Apple’s Cook Comments on Rumors About Orders for IPhone 5 Parts

On Apple’s earnings call today, Chief Executive Officer Tim Cook commented on rumors in recent days that the company had slashed orders for iPhone 5 parts, which suggested lower-than-expected demand for the device.

He said those rumors, if you’ll allow me to translate, were hogwash.

“It’s good to question any kind of rumor about build plans,”  he said, using the industry parlance for the rolling forecasts that component suppliers get from tech companies to manage production levels. “Even if a particular data point is factual, it would be impossible to interpret what it would mean for our entire business.”

He said there are too many factors in play — multiple suppliers, each supplier’s manufacturing yields, how much inventory Apple and its suppliers each already had on hand — for any one piece of information to explain Apple’s total demand.

Cook didn’t go into more detail, and in fact warned analysts not to expect such commentary in the future.

“I don’t want to comment on any specific rumor, because I’d spend my entire life doing that,” he said on the call.

That said, the commentary from Cook and Chief Financial Officer Peter Oppenheimer suggests that Apple is having the opposite of a demand problem. The issue is a shortage of components. They pointed out that the company had not been able to make enough of many of its products, including the iPad mini, the iPhone 4 and new models of the iMac, which came out late last year. The iPhone 5 was also in short supply for much of the quarter.

“Overall, our team did a fantastic job ramping up production” of a variety of new products, said Cook, who reminded analysts that the company had never upgraded all of its products in a six-month period, as it did in the latter half of 2012. He predicted the company would build enough iPhone 4s and iPad minis to catch up with demand by the end of the current quarter. As for the iMac, he’s not so sure.

“Demand is very strong, and we are not certain we will achieve balance this quarter,” Cook said.

It’s usually great to have products that are so popular that you can’t meet all of the demand. But what’s with all the supply chain miscues? That’s something we haven’t seen for a very long time. It makes me wonder whether Apple is capable of upgrading so many of its products in such short order, and maintain the supply chain excellence we’ve come to expect.

Ultimately, so much comes back to the basic question facing Apple: Does it have more change-the-world, category-busting products up its sleeve? If yes, it won’t be under as much pressure to ramp up so many products at the same time.


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