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Rising iPad demand too much for Apple?

Posted: 21 Jul 2011 ?? ?Print Version ?Bookmark and Share

Keywords:tablet? consumer demand? Web-connected TV?

Apple Inc. is still having a hard time keeping up with the demand for its iPad, fifteen months after the popular table was launched.

"This is a good problemdemand is fantastic," said Tim Cook, Apple's chief operating officer in a conference call announcing record quarterly revenues and profits.

In this report
??Dipping revenues
??New line of products and emerging markets

However, it is still a problem; one of the problems Apple is facing but would not talk about in detail. The company is also forecasting a decline in sales for its fall quarter. According to Apple, the sales decline is due to "a future product transition." In the last three months, Apple sold 9.25 million iPad units. This is twice the number of the units sold in the previous quarter and three times as many as the same quarter last year. However, Apple could have sold more if it could have made more units.

Tim Cook

Cook: We are working very hard to get as many units to customers as we can.

"In the first weeks of July supply improved so that some SKUs in some countries are now in supply/demand balance," Cook said, refusing to say when the company would be able to meet global demand. "We are working very hard to get as many units to customers as we can," he added.

Cook also avoided a question about whether the company was diversifying its base of manufacturing partners beyond Foxconn. Foxconn operates city-sized factories in China specifically for Apple products. Supply chain management is "part of our secret sauce, so I don't want to share too much about it," said Cook.

An explosion at a Foxconn plant in China was expected to impact iPad manufacturing.

Tablets are cannibalizing notebook sales, but Cook did not quantify the effect. "We believe some customers chose an iPad instead of a Mac, but even more chose an iPad over a Windows PC and there's more Windows PCs to cannibalize than Macs," he said.

Dipping revenues
Looking ahead, Apple predicts its revenues will fall from $28 billion this quarter to $25 billion next quarter while gross margins slip from 41 to 38 percent. The company expects iPhone, iPad and Mac sales to continue to rise, but alluded to a "future product transition which we are not going to talk about" expected to be a drag on sales and margins.

Two thirds of the margin decline will come from "a different product mix" in the fall quarter, says Peter Oppenheimer, Apple's CFO. The rest of the decline would come from the future product transition and increased marketing expenses for the back-to-school quarter, he says.

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