AppleInsider StaffThe real economic impact on Apple from the disaster in Japan will come from sales. Apple has adjusted its expectations down $200 million, represented in its guidance for the June quarter. But Cook noted in his company's quarterly earnings call Wednesday that the economic effects of the disaster in Japan "pales in comparison to the human impact."
Since the event in March, numerous reports have suggested that Apple has seen a significant impact on its component supplies originating from Japan. But Cook took the opportunity during Wednesday's earnings report to dismiss those notions.
Cook revealed that the disaster did not have a major impact on component supplies or pricing in the second quarter of fiscal 2011. He also said that Apple does not anticipate the ongoing situation to have a major impact in the third quarter, either.
However, the COO also cautioned that the situation in Japan remains volatile, with aftershocks and potential power outages.
Cook revealed that Apple's employees have been working "around the clock on contingency plans," to ensure that the company will be able to secure components if deals were to fall through in Japan. But he also said he would prefer to stick with Apple's long-term partners in Japan if possible — something he said he expects will take place in most cases.
"They have displayed an incredible resilience that I have personally never seen before," he said.
Apple's component supply has come under close watch as the company struggles to meet demand for the iPad 2. Though the disaster in Japan did not have an impact in the last quarter, Cook acknowledged that he wishes Apple could have built many more iPad 2 units to satisfy customer demand.
Cook characterized demand for the iPad 2 as "staggering," and admitted that Apple remains "heavily backlogged" at the moment. In fact, he referred to the iPad 2 as "the mother of all backlogs."
Apple sold 4.69 million iPads during its second fiscal quarter of 2011, a number that was below the 6 million Wall Street analysts were hoping for. But looking forward, Cook said he expects Apple to produce a "very large number of iPads" in the third quarter of fiscal 2011.
The company will need that production, as Cook revealed that the iPad 2 will launch in 13 additional countries starting next week. The COO did not reveal what countries would be included, but Apple had previously announced intentions to begin sales in Hong Kong, Korea and Singapore in April. Another potential country is Japan, which was supposed to receive the iPad 2 in March, but the launch was delayed due to the disaster.
During Wednesday's call, Cook was asked when he thinks Apple might be able to satisfy the incredible demand on the market for the iPad 2. But the executive was reluctant to venture a guess.
"Demand has been staggering, and I'm not going to predict when supply and demand will come into balance," he said. "I can only be confident on the supply side."
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17 Comments
As an Apple shareholder, I'm really getting tired of these supply issues. I'm not sure if Tim Cook is being way too careful about over-production or what, but if he continues like this it's going to bite Apple in the ass.
Apple is damn lucky that Motorola, RIM and Samsung have stumbled so badly with their tablets. If they hadn't you would have had tons of people flocking to them, the same as with the Android phones.
Tim, get your act together on supply!
As an Apple shareholder, I'm really getting tired of these supply issues. I'm not sure if Tim Cook is being way too careful about over-production or what, but if he continues like this it's going to bite Apple in the ass.
Apple is damn lucky that Motorola, RIM and Samsung have stumbled so badly with their tablets. If they hadn't you would have had tons of people flocking to them, the same as with the Android phones.
Tim, get your act together on supply!
last i heard Android is number one, the slow market share regarding Android tablets will eventually turn the corner to become number one as well. Android started slow too, and look at it now the number one mobile OS in the world. Share holder! LMAO.
As an Apple shareholder, I'm really getting tired of these supply issues. I'm not sure if Tim Cook is being way too careful about over-production or what, but if he continues like this it's going to bite Apple in the ass.
Apple is damn lucky that Motorola, RIM and Samsung have stumbled so badly with their tablets. If they hadn't you would have had tons of people flocking to them, the same as with the Android phones.
Tim, get your act together on supply!
Apple has booked up over 60% of the touchscreen capacity. Rumor has it that they're offering upfront cash payments to suppliers to get served first with components.
What more would you have Tim Cook do?
How cute that someone actually thinks Cook is screwing up by not meeting demand of the fastest ever selling consumer product!
Of course it is so much better to have inventory sit idle than to have customers breaking down your door demanding more.
Cook - you big screw-up! Only managing to produce and ship ~200M iOS devices since 2007. Embarrassing record! Can't you see others have done so much better? For example ... eh ... duh ... bla ... someone help with an example please?
As a shareholder you should be nothing but happy. Apple is performing amazingly in one of the worst economic ever seen.
Further, Apple has two problems it has to balance. First, Judging sales volume is always easy in hindsight. You don't want to order three million of something and struggle to sell the last million quickly. Critics said the original iPad would be a flop. Moreover, unsold inventory in Apple's hands at the end of the quarter counts against sales, which is one of the main reasons Apple did away with owning its own factories. If it was over aggressive in ordering product, any unsold product would hurt earnings.
Further, not everything Apple builds is a run away success. Just ask shareholders the quarter Apple introduced the Cube (great computer, but overpriced). Apple had to eat hundreds of millions of dollars because it had to cancel orders of components because it was over aggressive in estimating the number of sales. That write off was compounded by having to count inventory on hand against earnings. Apple was so desperate to make sales at the end of the quarter, I bought a $1999 G4 Tower for $1399, and Apple was kind enough to throw in a free $799 17 Apple Monitor (through my schools Apple Store).
Second, third party factories only can produce so much. Those factories have contracts with producers other then Apple. Moreover, you don't want factories to ramp up to quickly with a new product. The first couple of weeks building a new product is when the manufacturing process is refined. Often small issues are discovered and corrected. Apple is doing a great job. Amazing really.
As an Apple shareholder, I'm really getting tired of these supply issues. I'm not sure if Tim Cook is being way too careful about over-production or what, but if he continues like this it's going to bite Apple in the ass.
Apple is damn lucky that Motorola, RIM and Samsung have stumbled so badly with their tablets. If they hadn't you would have had tons of people flocking to them, the same as with the Android phones.
Tim, get your act together on supply!