Update: AT&T now selling iPhone 4, exhausts supplies

Supply problems have 'done damage' to Apple brand, says analyst

As promised, AT&T Inc. today started selling the iPhone 4 to walk-in customers, but many stores quickly ran dry.

AT&T confirmed that some stores have already exhausted their supply of iPhone 4s.

Lines ranged from the dozens to more than 100 at various stores, and AT&T rapidly exhausted its stock at some outlets.

"There was [sic] 40 people waiting outside the AT&T store this morning. No iPhone 4 today," said Californian Mando Fauzey on Twitter.

Others celebrated getting their hands on a new iPhone. "Score! The last iPhone 4 at AT&T in Longmont. Nice!!," said George Morris of Boulder, Colo., on Twitter.

Some said that obtaining a phone was a breeze. "Casually walked into an AT&T store and walked out with an iPhone 4 all of 20 minutes later," reported Daniel Shusta of Athens, Ohio, in a tweet at 11.30 a.m. Eastern time.

In Lexington, Ky., police were called to a local AT&T store to handle a crowd of more than 150 would-be buyers. According to WKYT-TV, AT&T employees called police after "fearing customers in line may get out of control."

AT&T also again began taking online orders for Apple Inc.'s new smartphone today.

Apple's exclusive U.S. iPhone carrier stopped taking online orders for the iPhone two weeks ago, after its ordering and eligibility systems collapsed when customers swamped its servers with pre-orders prior to the official launch last Thursday. At the time, AT&T said it had decided to halt pre-orders so it could fulfill the orders it had accepted.

Today, AT&T confirmed that in-store sales were brisk enough to drain its iPhone 4 supplies.

"Things are going well and demand for iPhone 4 is strong," said AT&T spokesman Mark Siegel in an e-mail reply to questions. "Given the demand, some stores are running out of inventory."

Siegel said that customers can call stores to check on iPhone 4 availability, but added that "available supplies depend on the individual store's situation."

The iPhone 4 is also in short supply at Apple. Orders placed Tuesday will not ship until July 20, according to the company's online store.

On Monday, Apple said it had sold 1.7 million iPhone 4s in the first three days of availability and boasted that this has been the most successful Apple product launch ever. Analysts have said they expect the new model to be hard to get for at least the next several weeks.

Apple has had problems keeping enough iPhones on hand to meet initial demand in the past. Although last year's iPhone 3GS was relatively easy to obtain, the 2008 iPhone 3G was in short supply for several weeks.

A research analyst said today that the iPhone supply issue could hurt Apple and push customers to competitors.

"What is happening now certainly has done some damage to the Apple brand," said Tina Teng, an analyst at El Segundo, Calif.-based iSuppli, in a statement. "Consumers, questioning Apple's supply chain management capability, have started looking for alternative devices. In particular, consumers are not satisfied with Apple's response to the antenna issue causing poor reception and dropped calls."

Teng was referring to mounting complaints that holding the new iPhone can impede signal strength, making it difficult or even impossible to make and maintain calls.

"With threats coming from every corner, can Apple afford another slip in its supply chain management?" asked Teng, pointing to recent countermoves by rivals Nokia and Research In Motion.

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

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