Apple crushes forecasts again, iPad backlogged
Updated: 2011-04-21 10:08
File photo of March 25, 2011 shows a shop assistant in Sydney gestured in front of an advertising sign moments before Apple's iPad 2 became available for direct purchase in Australia.[Photo/Agencies]
SAN FRANCISCO - Apple Inc's results smashed Wall Street's expectations after iPhone and Mac sales scaled new heights while iPad supplies could not keep up with roaring global demand.
Shares of the world's most valuable technology corporation rose 3 percent after it said a record 18.65 million units of the category-defining iPhone - its flagship product - moved in the March quarter, outpacing the 16 million or so expected.
Apple sold just 4.69 million iPads - which command an 80 percent share of a burgeoning tablet market in which Motorola Inc and Samsung Electronics also compete - but investors argued that would not detract from strong long-term demand.
But investors largely ignored the lower-than-expected sales for iPads during the quarter as company executives said they were scrambling to meet "staggering" demand and were heavily backlogged for now.
"I'm not going to predict when supply and demand will come into balance," Chief Operating Officer Tim Cook said. "I can only be confident on supply side."
Apple's iPad 2 dominated the nascent market for tablets with competing products like Research In Motion's PlayBook receiving poor reviews from customers and experts.
The stellar results on Wednesday came as concern is growing over how component supply constraints after Japan's earthquake and tsunami would squeeze margins and restrain iPhone and iPad sales in coming months.
"Dynamite numbers across the board. The only hiccup is lower than expected iPad numbers," said Capital Advisors Growth Fund portfolio manager Channing Smith.
"We can attribute some of the weakness to stocking issues at some of the retail outlets and obviously the supply chain issue in Japan. Unfortunately, the supply chain issue will likely persist for the coming months but once we get past summer and the supply chain issues are resolved it's all systems go again for Apple."
Apple executives told analysts on a conference call they foresaw a hit to revenue this quarter of about $200 million - less than 1 percent of projected global quarterly sales - but expected no cost impact.
The company, known for its tight relationship with Asian suppliers, stands at the head of the queue for electronics components even if the supply crunch continues. Japan accounts for an estimated 6 percent of overall revenue.
"We source hundreds, literally hundreds, of items from Japan, and they range from components such as LCDs, optical drives, NAND flash and DRAM, to base materials such as resins, coatings," Cook said.
Apple did see some revenue impact from the crisis during the second quarter but it was not material to the results, Cook said, adding that he does not see any unsolvable problems related to the disaster.
On rising prices for memory chips, Cook said he felt "good" for the third quarter as the company does not typically buy in the spot market.
"Beyond Q3, I'm saying I'm not sure because it's tough to see that far," he said.
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