Soft sales by Apple suppliers may hint at iPhone, iPad production cuts

Computerworld - Softer-than-usual sales numbers last month by several of Apple's component suppliers has one analyst puzzled and worried at the same time.

The slide in October sales of the suppliers may mean Apple has downscaled orders for popular products like the iPhone 4S, iPad 2 and MacBook Air, said Brian White, an analyst with Ticonderoga Securities.

"Our Apple Barometer was weaker than normal for October," said White in an interview today. "In fact, it was the weakest October for the Apple Barometer we have on record."

The Apple Barometer is a proprietary Ticonderoga model that examines a "basket" of Taiwanese parts suppliers whose sales to Apple account for about 50% to 60% of their revenues. Its measurements typically closely correlate with Apple sales, and is one way White tries to penetrate Apple's notorious secrecy to estimate the company's sales trends.

Sales numbers for the barometer were down 12% for September-October from the same period in the past, White said.

He put forward several explanations, including soft sales for the basket's suppliers to non-Apple customers; the impact on Thai hard drive manufacturers from recent flooding; and too-aggressive purchasing of parts by Apple.

"It's fair to say that that's happened for the iPad 2," said White, who previously had joined several other analysts in noting a downturn in Apple's iPad production orders.

But another possible reason for the slowdown in parts orders has White concerned.

"Maybe Apple sees a weakness in the market that we can't yet," said White. "Maybe there's a vibe they're getting, something that's not showing up but something they see."

If that's the explanation, Apple may have slashed component orders to play it conservative in the expectation that sales will not be as robust in the tail end of 2011 as it had earlier predicted.

That jibes with reports by others, including DigiTimes, that Apple has cut component orders for the iPhone 4S, and that the phone remains in short supply nearly everywhere more than a month after its release.

Apple also faces new rivals in the tablet market this quarter from both Amazon and Barnes & Noble, which will respectively ship the Kindle Fire and Nook Tablet later this month.

White pointed out that supplies sold out in minutes when Apple launched the iPhone 4S in Hong Kong, the first country in the three-nation "Greater China" region that last quarter accounted for 16% of the company's total revenues.

Even so, White has not changed his sales forecasts, and expects Apple to sell 5.2 million Macs, 12.2 million iPads and a record 29.9 million iPhones in the final three months of 2011.

"But these [barometer] numbers have us scratching our heads," White acknowledged.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@computerworld.com.

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