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Apple Earnings: Great Quarter, but Supply Problems Loom

Yes, Apple (AAPL) had another huge quarter, with $24.7 billion in revenue and nearly $6 billion in profit, floating on a tide of 18.65 million iPhones sold. However, there are signs that, despite what Apple says, there may be a supply chain impact of the Japanese earthquake and tsunami may have been accurate, and that issues could dog the company, at least into next quarter.

The first evidence is iPad sales. Typically when Apple releases a product that turns into a hit, it announces opening weekend sales. Not with the iPad 2, though. Apple sold about 4.7 million iPads last quarter, which is well off the 7.3 million sold during the last three months of calendar 2010.

No surprise that holiday sales could be tough to beat. Mac sales were off as well, as were iPods. Only iPhones gained unit volume quarter-over-quarter, from 16.2 million to 18.6 million, and Apple had Verizon getting the iPhone to help boost business. Nevertheless, that's logic. Announcing that the iPad 2 sold less in its first quarter than the original iPad would have been bad marketing -- something that Apple wouldn't do.

Was demand really that far off? In March came stores running out of iPad 2 stock. Apple today said that it sold every iPad it could make. The normally secretive company gave no additional details, but according to iSuppli, the Japanese earthquake may have caused component shortages. It only takes a lack of one critical component to keep a company from building product. Reuters reported that the iPhone 5 would ship in September. The likely reason for Apple to depart its usually rigorous product release schedule was supply chain difficulties.

COO Tim Cook denied "any supply or cost impact" and said that the company had experienced the "mother of all backlogs." That hardly seems credible. If there was no impact, why didn't the company simply make more iPads? Were they so much harder to build than the original iPad that Apple could only manage to build two-thirds the number? Or could a backlog mean a lack of components, just as CEO Steve Jobs had a hormone imbalance that turned out to be a liver transplant? Oh, the credibility problems that appear when you're ready to bend the truth.

Cook said that Apple doesn't expect any supply chain impact next quarter either. And yet, Apple's guidance for next quarter is $23 billion in revenue, versus analyst expectations of $23.38 billion. So maybe there's more of a supply chain impact than Apple wants to admit.

The other possibility is that Apple just screwed up last quarter and couldn't keep pace with demand, which would be disturbing in a different way, as it would suggest some major operational issues. As far as the guidance for next quarter, Apple could simply be playing the lower-expectations game. Its guidance for last quarter was $22 billion.

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Image: Flickr user achimh, CC 2.0.
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