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Demand for Apple's new iPod shuffle outstripping supply

Apple Computer's second-generation iPod shuffle is in extremely high demand this month with sales tracking in excess of 5 million for the quarter, AppleInsider has been told.

People familiar with the matter say Apple executives are thrilled with the strong response to the diminutive 1GB flash-based digital music player, which recently eclipsed the iPod nano by rising to the forefront of the company's top seller list.

The entry-level player is selling out at some resellers faster than Apple can provide fresh stock and, come the close of the holiday shopping season, could account for as many as 6 to 8 million unit sales, those same people claim.

During an interview last week, Apple vice president of worldwide sales, Phil Schiller, similarly characterized early reaction to the new shuffle as "tremendous" and "phenomenal." While Schiller's comments were the first from the Cupertino, Calif.-based company in relation to sales of the player, some industry watchers on Wall Street seem to have received a heads up.

Shaw Wu, an analyst at American Technology Research, had previously observed strong sales both from first- and third-party retailers and speculated that the player could become the unexpected bestseller of Apple's entire iPod repertoire. Even earlier, Needham and Co.'s Charles Wolf had mentioned that he had been hearing the new shuffle could be "huge." Already, it has emerged as the top-selling item at both the American and Canadian online Apple Stores, followed by its counterparts the iPod nano and fifth-generation video iPod.

Checks with both Apple and big-box retailers have verified that demand for the newest iPod is quickly outstripping supply. While select online stores such as Best Buy and MacMall (which is also offering a free FM tuner with purchase) continue to show immediate availability, many are facing extended lead times or even total unavailability as they struggle to cope with the unexpected popularity of the device.

As of late Friday afternoon, the internet's largest retailer was devoid of stock in its warehouses and only shipping the player through affilliate Blue Proton, which maintains supply but is subsequently charging a premium price of $109 —a full $30 above the official $79 list price. Crutchfield and other electronics stores also reflect recently drained inventory. Hardest hit is Target, which estimates a minimum two-week delay for new orders.

The online Apple Store itself is showing indications of a gradually building strain on inventory. European customers hoping to buy the iPod shuffle directly from Apple can face as much as a five-day interval between placing an order and receiving the shipping notice. Other iPods ship within 24 hours, Apple says. The normally well-supplied American and Canadian sites themselves face unusual delays, with orders in either country requiring one to two business days' lead time.

Black Friday and the coinciding Apple promotions are likely to compound the situation; as the peak day of Christmas shopping, the day after Thanksgiving will almost certainly see a dramatic spike in iPod shuffle sales as customers are drawn in by discounts on related products. However, due to its existing popularity, Apple is unlikely to discount the player for the 24-hour sale.