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iPhone Inventory Now in Apple-Pie Order


Production scaled back to avoid backlog.

The wire service headline signaled the end of the world as we know it: Analyst says iPhone production may be cut. Say it ain't so.

Such a move might seem to spell doom for more than a few Apple aficionados - and it wouldn't do much for Apple's (AAPL) stock price.

But relax: Apple is just getting its inventory in order, as planned - not cutting back due to weak demand in a sagging economy. Apple cranked up production of the new smartphone as part of the rollout. (Wow, that's news you can use.)

Any cutback now is probably just a move to reduce the number of units so the company can meet holiday demand without an inventory glut in 2009.

In short, end of the world averted.

Still, the iPhone costs $200 to $300 and requires a monthly service fee of about $70 a month. It's not hard to imagine that becoming an increasingly difficult sell in a souring economy - but it's also hard to imagine that the smart folks at Apple only just realized there was an economic crisis.

Craig Berger, an analyst at Friedman Billings Ramsey, says he expected Apple to cut production about 10%, but it now appears it will drop about 40%, Barron's reports.

"We believe Apple is a good proxy for broader consumer demand given that it has the hottest, sleekest, most desirable products available today," Berger says. "That the firm's iPhone production plans are being revised lower suggests... no market segment will be spared in this global downturn."

If so, that almost certainly means troubles ahead for Apple, at least in the short-term.

Apple's iPhone faces stiff competition, but that's not to say consumers have soured on the gizmo. Research in Motion (RIMM) recently rolled out the BlackBerry Storm. It will be available on Verizon (VZ) and overseas on Vodafone (VOD). T-Mobile offers Google's (GOOG) G1. Sprint Nextel (S) offers the Samsung Instinct. AT&T (T) serves the iPhone and users can roam internationally.

Demand for the iPhone surged between July and September as early adopters rushed to buy the device. (Stockholders should always be thankful for the saps who have to be the first on their block to have The Latest Big Thing, no matter the premium price.)

Believe it or not, Apple is good at marketing, and recognized that just about everyone who wanted to get their hands on the device early would do so; sales would then retreat from an initial spike to a more rational level as the iPhone moved into the mainstream.

Apple didn't goof. The world isn't turning on the company or its products. Apple is as savvy as ever.

But there are still those who hate the iPhone.
No positions in stocks mentioned.
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