Friday, February 8, 2008

Apple Cuts iPhone, iPod Touch Production

Mac sales appear to be rising, but Craig Berger of FBR Research says Apple, Inc. has reduced orders for iPhones and iPods for the second time in two months. Apple's iPod Touch may have the weakest sales since it is less than an Apple iPhone. Another report finds that Apple iPhone calls are coming from countries without Apple contracts.
Are Apple sales in trouble? Two research analysts have reported in recent days that Apple is aggressively cutting back production on iPods and iPhones, while increasing production on Mac computers.
Craig Berger, an analyst with FBR Research, told clients in a research note this week that Apple has reduced orders for iPhones and iPods for the second time in two months. Berger concludes that Apple is experiencing weak sell-through in the fourth calendar quarter of 2007 or in the early going this year.
"For both iPods and iPhones, we believe Apple was previously targeting a roughly 50 percent quarter-over-quarter decline for first quarter units, whereas we now think the firm is targeting a 60 percent quarter-over-quarter unit decline for first-quarter units," he wrote.

iPod Touch Weakness

It seems that the iPod Touch may have seen the weakest sales. Berger reported production orders for the Touch have fallen the most. The device may suffer from being less than an iPhone, since it has no phone capabilities but is substantially more expensive than Apple's music-playing iPhones. The touch relies on Wi-Fi for connectivity, so users who aren't in range of a Wi-Fi connection simply can't get online.
Berger also said MacBook chip orders in the first quarter look to be down 50 percent compared with the fourth quarter of 2007. But iMac orders are up 35 percent compared with previous checks.
Apple just announced new, higher-capacity versions of both the iPhone and iPod Touch, so the production cutbacks may have been in preparation for the new models. Another possibility, more remote, is that Apple is scaling down production of the current iPhone in preparation for a 3G version. AT&T, Apple's exclusive carrier for the iPhone in the U.S., announced it is building out its 3G network to more locations around the country.

Mac Production Up

Meanwhile, Banc of America said its checks of Asian production facilities indicate that production is going up for Macs, down for iPods, and the iPhone situation is volatile.
For MacBooks and iMacs, production has moved up more than 20 percent so far this quarter, Banc of America said, which indicates Apple is replenishing inventory and seeing solid demand. Banc of America predicts continued growth through March.
But Banc of America agrees with FBR that iPod production has been cut some 10 percent to 20 percent since January and 30 percent since December. Where the firm had been predicting 5 percent year-over-year growth, it now looks like Apple will see as much as a 10 percent decline in iPod sales.

iPhone Usage Is Global

After severe production cuts in December and early January, production is now up for iPhones. Banc of America expressed concern that production and demand for the innovative phone remain lackluster.
Meanwhile, Net Applications released new numbers on its operating-system statistics, which revealed that Macs accounted for the largest percentage of Internet traffic ever -- 7.57 percent. iPhone-based traffic nudged up from 0.12 percent in December to 0.13 percent in January. More importantly, Net Applications' numbers show that iPhone traffic is coming from many more countries than have official wireless carriers for the phones, indicating substantial gray-market sales.
"We've heard the rumours that many iPhones are being used outside the officially sanctioned countries. So we decided to check it out and surprise, surprise, it's true. The iPhone has a presence in almost every country on Earth," Net Applications wrote in its report.

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