Apple has announced a delay in the shipment of the iPod mini to international markets until July, citing strong demand in the US for the product.

On the news AAPL has jumped more than 4% from last night’s close and is currently trading at about $26.50 on heavy volume.

Is this good news for Apple or just another case of Apple underestimating consumer demand?

edited 3/28 to change topic to normal from announcement

I think it’s a case of the hard drive maker not being able to meet demand.

Ok. But should Apple have forecast greater demand and either looked to other suppliers or begun manufacturing at an earlier date?

As it is the company ran out of iPod inventory before the close of the Christmas season and is now beset with yet another iPod product shortage.

This delay only gives competitors more time to launch competing products.

K.C. Swanson of The Street.com, who I think does fine work, by the way, has more on the subject.

Here.

Interesting point from the article:

While disappointing, until the iTMS is available in overseas market, it isn’t the end of the world that the iPod mini will be delayed.  Apple stands to sell the most iPods when they can offer the “entire package.”  There will always be early adopters, but as it has proved in its short yet eventful existence, the iTMS is a huge catalyst to iPod sales.  Better to bring them to market together.

Hopefully by the summer, iPod production will be up to speed, just in time for the announcement of the iTMS Europe/Everywhere Else.

As for the competition, they are all in the same situation.  Roxio has plans to launch Napster in the U.K. by summer, but has made no announcement for further entry into Europe. 

[Snide remark]Who else really matters?  [/Snide remark]

Deep breaths everyone.

The best bit of commentary on this came from my good friend (and TMO’s biggest fan) Paul Thurrott.  He notes that this is basically proof positive that demand for the iPod mini is non-existent.

Isn’t he cute?

In any event, this is what I think on the subject:

Apple jacked the price of the mini up to US$249 from what it was intended (likely either the US$199 or US$219 price that was rumored before the release) in order to limit demand.  I think the company felt that the US$249 level would limit demand enough to get through the hard drive ramp up period.

The only problem, of course, was that the US$249 price wasn’t high enough.  The proof being in the pudding, and all.

Furthermore, I am not sure that Apple could have done more than it has done. To my knowledge, no one else is making a drive mechanism that small. On the other hand, had Apple jacked the price up even higher, that might have been just enough to keep anyone from buying it.  The mini being a dismal flop on release is far worse than it being successful beyond Apple’s wildest dreams.

Apple’s usual supply problem is that the company only gets out a meager supply of a product that can’t meet moderately high demand.  With the mini, the company has pumped out a lot of product (we don’t have numbers yet, but I’ll put that prediction up against Paul Thurrott’s without a moment’s hesitation) that can’t meet incredible demand.

I think that makes it far different from Apple’s usual supply problem.

Don’t get me wrong: It very much sucks that Apple is having yet another supply problem, but at least the company is getting minis into the hands of people in the one market it is selling to.

Paul just needs to stop thinking too hard.  I was about to write a paragraph explaining why I think that’s totally bogus, but on second thought, I’d rather not waste my time on something so silly.

Anyway, here’s the permalink to the story, in case you didn’t want to hunt down through the page looking for it.

This is a tough call for me. On one hand, it’s great for Apple to see the demand for the iPod mini (especially since I was so skeptical that it would be a big sell). Frankly, the 100,000 pre-orders floored me.

On the other hand, Apple has a reputation for delays in release and running out of supply. This will contribute to that. Even though I don’t think Apple could be doing anything more (it sounds like it’s the Hitachi drives that are short in supply), I think this looks to many as Apple once again not getting their act together.

Overall, it’s not too bad. I’d rather see this than very little demand.

Now, enough with the iPods….bring on some new computers! 

It is not a shortage - IT IS MARKETING

Apple always has a shortage of product simply becuase they only produce enough intially to put them in the hands of reviewers and the like.  This is simply a marketing strategy. They are leaving themselves the option of not producing a product if it does not sell or at least ramping production in direct relation to sales.

They get a hard rap for this, but with such a small market share it is really the wise thing to do.  Mac people know that 90% of the time, if Apple produces a product, it will be worth waiting for. 

I will say though that with the PC market that they are dipping into, they will have to change this strategy.  Other PC manuf. typically over shoot the projections on sales, produce more product that may be needed, resulting in reduced or no shortages, and count on the larger market share to eat up the excess inventory.  Apple does not have that advantage so they have to be more cautious.  But this could bite them in the arse if they are not careful.  PC folks buying Apple products do not have the experience of what owning an Apple product is like and they are used to a product being available upon release, therefore they are more likely to grip and complain about the shortage.

I think we will see that this will change as Apple continues to gain more of a market share.  In the future we will see fewer delays as they pre-produce more inventory prior to the release of product because they know they can sell more from the outset.

mini price

I was complaining for a while about the price of the mini, then I found out how much the internal hard drives were worth. People are actually taking the mini apart, pulling the hard drive to sell, then throwing the mini away. The HD’s are worth that much!! kinda sad.

Didn’t know there was an identical topic up on the Finance Board…my bad.

To put in my 2 cents, I think the scales balance out on the slightly-to-fairly positive side.

Obviously it’s great that Apple’s newest product is selling like crazy. The press was just all over the news. Of course, this does bring up that specter of Apple historically suffering from insufficient supply to meet demand, product delays, and so on. Still, I agree that it’s better to somewhat adequately address the needs of one market (U.S.) rather than starving two (US + world). As Steve Jobs put it in that Q4 2003 results conference call, it’s a pretty safe bet to go after the “lowest hanging fruit” first, since demand is just so huge over here.

I guess at the end of the day, having the rest of the world wait for another three months or so for minis (hopefully they’ll ship before July, but noting Apple’s timeliness of shipping as of late, that’s probably wishful thinking) won’t be too bad…so long as one or two notable intervening events don’t occur in the meantime. Given Hitachi apparently has a near-100% strangehold on the 1-inch HD market right now, if Apple has no hard drives for iPod minis, and iPod minis are the market share leader in their particular segment (here’s hoping they are), then the other guys can’t have all that many 1-inch hard drives to work with themselves, assuming Apple’s been buying them all. Thus the negative market impact of having frustrated buyers going after the “next best thing” should be somewhat blunted by Hitachi’s limiting factor (though I imagine some degree of harm will be done in the worldwide market).

To me, the most foreseeable/troublesome intervening problem that could put a significant hurt on iPod mini’s quest for world market domination could be from players like Cornice, or perhaps other firms with tech we’ve yet to see. If Cornice can bump its “storage elements” to 2, 3, even 4GB before July, and with wide availability, there may be a chance for “close enough” products employing Cornice tech to gain a substantial first mover’s advantage. I guess we’ll just have to see.

EDIT: Interesting thought, Bryan…and here I was thinking Apple was just doing its traditional “premium price for superior product” thing, with a dash of cutting-edge technology price adjustment (given that the price differential of competitors is actually kinda small). Because when you stack it up against 256+ MB flash players, the iPod mini is still an absolutely kick#$$ value. If only they had a time machine, huh?
Can’t wait for the iPod/mini sales figures for this quarter.

Re: It is not a shortage - IT IS MARKETING

[quote author=“macrebel”]I think we will see that this will change as Apple continues to gain more of a market share.  In the future we will see fewer delays as they pre-produce more inventory prior to the release of product because they know they can sell more from the outset.

???
Where are they gaining?

[Edited to fix the BBCode quote - Bryan ]

[quote author=“Mav”]
Can’t wait for the iPod/mini sales figures for this quarter.

In addition to the sales figures I’ll be closely watching for any info on exisiting orders and the level of inventory in the channel. Most likely Apple will carry into the second calendar quarter backorders from consumers and dealers.