By Aldo Panessidi
It looks like Apple is making some adjustments to its current product inventories in preparation for the upcoming launch of the 6thgeneration iPhone.
According to Sterne Agee analyst Shaw Wu in a note to investors, Apple has reduced iPhone orders by between 20% to 25% from the 35.1 million units the company shipped in the first quarter of this year. Wu now expects shipments of between 26 million and 28 million. With the estimated 8.6 million iPhones already in the pipeline, Apple will have an iPhone supply of between four and six weeks in inventory.
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According to Wu, “From our understanding, the reason for the reduction is not demand related but rather due to the upcoming 6th generation iPhone refresh likely in the September-October timeframe. It appears that APPLE is opting to be conservative with its suppliers to factor in a potential 2-quarter pause ahead of the refresh and also to manage inventory. We believe this helps explain why its June quarter guidance was somewhat more conservative.”
Wu also explained developments on the iPad front. He reported that Apple is finally increasing their new iPad build plans. Shipments of the device were previously held back due to the supply of its new Retina Display, and the situation has been “greatly improved with an additional supplier.” Wu believes that this will help Apple to better meet strong demand for its iPad3.
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For the June quarter, Wu reduced his iPhone forecast from 28 million units to 27 million, and raised iPad shipment expectations from 14 million to 15 million units. Due to improved iPad profitability, Wu increased his gross margin assumption from 42.5% to 43.5% and forecasted $36.1 billion in revenue and $10.16 in EPS. He’s keeping his Buy rating on shares of Apple stock, as well as his $780 price target.