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Apple hit by iPad sales guessing game

Obsession with totals misses broader picture, the point

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Comment So who exactly forecast Apple's fourth quarter - equivalent to calendar Q3 - iPad sales would be so much higher than the 4.19m the company last night announced that it had shipped during the period?

Someone must have done, to prompt all the stories appearing across the internet suggesting that Apple's iPad sales were "lower than expected" - the sober response - or even "flattened" - a frankly bonkers conclusion, given the numbers.

For the answer, look no further than the nebulous Wall Street "consensus", a mean that can easily be knocked out of kilter by a few particularly bullish forecasts - or by some overly negative ones. It seems odd to sneer at a product's sales because they didn't surpass the guesswork - some of it educated, much of it probably not - of folk not directly involved in that item's production.

In fact, 4.19m iPads represent quarter-on-quarter sales growth of 28 per cent on the previous quarter's total of 3.27m units. Hardly a "flat" growth curve.

That makes 7.46m in total, leaving Apple with the task of selling 4.54m more in the last three months of the year if it's to hit analyst expectations - guesswork again - of up to 12m iPads for the whole of 2010.

That would represent sequential growth of just over eight per cent, a rate well below the calendar Q2-Q3 increase and would come at time - Q4 2010, also the first quarter of Apple's 2011 financial year - that's typically the best in Apple's year.

Comparable growth would see Apple shifting 5.36m tablets in Q4, for a year total of 12.82m. You don't have to be a bull or a fanboy to anticipate that, given the current quarter contains Christmas and, in the US, Thanksgiving. And, here at least, the prospect of a sales tax rise in January.

Apple finished the last quarter with three to fours weeks of channel stock for the iPad, slightly lower than its preferred 4-6 week level, CFO Peter Oppenheimer said last night. That shows that the supply issues that have been holding back iPad sales are still present, though possibly to a lesser extent than before.

But that hasn't stopped market watcher iSuppli from bullishly increasing its sales forecast. It reckons Apple will now sell 6.34m iPads in the current quarter, up from the 5.44m it forecast before Apple's announcement last night. The increase makes for full year sales of 13.8m, and the researcher likewise upped its forecasts for 2011 and 2012 to 43.7m and 50.4m, respectively.

Of course, this forecast is no less an example of guesswork than the figure produced by taking a variety of Wall Street predictions and averaging them, and iSuppli may seem to be saying the obvious when it states "the only factor limiting production is the availability of key iPad components".

The crucial point is that it's supply that is hindering iPad sales, not demand, a notion seemingly missed by the investors who led to the dip in Apple's share price following the announcement of the quarter's iPad sales. Shares went down $18 or so between trading days, but regained half of that today.

We'd just add that, in many ways, the number of iPads sold so far - whether they exceed Wall Street forecasts or not - are relevant only in as much as they demonstrate demand for the tablet form-factor. During the last two quarters, Apple had no competition worthy of the name - sorry, cheap 7in Android tablets sold off the pages of Hong Kong websites don't count - and won't really have much to fight against during the current one.

What we want to hear are the sales Apple made when the iPad - the iPad 2 by then - went up against Android 3-based offerings from other major vendors in Q1 and Q2 2011. No amount of guesswork will tell you that now. ®

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