iPhone 3GS Supply Squeeze Hurting Apple?
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Apple is scrambling to meet demand for the iPhone 3GS but analysts say the dilemma likely won't harm the darling of the tech sector in the long-term.
"We are currently unable to make enough iPhone 3GSes to meet robust demand, and we are working to address this," Apple CFO Peter Oppenheimer said during the company's quarterly earnings conference call yesterday.
The iPhone 3GS went on sale June 19 and 1 million were sold within the first three days, according to Apple (NASDAQ: AAPL).
"The demand has been staggering almost in every country that we've shipped in," Apple COO Timothy Cook said during the call.
Apple is still planning to launch the smartphone in 20 more countries next month, and Cook added that a recent boost in production is working according to plan and will be able to meet demand when the iPhone 3GS is rolled out in additional markets.
"We are confident enough in the production ramp that we will be launching about 20 additional countries on 22 August -- which would bring our total to over 40 -- and we still expect to be selling the iPhone in over 70 countries later this calendar year," Cook said.
Apple reported during the call that it sold 5.2 million iPhones in the quarter, seven times more than it had in the same quarter a year earlier -- numbers that have many Apple-watchers saying the Cupertino, Calif.-based company seems immune to damage.
"5.2 million phones sold last quarter is amazing," Gartner analyst Ken Dulaney told InternetNews.com. "They just have more demand than they expected, but nothing hurts Apple, it seems. The users are so in love with the device they are willing to live with any issues until Apple corrects them or they simply ignore them. All devices can have issues and Apple has generally delivered a solid product. It's the fun of the [device] that keeps [consumers] coming back."
Current Analysis analyst Avi Greengart said the supply constraints are a wrinkle in the roll-out strategy.
"Any time you have more demand than product it's a problem, unless you are deliberately trying to create a shortage to stoke demand," Greengart told InternetNews.com. "That is most certainly not the case here -- the supply problems are delaying previously announced international launches."
Still, he said Apple will withstand any fallout from the issue.
"Apple indicated that it would affect product launches by weeks, not months, so it does not appear to be a long-term problem," Greengart said. "The silver lining is that the demand is so incredibly high."
In other iPhone news, Cook during the call also hinted that a redesign of the App Store is underway.
"We are always looking for ways to categorize apps differently, and we do have some ideas in this area," he said. "As you know, today we do it by type of app and also show popular apps and top-selling apps. We realize there's opportunity there for further improvement and are working on that."
He also took the opportunity to tout the success of the App Store when asked how the company will address encroaching competition in the mobile app space.
"The App Store ... by any measure has been an unprecedented success with over 65,000 apps now in the store and over 1.5 billion apps downloaded," he said. "The latest numbers we have for [BlackBerry maker Research In Motion] and Nokia... [are] between 1,000 and 2,000 each. And the latest published number that we've seen on Android puts it at less than 5,000."