Production Delays May Cripple Apple 3G iPhone Sales (AAPL)

Henry Blodget | June 7, 2008 9:26 AM

3giphones.jpgCounting on the 3G iPhone launch to drive Apple's stock to the stars? (AAPL). Planning on grabbing the new unit thirty seconds after it goes on sale? Better hope the information fed to Barron's this weekend (presumably by hedge funds who are short Apple) is wrong:

[W]hat the fanboys won't tell you -- as won't many unabashed boosters in the press -- is that the iPhone's production rollout is behind schedule. That's what a number of tech hedge-fund managers are saying, attributing their information to investigative research outfits that talk with engineers and supply-chain managers at the contract manufacturer and component suppliers in Asia.

These sources say that Apple has slashed its internal expectations for iPhone unit sales by up to 16%. They report that Apple had planned to ship 12 million 3G units by the end of the third quarter, but now expects to ship about 10 million to 10.5 million by the fourth quarter, owing to production delays...[P]eople have been stating that Apple has shipped hundreds of thousands of 3G iPhones, which are supposedly sitting on warehouse shelves. But hedge-fund sources say that Foxconn International Holdings, the contract manufacturer that assembles the devices, has shipped only several thousand...

Foxconn and component makers won't crank up mass production until the middle of this month, although researchers say that they had been pressured by Apple to start doing so a few weeks ago. The reasons for the delays are unclear, but the most logical presumption is that Apple was too optimistic about how fast supplier Infineon Technologies (IFX) would introduce a new chipset for the phone. Infineon reduced its forecast for shipments this year, and analysts suspect that it's Apple-related.

And to top it off, the "iPhone 2" allegedly comes in an ugly gray (Engadget says these photos are silly fakes). Breathlessly awaited for almost a year, it seems the 3G iPhone is not shaping up to be Steve Jobs' greatest launch.

(This won't make a lick of difference to Apple's financial performance, of course--the iPhone is still irrelevant to the big Apple picture. iPhone glitches will likely punish sentiment, though, especially given the ordinary tendency to buy on the rumor, sell on the news.)

See Also:
3G iPhone Pix: Comes in Ugly Gray With Video Chat
Where Are The New iPhones? Fremont, California

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38 Comments

Azazello said:
As a hedge-fund manager I would do exactly the same: wisper about delays and disappointments, watch the stock slide and POUNCE!

my oh, my, ugly gray!
Bjorn Tipling (URL) said:
Engadet has debunked that 'leaked' image with the gray and red phones and the video chat.

http://www.engadget.com/2008/06/07/loads-of-fake-apple-shots-hit-the-web-3g-iphone-pre-wwdc-editio/

I didn't think the gray was ugly, maybe you did, but to then use that objective observation as a premise to make an unqualified claim is misleading.

And given how much you and everyone else is blabbering about this Apple announcement that hasnt happened yet, your statement that Steve jobs is not managing the situation well is not accurate.

What happened to the hard hitting analysis you used to put on internetoutsider man? I may not be the best qualified to say this, but you are not in best form. This is all speculation and soothsaying. If you were to post less, but higher quality posts, I think it would be better.

The headlines on this blog are less staid than Techcrunch! Quality control. You were doing something unique here once, and now I might as well be reading mashable.

If you want to turn this outlet into trash, fine, but at least put a meaningful post up on internetousider once and a while or say something on Slate.
Think the gray looks a lot better than scratch-prone chrome. Would call that Bono red uglier any day. Anyway doubt that gray is even close to the real gray; picture is too noisy and brightness/contrast way off.
Bjorn, thanks. Appreciate the input. I like a mix of hard/light myself, but balance critical, and we'll keep it under control.
JOe said:
Just a couple of weeks ago, they were saying that there was a glut of chips on the market - and they blamed Apple's iPhone sales drop.

IOW, the press has learned that they can fabricate any story they wish and some people will buy it. Just ignore them.

Of course, anyone who pretends to be a legitimate news source and then talks about 'Apple fanboys' can be ignored, anyway.

WHat ever happened to journalism in this country?
hehateme said:
i wonder will the iphone end up like the RAZR. i think at&t suckerd steve jobs! they know there is now way you can push a lot of phones without making the cost low. A LOT OF PEOPLE SAID STEVE JOBS WOULDNT SELL CHEAP PHONES!!! WELL HE IS ON HIS WAY TO DO JUST THAT!
dig said:
FUD. wait and see folks, this tactic has been tried before and apple always comes out on top. i would not bet against them they are gearing up to own this space and they already have ALL of the pieces in place.
ABX (URL) said:
JO(e),
your post is inane. the "Fanboy crap filter" and "Rumor Legitometer" or whatever it was, was one of the best iPhone posts on TechCrunch that I've seen.
I don't think any blogger claims to be a "legitimate" news source. Just a news source. Take it for what it's worth. Let the freshness and overall quality of the content speak for itself.
The revolution will not be televised.
XAB

ps, the stock price will not react to anything as meaningless as any of these rumors. I know it has happened in the past, but probably w/ smaller stocks. amazon was down +1 hr, and the stock didn't show any meaningful deviation from what the rest of the Net stocks were doing.
Dan Butterfield (URL) said:
In reading through Verveka's missive ... it appears that he is deliberately playing with words. If Verveka's sources are to be believed, the OMG production delay is all of two (2) weeks. He reports that Apple had planned to ship 12 million next-gen iPhones by the end of the third (3rd) quarter. Now the shocking news... his sources report that Apple will "slash" production and "only" ship 10-10.5 million iPhones "by the fourth quarter!"

Read carefully folks... Verveka is giving HIGHER figures than most fervent Apple "fanboys." Huh? How's that? As a professional journalist, Verveka no doubt chooses his words carefully. When he says "by the fourth quarter" he means "before the fourth quarter," not "by the end of the year."

All should be back to the planned 12 million run rate by the Fourth (4th). That's 22+ million units total by the END OF the 4th quarter.

I expect the hedge funds that are playing the "sell the news" game will cover their AAPL shorts quickly.

Joe said:
Do you really think Steve Jobs would risk a less than stellar review and launch of the 3G iPhone because of a poor color choice. C'mon people, this guy is the master of design.

And if there is one thing that Jobs knows well in addition to design, it's marketing...the speculation and anticipation is part of the hype. Will he fail!? Will it live up to expectations!?

Prepare to be impressed...AGAIN.
Sach (URL) said:
Developers, Developers, Developers...

http://tinyurl.com/4w2lw9
Andy Zaky (URL) said:
Barrons is serious becoming the least credible media source on-line. They are always bearish on Apple and their biases are always clear. Also, its stupid for anyone to say that the 3G iPhone will sell on the news when no one even bought on the rumor. First, Apple's stock price is up considerably since February because the entire NASDAQ has rallied. RIMM, GOOG, AMZN are all up considerably. Additionally, these stocks are up proportionately to the amount they have fallen on the January bullshit correction. RIMM didn't fall that much, so its not up that much. But guess what? RIMM has made fresh 52-week highs, Apple has not. RIMM is also higher than Apple over the last 12 months. GOOG and AMZN are also up considerably from the January and February correction. You don't see people saying that some product has propelled RIMM, AMZN and GOOG's stock price now do you?

Of coruse not. It's complete and utter fucking nonsense to say so. So why the fuck do these journalists do it with Apple? Apple is down 5 out of the last 7 days. It's down for the majority of may. It's down 1.65% for the month of june. Where's the buying. If this is buy the rumor and sell the news, WHERE THE FUCK IS THE BUYING HUH ASSHOLE? It's easy to say the maxim "buy the rumor, sell the news," but its not always applicable. In this case, it would be obviously stupid to say this maxim applies. Especially since Apple has been down since the first week of May!
David Dugan (URL) said:
@Andy... you make some very good and rational points, but why do you have to be such a vitriolic asshole in doing so? Have you got Tourette's?
Jim said:
Short-sell, hedge-fund borderline criminality and institutionalized sociopathic behavior.

Stock manipulation via the dregs of the media.

Crooked 'journalists' joining hands with hedge funds.

Organized crime feeding both Cramer, Savitz, Moritz, Blodgett and the so-called 'journalists'.

Everyone is for sale - it's a pandemic of prostitution.

Keep it in play, Henry. That's your bag now that you're out of the big house, right?

Believe it if you want to.

I don't.
Tim F. said:
So some people are still running around acting as if 10 million is impossible or at least unlikely, and these hedge fund managers are saying 16 million (~4 million for 1st and 2nd Qtr, 12 million 3G by end of Q4)?

Okay, cool beans.
bill said:
Hedge fund liars don't realize Apple is number 1 worldwide in supply chain management:

http://www.mmh.com/article/CA6565193.html

That means they know how to get what they need when they need it - from multiple vendors!

And Henry, your as dumb as the hedge funds think WE are!
artman1033 said:
Henry:
My goodness!
Stick to calling Icahn out as a silly goose on yahoo (I agree)
and hyping AMZN (which I think is crazy)

You are NO match for the Brilliant marketer Steve Jobs
Steven Bliss said:
This story is a joke and TOTALLY without foundation. Typical though.
Jack said:
If hedge funds, who are short, are spreading these rumors, should this not be investigated by the SEC?

A couple of months ago, the SEC nailed a trader at the Schottenfeld Group for spreading false rumors about Alliance Data Systems and profiting from it.

I would like the SEC to get aggressive about such rumor-mongering.
The Guilty Carnivore (URL) said:
"Breathlessly awaited for almost a year, it seems the 3G iPhone is not shaping up to be Steve Jobs' greatest launch."

You are an idiot.
The Guilty Carnivore (URL) said:
Seriously. "Breathlessly"?
The Guilty Carnivore (URL) said:
And want is "not shaping up"? A nebulous entity that doesn't yet exist?
iPwn said:
The gray and red iPhone images are clearly fake.

The 3G iPhone will be made of zirconia and come in black. See Wikipedia's definition of Zirconia for an Apple patent on using zirconia as an enclosure material:

http://en.wikipedia.org/wiki/Zirconia
Pete said:
Blodgett has no shame and obviously harbors a secret wish to head back to the penitentary.

Here's hoping he gets what he wants!
jay said:
Wow you guys above are way too.........lighten up this is just for fun n games here. Look we are going to make lots lots of money on aapl there already bidding it up over in asian pre market,so up or down last hour is going to be fun.
KenC said:
Wow, nice strawman by Barrons, citing hedgefunds. So, this rumor is 4th hand? Investigators to hedgefund manipulators to Barrons to Blodgett.

You wrote: "They report that Apple had planned to ship 12 million 3G units by the end of the third quarter, but now expects to ship about 10 million to 10.5 million by the fourth quarter, owing to production delays"

Well, since the stock market is pricing in the only target we know, which is 10 million units this year, and analysts have been predicting anywhere from 11 to 14 million. I hardly see this supposed rumor as having any affect. I mean, 10.5M by the fourth quarter, on top of the 3M or so 2.5G iPhones already shipped, adds up to about 13.5M iPhones in 2008, which is at the high end of what analysts have predicted. How is this supposedly bad rumor going to affect the stock, when the only people floating it are likely shorters?

Don't tell me, on Monday, Scott Moritz is going to run this rumor and then Cramer will support it, and of course we'll have a short-term correction while the hedgefunds make hay. All the while, Apple makes their target, and the rumored delay just turns out to be a ruse by hedgefunds. Something like the big selloff in January.
KenC said:
I just read Dan Butterfield's comment and he's right. The critical point is that this report is much like the report back in January when it was reported that Apple had "slashed" NAND flash orders, when in fact, it had ordered a record amount, but 16% less than anticipated. Nevertheless NPD reported this as a "slash".

Once again, we get that "slash" phrasing, "These sources say that Apple has slashed its internal expectations for iPhone unit sales by up to 16%. They report that Apple had planned to ship 12 million 3G units by the end of the third quarter, but now expects to ship about 10 million to 10.5 million by the fourth quarter"

And as Butterfield correctly notes, what looks catastrophic, is hardly so. The supposed goal is 12M shipped by end of Q3. That's far above expectations. So, production issues drop that by 16%, resulting in just 10.2M, since that's 16% less than 12M. This of course is how they also state, "about 10 million to 10.5 million by the fourth quarter". Either way, 10.2M by the end of Q3, is WAY ahead of any analysts expectations. They will have shipped 3+M 2G iPhones by end of this quarter. Add in the 10.2M in Q3, and a 12M run rate as Butterfield suggest, and the total for 2008, is what? 25.2M+ iPhones, far exceeding Apple's goal of 10M, and the analysts' predictions for 10 to 14M.

This is GOOD news, not bad. Amazing how a headline or phrasing can change one's perception.
Oh? said:
Ridiculous. Great journalism is exemplified here. Let's take rumors, photo shopped images, and a ill-informed journalist and create what is possibly the worst article on the net thus far regarding the upcoming debut of the new iPhone. I'm glad you think the fake images are a 'ugly' grey. Everyone loves to read a poor journalist's editorial and pessimistic outlook.
AdamC said:
After today we wlll know who are the LIARS..
BTW forget the SEC they are looking after the interest of the big boys and for those who the time read this
http://www.deepcapture.com/
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dan (URL) said:
640-802 Production Delays May Cripple Apple 3G iPhone Sales (AAPL) Go to hell! you're such a bully. Go to hell. You betrayed me.

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