Apple denies creating artificial product shortages for hype
By Neil Hughes
Published: 06:30 PM EST
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Apple does not purposely create artificial product shortages to garner free press and generate hype among consumers, executives with the company said during Tuesday's quarterly earnings conference call.
Speaking to analysts and members of the press following the release of the company's quarterly earnings report, Chief Operating Officer Tim Cook said Apple does not intentionally build a small number of units to generate hype. Gene Munster with Piper Jaffray prompted the discussion when he asked Cook why Apple is always running out of products after a launch.
"We do not purposely create a shortage for buzz," Cook said, adding that all of the company's suppliers are working hard to fulfill orders.
Apple has been faced with a shortage of iPhone 4 units after its launch in late June, and Cook said that the company has struggled to keep up with demand. "We are selling every unit we can make," he said.
The case was different with the iPad, though, which was a new product category where Apple was unsure how many they would sell. Apple initially planned to make a million iPads per month, a number that Cook said was far more aggressive than most believed Apple could sell in the first year.
The company announced Tuesday that it has already sold 3.27 million iPads since the device went on sale. But Apple was simply caught off-guard by the demand for the iPad, Cook said.
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Apple denies creating artificial product shortages for hype
Apple earnings should quell antenna debacle
Steve Jobs at WWDC 2010.
(Credit:
James Martin/CNET)
Apple CEO Steve Jobs said Friday he has no intention of apologizing to investors for the stock drop resulting from "Antennagate." After Apple's third-quarter earnings are reported Tuesday afternoon, it's likely he won't need to.
Apple is expected to again report results that will please investors. Wall Street is expecting between $13.82 billion and $15.74 billion in revenue, and earnings between $2.65 and $3.74 per share. Apple has offered a typically conservative forecast: third-quarter 2010 revenues between $13 billion and $13.4 billion, and earnings per share between $2.28 and $2.39.
Apple on Tuesday will surely be trumpeting the high demand for the
iPhone 4 (it's still out of stock in many stores) and the continued expansion of the
iPad in new markets (nine more countries this Friday). Apple said at a special press conference to address antenna issues last week it has sold "well over 3 million" iPhone 4s since its release in late June.
That's despite a well-publicized tendency for some iPhones to drop or have a weakened signal when gripped in a way that blocks its antenna. Jobs was visibly annoyed Friday at having to clear the air about what was dubbed "Antennagate," but it was a wise move if he was trying to keep talk of the antenna from dominating what's expected to be another good earnings report.
The solution--giving away free bumper cases to iPhone 4 buyers--was fairly well received, but it will cost Apple to do that, and exactly how much will interest investors. Jobs said Friday that would be addressed during Tuesday's earnings call.
Analysts have been offering their estimates of Apple's cost for the fix, which range from Piper Jaffray's calculation of $178.5 million (36 million cases at $5 each) to Bernstein Research's guess of cases costing $2 each to reach for an overall impact of 2 cents per share during Apple's fourth-quarter earnings later this year.
Apple will probably spend as little time as possible discussing that. Instead, the company will want to focus on the positives: iPad sales and iPhone 4 demand. While the iPhone 4 has been a blockbuster, only the first three days' sales of 1.7 million will count toward the fiscal quarter, which ended on June 27. We'll also hear about the impact of the MacBook update from mid-May and perhaps the new
Mac Mini's results. And Apple is always happy to talk about iTunes Store receipts and iOS app sales.
Though Apple won't mention it, there is the slight possibility of Apple passing another historic milestone with the most recent quarter. Two months ago, Apple surpassed Microsoft to become the world's most valuable technology company. But now there's talk that Apple could finally pass Microsoft in revenue, something that was almost unthinkable when Jobs returned to Apple 13 years ago. At that point, the company he founded was "90 days from bankruptcy," something he revealed at a rare public interview last month.
As Fortune points out, Microsoft is forecasting $15.26 billion in revenue when it reports earnings on Thursday. Apple is always conservative, but some investors think it could report as high as $15.15 billion. Coupled with Apple's tendency to exceed earnings expectations, it's possible it could overtake Microsoft as early as this quarter.
While Apple tends not to discuss competitors at all, Jobs did so at last Friday's iPhone antenna event and has taken heat for it. That means there are likely to be questions from investors on Tuesday. Expect Apple to continue to defend its antenna research on the iPhone and competitors' devices, even as its has been slammed by the likes of HTC, RIM, and Nokia for trying to paint other smartphones with the same problem some Apple customers have been having with the iPhone 4.
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Apple earnings should quell antenna debacle
