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Apple Gear: So Much for a Lack of Demand

So the story is still playing out. Starting in December, there was an unproven claim that demand for the iPhone 5 had taken a nosedive. Why? Because of one unconfirmed report claiming that Apple had cut back on orders for the latest iPhone’s displays. Apple’s stock price took a dip, but things got real bad in January when no less than the Wall Street Journal published a similar report evidently based on the same unproven claim.

Even though Apple reported record sales for the December quarter, which lasted a week less than the December quarter for 2011, Apple couldn’t catch a break. Profits were flat, even though, after introducing so many new products in the previous few months, you’d expect exactly that result. And don’t forget Apple did caution against lower profits for the quarter.

Despite the flat profits, they still totaled over 50% more than Samsung, and many times more than Amazon, which seldom reports much of a profit. The stock market responded by tanking Apple’s stock price, but keeping Amazon relatively high. Does that make sense? Well, I suppose it does if profits aren’t important.

Consider, also, that Apple managed to sell 47.8 million iPhones, despite the fact that the newest model was in short supply for much of the quarter. And, once again, it was a 13 week quarter, compared to 14 weeks last year. Had there been another week, assuming the same sales rate for that extra seven days, Apple would have sold nearly 3.68 million more iPhones, a total that would have comfortably exceeded analyst estimates. And don’t forget the impact to profit margins.

While it’s true that you can get an iPhone 5 without waiting nowadays, the same isn’t true for the iPad mini, where the backlog has been reduced to one to three days as of this week. For the iMac, prepare to wait several weeks for the configuration of your choice, though standard models are more readily found at dealers if you shop around. The point is that there doesn’t seem to be any evidence at hand that demand for Apple products has suddenly taken a turn for the worse, other than normal seasonal trends. That Maps for iOS 6 was seriously flawed out of the starting gate isn’t enough to render Apple impotent, and the same is true for an unconfirmed report about a supply chain cutback.

It’s curious that the media didn’t make much of a deal about Tim Cook’s statement, during the quarterly call with financial analysts, that a single supply chain metric, such as a possible reduction of orders for one part from one supplier, can’t be used to judge the entire supply and demand situation. So even if Apple did reduce orders for iPhone 5 displays, there might be different reasons for the decision. One is simply to allocate supplies among different suppliers. Another is that manufacturing yields are higher, hence fewer parts are needed, and the third is the normal seasonal downturn in sales.

On last week’s episode of The Tech Night Owl LIVE, I asked industry analyst Stephen Baker, of the NPD Group, about Apple, and he said he felt the company was in fine shape. Of course, he’s not a financial analyst, so I wouldn’t expect him to understand the nuts and bolts of Wall Street, nor why stocks rise and fall with neither rhyme nor reason.

But Tim Cook still has to rise to a higher standard, and I expect that industry watchers will be paying close attention to how Apple fares this quarter, when no new products are expected, and the next. If Apple continues to do well, and there are no serious constraints to new product shipments beyond the current backlogs, I wonder how Wall Street is going to react.

This is very much a situation of the media talking down Apple without any logical reason. Some alleged journalists continue to blindly accept the rumor of an alleged falloff in demand for the iPhone 5. And that’s just a single example. There have been all those wacky articles suggesting that Tim Cook must be a failure because Apple doesn’t turn a market upside down every six months, and that Mapgate demonstrated a serious misfire that never would have happened under the watch of Steve Jobs, even though Jobs had his own notable failures over the years.

I suppose one real question is how Mac demand will shape up once the iMac backlogs are resolved. Is there going to be enough pent-up demand this quarter to really produce a huge sales increase? I do expect most people who want a new iMac are simply waiting for delivery, or holding off ordering anything until the model they want is in stock. It’s also possible that interest in the Mac will grow once the next version of OS X is announced.

If Apple is truly on an annual schedule for a while, you should expect word of OS 10.9 later this month. Some are already giving it the name “Lynx,” suggesting it’ll debut this summer, perhaps along with a few Mac refreshes, and a brand new Mac Pro.

Meantime, predicting Apple’s future sales is a waste of time, since getting it right is a crap shoot. It’s more fun, and more productive, to predict future product directions. You may be wrong most of the time, but it helps keep the gray matter healthy.