Posted by Rot'nApple View Post

Time to hire some more kids... sorry, couldn't help myself...

That's kind of mean, but I was thinking the same thing. That's one of the problems with being a good guy or at least protecting your image; there's a price to be paid for integrity or at least the perception there of.

I'm ready to plunk down some cash, so I hope I can still get one of the first runs.
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post #26 of 87
Quote:
Originally Posted by AdamIIGS View Post

All of the trolls are correct, it's apple's "fault", better to be like say M$ and release a product with a 16% failure rate and just force customers to return for repair, damn the quality checks in place!

Yeah, like the new 27" iMac...
post #27 of 87
Quote:
Originally Posted by Gazoobee View Post

This is turning out to be just like the 3Gs launch.

It's almost guaranteed that no one outside of the USA will hold one of these things in their hands until Xmas 2010-11.

What happened to all those awards Apple won in recent years for managing their supply chain better than any other company? I know they are a much bigger company now, but they are screwing up big time over the last couple of years. They can't seem to produce a single product without delays and major flaws.

You mean, according to this rumour? Do you have knee jerk responses to every rumour?

I'm in the UK, I'm pretty convinced I'll have my 6 pads by the end of April, no worries at all.

What happened to taking rumours with a pinch of salt and not berating a company based on nothing. I can't think of an Apple product with a delay or a major flaw. Not one. btw - my 27" iMac is just fine, first generation here in the first week. And my snow leopard install on launch day went fine and continues to be more than fine.
post #28 of 87
Quote:
Originally Posted by chrisf2573 View Post


It has been reported by many resources that customers are not very happy with the initial price of $499. In fact, there were also demographics that depicted a drop in customer interest.

People will never be happy with the price they have to pay for their product. Everyone I know who took their head out of their ass and compared this to the price of a kindle DX was amazed, in comparison, at the price. There will always be studies and 'experts' depicting whatever they want to depict. Opinion polls are irrelevant, units sold after launch is all that matters.
post #29 of 87
Quote:
Originally Posted by aaarrrgggh View Post

There seem to be several gaps in logic in his assessment. Firstly, that Verizon would impact total sales by ~10% two quarters out, yet preliminary numbers for this quarter are up 10%. Global unit growth should easily overshadow what Verizon would bring to the table, and if his estimates are based on rumors of unannounced products he is worse off than us...

The other major flaw is his price target. If he thinks that Apple's (historically) weakest quarter is almost on-par (down 15%) with its best quarter in iPhone sales, yet EPS forecasts are 64% lower. Apple also has the benefit of a significantly lower P/E ratio than historic, with a PEG of a mere 0.67 (based on consensus)!

Just letting the PEG trend toward unity should see AAPL much closer to $300 than $250, and as earnings surprises kick in we should see it much higher.

Do analysts just think they lose credibility if their price target is more than 20% growth?!

Maybe, but there's at least one other way of looking at this. AAPL's P/E has been in decline for more than two years now. Essentially, investors have been averting their eyes from Apple's steady earnings growth, even through the recession, and have refused to bid the share price up accordingly. (PEP has only a slightly lower P/E than AAPL now!) When you factor in the cash per share, which is about double what it was two years ago, then the lowered valuation becomes even more dramatic.

This can mean only one of two things. Either (1) AAPL is "undervalued" and poised for a big move up, or (2) investors are voting for a lowered rate of earnings growth in the future. Since (2) hasn't seemed to be true, at least not yet, I'm holding out hope for (1).
Please don't be insane.
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Please don't be insane.
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post #30 of 87
Quote:
Originally Posted by steviet02 View Post

Yeah, like the new 27" iMac...

Did you have an issue with your 27" iMac - cause i haven't found anyone who has... There will always be a tiny percentage of electronic devices with faults, it's the nature of electronics and manual delivery of goods in the back of lorries...
post #31 of 87
Maybe the delay is on purpose. Just another way to attract more attention, more hype, therefore more potential buyers.
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post #32 of 87
Give me an H!
Give me a Y!
Give me a P!
Give me an E!

What does that spell?! More Apple marketing.

Apple is f'ing brilliant. Now they'll have lines of people showing up, "just to see if they can get one"

And there will be somehow just enough to serve everyone in line at Apple Stores.

I'm saving this article and particularly the number 300,000, til we see the numbers from the first sale weekend.
post #33 of 87
Quote:
Originally Posted by Dr Millmoss View Post

This can mean only one of two things. Either (1) AAPL is "undervalued" and poised for a big move up, or (2) investors are voting for a lowered rate of earnings growth in the future. Since (2) hasn't seemed to be true, at least not yet, I'm holding out hope for (1).

Quite true. It's just the PEG that blows my mind... unless someone has inside information that SJ is actually dead and it was just a double at the shareholder meeting.

Google's PEG is at 2, and their growth prospects are not nearly as solid...

Oh well... who ever thought fundamentals matter...
post #34 of 87
Quote:
Originally Posted by pmz View Post

Give me an H!
Give me a Y!
Give me a P!
Give me an E!

What does that spell?! More Apple marketing.

Apple is f'ing brilliant. Now they'll have lines of people showing up, "just to see if they can get one"

And there will be somehow just enough to serve everyone in line at Apple Stores.

I'm saving this article and particularly the number 300,000, til we see the numbers from the first sale weekend.

Sheezus, give it a rest already. If true, this is certainly not good news. No company wants product supply to be insufficient to meet demand. That's just money left on the table.
Please don't be insane.
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Please don't be insane.
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post #35 of 87
This:

Quote:
Originally Posted by AppleGreen View Post

How does this analyst know? It's just speculation. By publishing this report, the analyst helps his short hedge fund clients.

AAPL is the most manipulated stock of them all.
post #36 of 87
Quote:
Originally Posted by Icesnake View Post


Do. Not. Want. In fact, after the multiple iTunes debacles and the AT&T iPhone lock-in, I don't ever want ANY Apple product.

You do want (to) make sure everyone knows this here - on an apple-related forum - doncha troll? You not want kids either it seems - which is fine. I not want you breeding.
post #37 of 87
Quote:
Originally Posted by aaarrrgggh View Post

Quite true. It's just the PEG that blows my mind... unless someone has inside information that SJ is actually dead and it was just a double at the shareholder meeting.

Google's PEG is at 2, and their growth prospects are not nearly as solid...

Oh well... who ever thought fundamentals matter...

If you have any mind left and still need it blown, then take a look at AMZN -- P/E close to 60 and PEG at 1.5. If AAPL sold at a similar multiple of earnings the share price would be close to $600.
Please don't be insane.
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Please don't be insane.
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post #38 of 87
That is one way to create a fake demand.
post #39 of 87
Quote:
Originally Posted by Damn_Its_Hot View Post

Different folks use different methods of grouping. I suppose you are one that hates it when someone uses the "," (comma) for the decimal delimiter also (as is done in a large part of the world outside the US)? If it is equivalent who cares - not everyone does it the way us "good old yanks" do it!

Well I'm English not Murican, but yeah I do kinda hate that french comma delimiter.

I think the use of the term "million" is pretty standard though throughout USA and Europe.
post #40 of 87
iPad shortage! Panic!!! Crank it up Hon Hai!!
:wo w:
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