paidContent - Earnings Call: Apple Says It Can't Make Enough New iPhones To Meet Demand

This story was written by Tricia Duryee.
Apple (NSDQ: AAPL) peeled back the curtain a bit today, revealing just how well iPhones sales are going—and how it is cannibalizing sales of their legacy iPods. Apple’s CFO Peter Oppenheimer said during the company’s Q3 earnings conference call that they are thrilled to have sold 5.2 million iPhones during the period. In fact, “we can’t make enough iPhone 3GS’s to meet demand.”

In the question-and-answer period, Apple’s COO Tim Cook declined to break down iPhone sales between the older 3G $99 model vs. the iPhone 3GS, which added features, such as video-recording and an internal compass. But he said: “As we made the changes—both the launch of the 3GS and the price reduction—we saw a significant increase in total sales. We dont want to give you the precise mix, but as Peter said we are currently constrained in every country we are shipping in. The demand for it has been very robust. It speaks to the great product that it is, and we are working really hard to fulfill that demand.” 

Cook said it’s hard to say when supply will catch-up. “I know it wont balance in the short term, and I dont want to give predictions. Its difficult to gauge demand without having the supply there to find out.” Apple is having problems filling demand even though the iPhone 3GS is only on sale in 18 countries, rather than the 80 countries where the older 3G model is for sale. In terms of supply affecting how fast Apple can sell the device in additional countries, Cook said: “It may move the date here and there, but will be shipping in the majority of countries by the end of the fiscal quarter.”

The iPhone’s success hasn’t come without Apple having to pay a small price. Today, Oppenheimer said that the iPhone has cannibalized sales of their traditional iPod business, which he is categorizing separately from two other “pocket products.” The three products are: the traditional MP3 player, the iPod Touch and the iPhone. In Q3, Apple sold 10.2 million iPods during the quarter, representing a seven percent unit decline from the year-ago quarter. Oppenheimer: “This is one of the reasons we developed the iPod touch and the iPhone. ...We have a great business that we believe will last for many, many years, despite the decline in sales.” Meanwhile, the company sold 5.2 million iPhones, representing 626 percent growth over year-ago period when it sold 717,000.


By Tricia Duryee