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Is Apple Reducing iPhone Production? It Wouldn't Surprise Me.

Posted by: Peter Burrows on July 31

Apple’s shares got hammered today, losing nearly 7% of their value based on talk about talk among Wall St. traders that Apple might be slashing iPhone production from 9 million to 4.5 million.

I’m left with two thoughts. On the one hand, even if it’s true, what’s so terrible about 4.5 million? Most analysts are only expecting the company to sell around three million in the final two quarters of the year. Sure, some upside surprise is built into the stock, so it’s no surprise that the shares would get dinged—but more of a trim than the major haircut that came today. Assuming most of those 4.5 million are sold this year, the company would be well on its way to achieving its goal of selling ten million by the end of fiscal 2008, which ends next Sept. 30.

On the other hand, I wouldn’t be at all surprised to learn that Apple has actually scaled back on the production front. Again, I don’t believe Jobs & Co. so badly miscalculated demand as to have to slash production in half. I’m talking about a less radical mid-course correction. I say this because it is now a month after the frenzied launch, and the iPhone has not become the Cabbage Patch dollfor cellphones that some predicted. Consumers don’t have to wait in lines to find them, or outbid each other to buy them. In fact, I’m told Apple has had taken back more than a few unopened iPhones bought by people who thought they could hawk them at a higher price on eBay.

My other evidence comes from my own life. Fact is, I just don’t see iPhones popping up wherever I look. Sure, some of my sources have taken the iPhone plunge. But I’m still the only one on my block that has one (and I didn’t pay for it; it’s a loaner from the company), and my relatives and friends aren’t asking if I can get them one (as they did with the iPod).

To see if I was alone in this opinion, I did an informal poll of our seven-person bureau. Only one of us senses a groundswell of iPhone proliferation. That’s online copy editor Jen Nagaj. Her boyfriend bought her one on launch day, and she’s noticed them around San Francisco, including one guy at a bar who seemed to be using his to spark up conversations with fellow bar-goers. Bureau Chief Rob Hof says he’s seen quite a few at tech conferences he’s been to, but that’s to be expected. Cliff Edwards has seen some around—but has also heard stories of people returning them, as well. The rest of us couldn’t name one person, other than sources, who owned one.

So that’s us; maybe we’re not hanging out in the right places. What are you sensing out there? Are you seeing as many iPhones as you expected to, now that we’re at the one-month mark of the iPhone Era?

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Reader Comments

lee Gordon

July 31, 2007 09:09 PM

sorry-dude I live in NYC and see them several times a day. That's what counts. They're on the ferry to all the spots to weekend. They're going down the street. People are even past showing them off at work. that was that first Monday, Big Time, Actually\, It's just a matter of time till you other people see the flood, but the game is changed. A Blackberry Pearl looks like a Model T.

PXLated

July 31, 2007 09:32 PM

Almost everyone I know wants one but are locked into Verizon contracts and not willing to pay the cancellation fee. I'm sure they'll be getting them when they can. As for me, I use voice dialing almost exclusivly, as soon as the iPhone can be used hands-free, one will be mine.

Peter

August 1, 2007 02:20 AM

Where do you live?

Larry Racoma

August 1, 2007 06:58 AM

Here in Hawaii, the iPhone had a hugh buzz. But I know of only one person who called to brag about having one. Everyone else like me are not willing to hand off the termination fees with their carriers. I've scheduled a January purcahse date when I'm free from Verizon's grip. Also people are thinking iPhone v2 by then and the surge will pop again. I truely hope Apple will solve the battery change issue to make it as seamless as possible. Also to get AT&T to revamp their connection times.

Patrick Murphy

August 1, 2007 09:08 AM

I live in Orlando, and have seen just one iPhone "in the wild" (parking lot of a Barnes & Noble).

In mid-July I went on vacation to Washington DC, staying downtown in the midst of the power players, riding the Metro, etc. I was hunting for iPhone users but only saw one person all week. (Note: I look not only for the phone but for the tell-tale white earbuds with square mic/switch.)

So by my informal survey, the iPhone is not very prevalent.

John Faughnan

August 1, 2007 09:09 AM

I suspect it's been somewhat of a disappointment for Apple, the product has been a disappointment for me. The built-in software is less useful than any of the Palm phones that came out over five years ago, and I need built-in software. Net stuff is nice, but not reliable even on the best phone network -- and AT&T is the worst.

I hope Apple is hurting right now. That makes it more likely they'll reconsider, and at least equal the built-in software of a 2001 Palm phone, and the Outlook synch of a 2004 Palm phone.

I do want to buy an iPhone, I just don't want a toy iPhone.

Craig Ross

August 2, 2007 02:43 PM

I know several people who already have an iPhone (myself included) and can usually spot a person who has one (here in CT) without too much difficulty.

A tremendous benefit of the iPhone that many people do not fully appreciate is that it has a "true" web browser that supports JavaScript and Ajax. This allows people who use web based applications like Salesforce, Netsuite, and Nexternal to access and work with their data on their phone. I am unaware of any other phone (treo, blackberry, etc..) that has these capabilities.

While the iPhone is not currently seen by some as a tool for "business", I think this is going to change as more and more companies switch to web based applications.

Raghu

August 6, 2007 08:33 AM

I had great hopes on iPhone as I was and am a great fan of iPod but i was totally disappointed. I am not sure why Apple tagged up with AT&T when there were far better carriers in the market.

I stay in Avon, CT and in the past one month I have hardly seen couple of people owning iPhone. I want to buy an iPhone but do not want AT&T. So my wait for good phone and good service continues..

John

August 10, 2007 06:12 AM

I-Pod wasn't a success initially.

They're still in usability terms a generation ahead of anything else.

New technology always takes a year to make it's mark.

Chris Krasowski

August 13, 2007 06:56 PM

Interesting take on these events, I agree that the iPhone isn't as common place in social settings yet but I think this is more because a) it's only available from 1 carrier b) requires a 2 year contract and c) costs $600

The iPod, wasn't huge when it started either however as it did become the gadget to have, it was available virtually everywhere and required no such additions like contracts.

As many people as switched, these were clearly hardcore fans of the device and I believe a bigger subset of iPhone purchasers will wait till their contracts run out instead of paying cancellation fees. I can't comment on seeing the Phone itself in use in the wild because us Canadians don't have it yet.

However, thanks for the link back to my article in your piece.

Regards,
Chris Krasowski

Capt

July 18, 2009 01:11 AM

Thanks for the "Cabbage Patch" link to the yuleblog!

Capt

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A blog on the daily doings of Apple and the many companies in its orbit, with insight and analysis by two longtime Apple-watchers BusinessWeek Senior Writer Peter Burrows and BusinessWeek.com Senior Technology Writer Arik Hesseldahl.

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