Apple Says It’s Not Sure When iPad Supplies Will Meet Demand

Apple doesn’t know when there'll be enough iPads to satisfy demand, and “it’s too early to tell” if iPad will cannibalize sales of other Apple products, Chief Operating Officer Tim Cook said on a Tuesday earnings call. Strong sales of those devices, as well as Macintosh computers, allowed the company to report strong results for Q3 ended June 26, it said.

The company is “working hard on catching up with customer demand” for the iPad and iPhone 4, said Chief Financial Officer Peter Oppenheimer. Ongoing controversy over the iPhone 4’s antenna design that causes phone calls to be easily dropped has apparently not impacted its sales, according to Cook. “We are selling every unit we can make,” he said. Returns have also been “less than the iPhone 3GS” and returns caused by that “specific issue are extremely small,” he said.

Apple had a “backlog at the end of last quarter” on iPad and iPhone 4 orders “that we were not able to fill and currently we are still selling both of those products as fast as we can make them,” Cook said. The company is “working around the clock to try to get supply and demand in balance,” he said, but: “In the scheme of things, it’s a good problem to have.” Cook also insisted that Apple does “not purposely create a shortage” on new products to gain more “buzz.” That was “certainly not our objective,” and Apple “would like to fill every customer’s order as quickly as we can,” he said.

Before shipping the iPad, Apple believed its plan for 1 million per month capacity “was a very bold move,” Cook said. Many industry analysts predicted Apple “would only sell somewhere around that number for the whole calendar year,” he said. As it turned out, Apple sold 1 million iPads its first month available, another million in month two and a third million in the third month, he said. The company sold a total of 3.27 million iPads, it said. Apple is “increasing capacity as quickly as we can,” he said. The company released the iPhone 4 on June 24, only two days before Q3 ended, and Apple is “still ramping and increasing volume” on that device, Cook said.

Q3 profit jumped to $3.25 billion, $3.51 per share, from $1.83 billion, $2.01, in Q3 last year. Revenue increased to a record $15.7 billion from $9.73 billion, with sales outside the U.S. accounting for 52 percent of Q3 revenue, it said. Revenue from sales of iPad and iPad accessories totaled $2.17 billion, Oppenheimer said. “The sales value of iPads alone was almost $2.1 billion,” representing an average selling price of about $640, he said.

Apple sold 8.4 million iPhones in Q3, up 61 percent over Q3 2009, it said. Of the sales, more than 1.7 million were the iPhone 4 in its initial five markets, Oppenheimer said. Total revenue from iPhone handset and accessory sales, as well as carrier payments, was $5.33 billion in Q3, up from $3.06 billion in Q3 2009, Oppenheimer said. “The sales value of iPhones alone was about $5 billion,” representing an average selling price of about $595, he said. At the end of Q3, Apple had iPhone distribution “with 154 carriers in 88 countries,” and it “continued to experience very strong year-over-year growth, particularly in Asia, Europe and Japan,” he said.

The company sold 3.47 million Macs in Q3, “a new quarterly record and a 33 percent unit increase over” Q3 2009, it said. The Q3 sales total topped the prior record “established in the most recent December quarter by over 100,000,” Oppenheimer said. Apple “experienced strong double-digit Mac growth in each of our geographies, led by both the continued momentum of iMac” and the MacBook Pro line, he said. “We began and ended the quarter with between three and four weeks of Mac channel inventory,” he said.

IPods were the only product category where Apple posted a decline, as unit sales fell 8 percent from Q3 2009 to 9.41 million. But Oppenheimer said iPod Touch sales “continued to be very strong with sales growing 48 percent” from Q3 2009. “The continued mix shift toward iPod Touch resulted in an overall iPod” average selling price increase of 12 percent, “generating total iPod revenue growth of 4 percent,” he said. Apple’s MP3 player market share in the U.S. remained at more than 70 percent, he said, citing NPD’s most recent monthly sales data. The iPod “continued to be the top-selling MP3 player” outside the U.S. and gained share in those markets versus Q3 2009, he said, citing GfK data.

Revenue from Apple’s iTunes online store topped $1 billion in Q3, growing 25 percent from Q3 2009, Oppenheimer said. The App Store now offers more than 225,000 applications including more than 11,000 specifically for the iPad, Oppenheimer said. To date, iPhone, iPod Touch and iPad users have downloaded more than 5 billion apps from the App Store, and Apple ended Q3 “within our target range of four to six weeks of iPod channel inventory,” he said.

Revenue from Apple’s retail stores grew to $2.58 billion in Q3 from $1.49 billion in Q3 last year, Oppenheimer said. The stores sold 677,000 Macs, up from 492,000 in Q3 last year, he said. About 50 percent of the Macs sold in Apple stores in Q3 “were to customers who had never owned a Mac before,” he said. Apple opened seven new stores in Q3, including four in the U.S., two in Australia and one in Canada, ending the quarter with 293 stores, he said. Average revenue per store jumped to $9 million from $5.9 million in Q3 2009, he said. A record 60.5 million consumers visited Apple stores in Q3, up from 38.6 million in Q3 2009, he said. The company plans to open 24 stores in Q4, including new stores in Paris and Shanghai, which opened earlier this month, a London store and its first two stores in Spain, to be opened in Barcelona and Madrid, he said.

Apple expects to report revenue of about $18 billion and earnings per share of about $3.44 for Q4, Oppenheimer said. It posted revenue of $9.87 billion and profit of $1.67 billion, $1.82 per share, in Q4 2009.