G5 Supply Delays Still Affecting iMac, Power Mac Sales

| Apple Stock Watch

Consumers wanting G5-based Macs may have to wait a while as supplies of G5 processors from IBM continue to fall behind demand. In a conference call with Wall Street analysts, Apple said Wednesday that inventories were getting better, but that it didnit expect supply to meet demand until sometime this quarter.

Apple sold 229,000 iMacs during the September quarter, but that number includes an unknown number of both iMac G4 and iMac G5 models. As a result of the lower-than-expected availability of G5 processors, unit sales were down 6% from the previous quarter and 23% from a year ago. Revenue from iMacs was $216 million, down 8% from fiscal Q3 and off 23% from the same quarter in 2003.

Units sold

156,000 G5 Power Mac systems were sold in the quarter, off 10% from the previous quarter and 29% from the same period last year.

In its conference call with analysts for the July quarter, Apple executives warned that supply constraints would be a problem throughout the quarter.

"We are extremely unhappy with these events," Appleis Chief Financial Officer Peter Oppenheimer said at the time. "We believe IBM has placed enormous resources to resolve this situation."

Catching up

During Wednesdayis conference call, the company again cited supply constraints from IBM as the reason for these sales declines, but the company also said that the situation was fast improving.

"Iim very encouraged by the progress that IBM has made in this area with Appleis help," said Tim Cook, Appleis Executive Vice President - World Wide Sales and Operations. "In August, we shipped more G5 systems than we did in July and in September we shipped twice as many as the combined total of July and August. That leaves me very encouraged about being able to reach a supply/demand balance at a point during the quarter on every system that we ship with a G5 in it, with the possible exception of the 2.5 GHz Power Mac."

Past problems

IBM production problems with the G5 have plagued Appleis transition to the new processor since its inception. In addition to manufacturing delays leading to a slow rollout of the original Power Mac G5 product line, Apple also had to go for almost three months without its consumer iMac line.

In July of 2004, Apple pulled the iMac G4 from the Apple Store. In a note posted on the Apple Storeis home page, Apple said that problems with G5 production had led to the company running out of iMac G4 units before the iMac G5 was ready. That note:

"Apple has stopped taking orders for the current iMac as we begin the transition from the current iMac line to an all-new iMac line which will be announced and available in September. We planned to have our next generation iMac ready by the time the inventory of current iMacs runs out in the next few weeks, but our planning was obviously less than perfect. We apologize for any inconvenience to our customers."

If IBM does catch up with Appleis demand this quarter, it will mark the first time that Apple has had a steady supply for both of its G5 product lines.

Brad Gibson contributed to this article.

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