Apple predicts that it will ship 10M iPhones within a year from it's July 2007 launch.
Apple ships about 5.7m iPhones (by multiple analysts conclusions) before supplies mysteriously begin to dry up in late March. By early May, even New York City has no inventory and a line for iPhones starts forming.
April 2nd, Henry Blodget at the Alley speculates that non-authorized international demand is consuming 'buffer inventory' and driving the shortage.
When Apple first introduced the iPhone 1.0, they could ship it 30/60/90 days post-announce because they had no shipping revenue product to stall. You really don't want to induce a revenue stall in a shipping product if you can avoid it, however Apple learned the hard way that you also don't want to anger your installed base of loyal/feral customers as they discovered with the iPhone price drop. So, you end up walking a fine line between angering your customers with lack of supply (or over-supply of new models) and angering Wall Street with periodic flatlines in your revenue stream.
The answer is to gracefully manage product transitions. This is an art form in itself, in the timing of messaging transitions, moving manufacturing lines, selling off inventory, upgrade and price protection programs, and the like.
Apple seems to have been caught in a perfect storm of unanticipated demand (Blodget's article about Europe) that they needed to quickly react to in the form of temporarily increasing the production line of iPhones so they could gracefully trickle out of them about May 30th....just in time to release the iPhone 3G and open up the larger price-sensitive and 3G-hungry market, and a new product introduction when they need to ramp down production of the older model in favor of the newer one.
So, do you ramp up or ramp down? Do you flatline sales of your iPhone line for 75 days during a key fiscal quarter (Summer/graduate presents) or do you enable your overflow production lines and meet demand at the risk of price-protection/exchange/returns exposure on your bottom line for a percentage of the customers who buy in May? It reads like a loaded MBA mid-term question from a sadistic professor who enjoys handing out 'C' grades to all students.
It appears Apple chose to flatline. I don't envy the beating they will take from Wall Street for this fumble, even though every Wall Street Analyst is slobbering over themselves today to say how much of a fait accompli the 3G iPhone is to wrest the title from the Blackberry for #1 in sales. I wonder how they will balance the stick and carrot of beating them for the quarter stall while praising them for the new product.
And it isn't an inevitability that Apple will more than address the revenue shortfall with the 3G iPhone. Even if Foxconn can overcome their initial production issues and achieve their 10M unit number, the revenue and profit per unit of the $199/$299 iPhone 3G are abysmal compared to the initial 1.0 iPhone at $499/$399. We used to have a sarcastic punchline back in the early Cisco IP Phone days..."We'll sell it at a loss but we'll make it up in volume!"
It could be worse, you could be the product manager at eTrade who announced yesterday the new eTrade Mobile Pro trading platform for mobile devices, exclusively for the BlackBerry.