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  • The Case of the Missing iPhone: Did Apple Screw Up?

    May 21st, 2008

    Do you want to buy an  iPhone right now? Well, good luck, because they’re hard to come by. A quick look at Apple’s online store, where they were once plentiful, returns a “Currently Unavailable” response.

    So when will it be available or have we seen the last of the original iPhones?

    Well, it’s not as if you can’t get one, because you can still find them at some Apple’s retail outlets or an AT&T factory-owned store, which which excludes authorized third-party dealers apparently. However, the real question is what went wrong? Wouldn’t Apple want to have iPhones for sale up till the very day its successor is released?

    So did something go awry with Apple’s best-laid plans? Did they run out of iPhones prematurely due to production issues, or did they simply misjudge demand?

    You might think the latter, because the iPhone has been a far greater success than anyone originally expected, or so it seems. At one point, Apple seemed overly optimistic when they envisioned a total of 10 million sales by the end of 2008. Now industry analysts are suggesting that the their early predictions about Apple’s sales were, well, a little conservative, and that iPhones, iPods and, of course, Macs, were moving off the shelves on far greater numbers than originally expected.

    Take, for example, the recent report that 66% of the desktops and note-books above $1,000 sold in the U.S. retail market are Macs. Indeed, the sole advantages of such giant PC makers as Dell and HP are in the enterprise or the lower price categories where fewer profits are to be earned. The latter is a playground where, except for Apple’s stealth entry, the Mac mini, you can’t find any Macs these days.

    If you do want to buy a new Mac, you can usually find the model you want, be it from Apple or another dealer. iPods are available in abundance as well, As for the iPhone sure Apple would certainly want to sell out of older iPhones when the new model appears — and that’s expected in a few weeks, maybe less — running out of stock a month ahead of schedule was probably not part of the plan.

    Indeed, it may well be that Apple’s usually pinpoint production plans were, like the industry analyst estimates of expected sales, far too conservative. There were no production shortfalls, failed parts or anything of that sort. They just ran out of stock.

    With higher demand, this won’t impact Apple’s financials for the current quarter in the least, except perhaps for the regret over not building more iPhones to meet the remaining demand. Oh well, I suppose iPhone 2.0 will remedy that, and there’s already a published report that some 25% of potential buyers are holding off for the next model.

    That happens to be a good thing, because, if there was ample product on the store shelves, Apple might have ended up with a surplus of unsold units when the upgrade appeared. That could result in a sell-off at reduced prices to clear inventory, and that never looks good on a financial report.

    In saying that, just what is the potential for the next iPhone, now that hundreds of millions of additional potential customers will be able to buy them and use them with wireless carriers in their own countries?

    Apple’s ten million figure now comes across as an overly conservative estimate, assuming they can churn out enough of the things fast enough to meet not just the pent-up demand but the expected demand that will arise once the new iPhone appears.

    I suppose you could say Apple screwed up here, but in a good way. On the other hand, what of the people who can’t get the iPhones they want now? Well, as I said, if you are prepared to do a little canvassing of Apple and AT&T stores, this shouldn’t be a serious problem. You stand a fairly good chance of finding an 8GB or 16GB model in stock. You aren’t forced to rush off and acquire a BlackBerry or similar device as a substitute.

    If you can be patient a while longer — and I don’t see that the need is urgent except for a business whose purchasing department is under a rigid deadline — you will be rewarded not just with a new iPhone with potential online speeds much greater than the current model, but you might pay a lower price as well.

    You see, it also appears that wireless carriers may soon be able to give you the same sort of discount they give for other phones if you opt for the standard two-year contract. In other words, they’ll subsidize the purchase of an iPhone to get your business, and that could mean a savings of up to $200 per unit.

    Now it’s getting tempting.

    We’ll know a lot more, of course, when Steve Jobs takes the WWDC keynote stage come June 9, 2008. Oh, and WWDC just happens to be sold out this year, the first time that’s ever happened.



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    7 Responses to “The Case of the Missing iPhone: Did Apple Screw Up?”

    1. Dana Sutton says:

      “On the other hand, what of the people who can’t get the iPhones they want now?” Are there any such people? I should imagine that the imminent launch of the next gen. iPhone has received so much publicity that the amount of interest in the current model has dropped down to something approaching zero. Especially because, as Gene says, there is a chance of getting a carrier-subsidized 3G phone. So why pay a lot of cash for a soon-to-be-obsolete model?

    2. We don’t know which carriers will subsidize and to what degree. For people who crave unlocked iPhones, price does not appear to be a barrier.

      Peace,
      Gene

    3. Dana Sutton says:

      We know there’s a large grey market in unblocked iPhones, but we don’t have a very good handle on who’s buying them or why. I mean, how many are being used here in the US by people who would rather not use AT&T versus how many are finding their way overseas for use in countries where the iPhone isn’t officially available yet. Maybe price is no barrier if you figure you can buy an unblocked phone, then turn around and resell it at a profit. And of course this subsidy business may be no more than a pipe dream, but the hope that it might happen is no doubt does a lot to discourage folks from plunking down the full price today.

    4. We know there’s a large grey market in unblocked iPhones, but we don’t have a very good handle on who’s buying them or why. I mean, how many are being used here in the US by people who would rather not use AT&T versus how many are finding their way overseas for use in countries where the iPhone isn’t officially available yet. Maybe price is no barrier if you figure you can buy an unblocked phone, then turn around and resell it at a profit. And of course this subsidy business may be no more than a pipe dream, but the hope that it might happen is no doubt does a lot to discourage folks from plunking down the full price today.

      Dana, I sort of suspect Apple has an idea about this demographic, but just isn’t letting us in on it.

      Peace,
      Gene

    5. mark says:

      I think there are two potential views. Either Apple is way incompetent in forecasting or this month of no or low availability was planned. I’m going with planned. My evidence? The European markets went into cost-cutting mode, and way too early.

      Here’s the details: By the end of March, Apple already knew that iPhone demand was greater than supply (see conf call). So if it was clear back in April that the European markets had too many iPhones in the pipeline, Apple should’ve redirected them to the U.S (as they could see that US-directed supplies would be depleted way before June 9th). But they didn’t. Instead, Apple had two cell carriers offer huge discounts … in April. And it turns out those carriers’ supplies weren’t even that large, as they sold out within a couple of weeks.

      So why have a month of no/low availability? To avoid having people complain about buying an iPhone that would soon be perceived to be “obsoleted”. Also, no returns, no make-up rebates, no refunds. Plus, Apple is supremely confident that they will hit their revenue/profit projections as they believe they will sell out the new model during the month of June; I’m using “sell out” not to mean there are none, but to mean that the supply system will be very strained to keep up with the burst of demand.

    6. PFV says:

      AT&T online seems to have plenty of the old ones, along with some refurbs at a $150 discount.

      I don’t own an iPhone, but I will as soon as a 3G version is subsidized — or should I say as soon as the reviews come back confirming that it actually works. Thank you, first adopters.

    7. AT&T online seems to have plenty of the old ones, along with some refurbs at a $150 discount.

      I don’t own an iPhone, but I will as soon as a 3G version is subsidized — or should I say as soon as the reviews come back confirming that it actually works. Thank you, first adopters.

      You’re welcome. 😀

      Peace,
      Gene

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