Widespread iPhone shortages fuel 3G rumors

Apple's iPhone has gone missing from most retail shelves, fueling speculation
that the arrival a new version of the mobile device--possibly featuring support
for faster 3G wireless technology--is imminent.

Following last week's announcement by O2, the iPhone's exclusive service provider
in the U.K., that it had run
out of iPhones, U.S. customers reported similar shortages. Over the weekend,
Apple's online stores in both the U.S. and the U.K. listed the 8GB and 16GB
models of the handset as "currently unavailable."

"We are currently out of stock," Apple spokeswoman Natalie Kerris
confirmed on Monday.

That goes for brick-and-mortar Apple Stores as well. Macworld called five Apple
Stores located across the U.S. The stores in New York, Chicago, San Francisco,
Cambridge, Mass., and Palo Alto, Calif., all confirmed that their iPhone offerings
had dried up.

"We don't have either [model]," said a sales representative at Apple's
flagship Fifth Avenue store in New York City. "At this time we don't have
any info on when we'll get them." Sales personnel at other locations suggested
that additional iPhones could be in stock as early as Tuesday, though they strongly
suggested that customers call to confirm availability before heading to the
store.

U.S. customers looking for iPhones aren't totally locked out, however; Macworld
also contacted AT&T stores near each of the Apple Stores we polled. Four
of the five stores reported that they had both 8GB and 16GB iPhones in stock;
the AT&T store in Palo Alto only had 16GB phones available.

That's a contrast to the U.K., where iPhones are out of stock both through
Apple and its partners. Besides O2 reporting that it was out of iPhones, Carphone
Warehouse, a retail partner in the U.K., says that it's out of stock for both
models.

Signs began pointing to a constrained iPhone supplier in recent weeks. During
an April conference
call to discuss Apple's second-quarter earnings, Chief Operating Officer
Tim Cook acknowledged that the company's U.S. stores had been experiencing an
inventory shortfall earlier that month, which he attributed to higher than forecasted
demand in the post-holiday buying environment.

Given Apple's oft-stated goal of selling 10 million iPhone by year's end, the
assumption gaining favor on the Internet is that iPhone supplies have dried
up as Apple readies a new version of the phone, with a release likely to come
in the next few weeks. "It would be the kind of thing that would naturally
precede the introduction of a new model," said Ross Rubin, director of
analysis at market-research firm NPD Group.

A second-generation iPhone, likely incorporating high-speed 3G wireless technology,
is widely expected to make an appearance soon. Hints have been dropped over
the past year by both AT&T CEO Randall
Stephenson, who said last November that a 3G iPhone would show up "next
year," and AT&T Wireless chief Ralph
de la Vega, who said during April's CTIA Conference that "our integrated
devices [will] be 3G devices in the not-too-distant future, and I mean months."


While Apple has kept characteristically mum about its roadmap for future products--the
company declined Monday to comment about the latest round of speculation--it
has not been secretive about its plans to expand further into Europe and into
Asia this year. Already, a slew of carriers have announced deals with Apple
in recent weeks to bring the iPhone to countries such as India, Australia, and
Italy. In the case of Italy, reports
from media in that country have suggested that 3G compatibility was part
of the deal negotiated between Apple and local carriers.

Regardless of the details of those agreements, it's no secret that many of
the countries Apple is entering or plans to enter soon have more widespread
and mature 3G coverage than what's currently available in the U.S. (Earlier
this year, though, iPhone partner AT&T announced
it planned to expand its 3G service to more U.S. cities.)

"It's a natural fit for a product that's marketed on the strength of its
internet presence," Rubin said. "AT&T has also made strides in
developing its 3G network, so now would be a sensible time to introduce it."

A look at the calendar also adds fuel to the rumored update fire. June not
only marks the first anniversary of the iPhone's launch, it also brings Apple's
annual Worldwide Developers Conference, where Steve Jobs traditionally delivers
an opening keynote. The iPhone figures to be a major focus at WWDC, since Apple
has promised to deliver iPhone 2.0 software in June that will add native applications
to the handheld device. WWDC begins in San Francisco on June 9.

And that poses a challenge for Apple. The June 9 keynote is still several weeks
away, meaning a potentially month-long gap between the disappearance of the
current model from retail shelves and potential arrival of a new iPhone.

"There is certainly some concern about that," said NPD Group's Rubin.
"You don't want to be in a situation for too long without available stock.
Perhaps the benefit will be if they are not selling many older models the day
before a release, they will keep that buyers remorse to a minimum."

Indeed, Apple has been stung by such remorse in the recent past. The company
cut the price of the 8GB iPhone by US$200 in September 2007, a little more than
two months after the phone's debut. After a sharply negative reaction from early
adopters, Apple wound up offering a $100
credit to people who bought the iPhone in its first two months of release.

Other potential reasons besides the forthcoming release of a new model could
explain the sudden dearth of iPhones. "It's either component shortages
or a deliberate sell-off before another iPhone is introduced," said Avi
Greengart, Research Director for market research firm Current Analysis. "It
really might be a component shortage--that happens, although I'm not aware of
any issues of that type."

But when it comes to Apple's explanation about higher than expected demand,
the situation doesn't seem to add up, analysts say. "Certainly there were
some shortage issues during the initial release, but nothing too severe,"
Rubin said. "Supply has been consistent since then and it would be unusual
to have a surge in demand at this point."