Apple Not Sure When iPhone 4 Supply Will Meet Demand, COO Says

IPhone 4 demand “in all countries is absolutely staggering,” even higher than Apple had expected, said Apple Chief Operating Officer Tim Cook on an earnings call. He said he couldn’t “predict when supply will meet demand.” Apple has boosted shipments and is working to do more, but “it will take some time to increase further,” he said. The company sold 14.1 million iPhones in Q4 ended Sept. 25, 91 percent more units than a year earlier, Chief Financial Officer Peter Oppenheimer said. CEO Steve Jobs went after Google and other rivals on the call.

Apple reported stronger results overall than it had in Q4 last year. Profit increased to $4.31 billion, $4.64 per share, from $2.53 billion, $2.77, a year earlier. Revenue grew to $20.34 billion from $12.21 billion, due largely to “record iPhone sales, the tremendous popularity of iPad and our best Mac quarter ever,” Oppenheimer said. But Apple shares fell, apparently partly because quarterly iPad sales came in at 4.19 million, fewer than the 5 million that some analysts expected.

Q4 revenue from iPhone handset and accessory sales totaled $8.82 billion, up from $4.61 billion a year earlier, Oppenheimer said. The average selling price (ASP) of iPhones was about $610, he said. Apple ended Q4 with iPhone distribution through 166 carriers in 89 countries, and the company is seeing “very strong year-over-year growth, particularly in Asia, Europe and Japan where iPhone sales more than doubled” from a year earlier, he said. The company started shipping the iPhone 4 in China on Sept. 25 and has “been very pleased with customer response,” he said. Apple ended Q4 with about 3.3 million iPhones in channel inventory, an increase of about 825,000 units from Q3, he said. “We continue to have a sizable backlog and believe we could have sold even more iPhones if we had been able to supply them,” he said.

Apple was “thrilled with” the iPad’s “momentum in just the second quarter of availability” of the device, Oppenheimer said. It’s distributed in 26 countries, and Apple is expanding distribution internationally, including by adding AT&T, Target, Verizon and Wal-Mart stores in the U.S., he said. Q4 revenue from iPad and iPad accessories totaled $2.8 billion, about $2.7 billion from sales of the device, making the ASP about $645, he said. The company was “able to increase the supply of iPads over the course of the quarter, building channel inventory by about 500,000 units to end the quarter with between three and four weeks of channel inventory below our target range of four to six weeks,” he said.

Apple sold 3.9 million Macs in Q4, topping a record set in the June quarter by more than 400,000 units, Oppenheimer said. The company saw “strong double-digit growth in both Mac desktop and portable categories led by very strong sales of iMac, which was updated in July, and the continued popularity of the MacBook Pro and MacBook,” he said. Mac sales growth “was strong in each of our geographic segments, led by Asia-Pacific at 56 percent” growth from Q4 last year and Japan at 49 percent, he said.

Overall iPod sales again fell, to just under 9.1 million from 10.2 million, Oppenheimer said. But he said iPod’s share of the U.S. MP3 player remained above 70 percent, based on NPD sales data. It also “continues to be the top-selling MP3 player and gained share” from a year earlier outside the U.S., according to GfK data, he said.

Oppenheimer reported “another strong quarter” for the iTunes Store, revenue exceeding $1 billion. More than 200,000 registered developers are making applications for Apple’s App Store, he said.

Revenue from Apple’s retail stores grew 75 percent year over year, to $3.57 billion, and the stores sold “a record 874,000 Macs compared to 670,000 Macs” a year earlier, Oppenheimer said. About 50 percent of the Macs sold at those stores were to consumers “who had never owned a Mac before,” he said. Apple opened 24 stores in Q4, 16 outside the U.S., boosting the store count overall to 317 -- 84 outside the U.S, he said. Apple opened stores in London, Paris and Sept. 25 in Beijing and Shanghai, he said. Day one sales from the new China stores “exceeded all previous store openings,” and Apple’s four China stores are its “highest traffic stores in the world and are among our highest performing,” he said. It also entered an 11th country, Spain, with stores in Barcelona and Madrid, he said. Apple plans to open 40-50 stores in its new fiscal year, most outside the U.S., he said.

Saying the 14.1 million iPhones sold in Q4 were far more than the 12.1 million BlackBerry devices that Research In Motion sold in Q4, Jobs told analysts, “I don’t see them catching up with us in the foreseeable future.” RIM “must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company,” and “I think it’s going to be a challenge for them to create a competitive platform and to convince developers to create apps for yet a third software platform,” after Apple’s iOS and Google’s Android, he said. With about 300,000 apps on the App Store, “RIM has a high mountain ahead of them to climb,” he said.

Jobs moved on to criticize Google in his unusual appearance on an Apple earnings call. While Android has become the top rival for the iOS platform, he said the 200,000 or so Android devices that Google says it’s activating daily pales in comparison to the 275,000 or so iOS devices that Apple has been activating daily “for the past 30 days, with a peak of almost 300,000 iOS devices per day on a few of those days.” Apple also has many more apps in its online store, he said. There’s “no solid data on how many Android phones are shipped each quarter,” he said. Jobs also knocked Google for charactering Android as an “open” platform when “many Android OEMs, including the two largest, HTC and Motorola, install proprietary user interfaces to differentiate themselves.” In contrast, “every” iPhone handset “works the same,” he said. “We think the open versus closed argument is just a smokescreen to try and hide the real issue, which is, what’s best for the customer,” he said: a “fragmented” model like Android versus an “integrated” one like Apple’s.

Jobs said competing tablets pale in comparison to iPads, in part because 7-inch screens are inferior to Apple’s nearly 10-inch screen. Another advantage that Apple has is that “every tablet user is also a smartphone user,” he said. “No tablet can compete with the mobility of a smartphone, its ease of fitting into your pocket or purse, its unobtrusiveness when used in a crowd. Given that all tablet users will already have a smartphone in their pockets, giving up precious display area to fit a tablet in our pockets is clearly the wrong tradeoff. The 7-inch tablets are tweeners, too big to compete with a smartphone and too small to compete with an iPad.” He predicted that rivals will also continue to have a hard time competing with Apple on price.

Separately, research company iSuppli boosted its iPad 2010 shipment forecast to 13.8 million from its July estimate of 12.9 million because it said Apple indicated it was “able to overcome limitations in component supply so that it can ramp up production.” ISuppli projected that by year-end, the iPad production rate will “approach or exceed 2.5 million units per month.” Now that Apple is “bringing on additional suppliers in 2011,” iSuppli also boosted its 2011 shipment forecast to 43.7 million units from 36.5 million, and widened its 2012 estimate to 63.3 million units from 50.4 million.