Ending Inventory Analysis

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    Posted: 31 July 2012 02:46 AM #16

    Gregg Thurman - 31 July 2012 05:25 AM
    Apple II+ - 30 July 2012 06:04 PM
    Gregg Thurman - 30 July 2012 02:47 PM
    Apple II+ - 30 July 2012 07:31 AM

    Also, not clear on where the 203k daily run rate comes from.

    Questions are always good,  don’t mind them at all.

    (Ending inventory minus beginning inventory plus unit sales) divided by total days in quarter

    8300k - 8600k + 26028k = 25728k

    25728k / 91 days = 283k

    203k a typo then?

    Not sure where you got your inventory numbers.  I show FQ3 Beginning 8,550,000 Ending 5,550,000

    For FQ4 I don’t have an ending inventory number, and assuming a September 28 iPhone launch, I took my units sold estimate (24,050,000) and deducted Beginning inventory (5,550,000).  I divided that result by 91 to get the 203K run rate.  If Apple were to complete FQ4 with 8,000,000 iPhones (by way of example) the “indicated” run rate would increase to 291K.

    I’m probably doing something wrong, but I’m sure we can nail this down if I spell out where I got my numbers.

    I am using the ending inventory from the transcripts from the last two earnings calls. I take the ending inventory from the Q2 transcript to be the beginning inventory for Q3.

    From the Q2 transcript:

    We ended the quarter with about 8.6 million iPhones in channel inventory

    From the Q3 transcript:

    We ended the quarter with about 8.3 million iPhones in channel inventory, a sequential decline of about 300,000 iPhones

    So, that’s how I get 8300k ending and 8600k starting inventory for FQ3.

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  • Posted: 31 July 2012 03:15 AM #17

    Gregg Thurman - 31 July 2012 05:25 AM
    Apple II+ - 30 July 2012 06:04 PM
    Gregg Thurman - 30 July 2012 02:47 PM
    Apple II+ - 30 July 2012 07:31 AM

    Also, not clear on where the 203k daily run rate comes from.

    Questions are always good,  don’t mind them at all.

    (Ending inventory minus beginning inventory plus unit sales) divided by total days in quarter

    8300k - 8600k + 26028k = 25728k

    25728k / 91 days = 283k

    203k a typo then?

    Not sure where you got your inventory numbers.  I show FQ3 Beginning 8,550,000 Ending 5,550,000

    For FQ4 I don’t have an ending inventory number, and assuming a September 28 iPhone launch, I took my units sold estimate (24,050,000) and deducted Beginning inventory (5,550,000).  I divided that result by 91 to get the 203K run rate.  If Apple were to complete FQ4 with 8,000,000 iPhones (by way of example) the “indicated” run rate would increase to 291K.

    AppleII+ I owe you an apology.  I went back to conference call transcript for iPhone Ending Inventory.  It was 8.3MM.  I don’t know where I got 5.55MM.  My math was correct, my data was not.  Your calculation of 283K run rate is correct.

    An interesting thing occurred with the change in Ending Inventory.

    FQ3’s Beginning Inventory (8.55MM) was 3.0 Weeks supply.  My estimated FQ4 unit sales (24.05MM) makes FQ4 Beginning Inventory 2.9 weeks supply.  At 3 weeks supply it infers unit sales of 24.9MM units during FQ4.  With no change in channel inventory that means iPhone daily run rate through FQ4 may be 273,000 units.

    This is important when considering max production capacity that could be allocated to the new iPhone.  If that max is 413,000 daily (FQ2 results), then surplus capacity is 140,000 units.  Over a 91 day period (spanning FQ3 through launch date), Apple could be stockpiling ~13MM units pre-launch.  However, I do not think Apple could produce at the 413K rate this early in the new iPhone cycle.  I would imagine that ramp up began early in FQ3, which would explain the sharp increase in channel inventory (end of FQ2) and slight draw down through FQ3.

    Cessation of iPhone 3GS and reduction of iPhone 4 production will have an impact on the new iPhone ramp rate, although slight .  Thank you for helping me think this through.

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    Posted: 31 July 2012 12:48 PM #18

    No worries, Gregg.

    As for the 8.3 million in indirect channel inventory at the end of June, 4+ weeks have passed, so I’m guessing most of it has sold through by now.

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    The only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. — Steve Jobs