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The iPad slowdown and impact from the Japanese disaster

Tim Cook explains that there was no material impact from the Japanese disaster:

“Regarding our global supply chain, as a result of outstanding teamwork and unprecedented resilience of our partners, we did not have any supply or cost impact in our fiscal Q2 as a result of the tragedy, and we currently do not anticipate any material supply or cost impact in our fiscal Q3. To provide a bit more color on this, we sourced hundreds, literally hundreds of items from Japan, and they range from components such as LCDs, optical drives, NAND Flash and DRAM to base materials such as resins, coatings and foil that are part of the production process at several layers back in the supply chain. The earthquake and subsequent tsunami and the associated nuclear crisis caused disruption for many of these suppliers, and many unaffected suppliers have been impacted by power interruptions.

But since the disaster, Apple employees have literally been working around the clock with our supplier partners in Japan, and have been able to implement a number of contingency plans. Our preference from the beginning of this tragedy has been to remain with our long-term partners in Japan. And I have to say, they have displayed an incredible resilience that I personally never seen before in the aftermath of this disaster. So while we do not anticipate — currently anticipate any material impact to our component supply or cost in our fiscal Q3, we do need to caution everyone that the situation remains unpredictable”

via Apple Management Discusses Q2 2011 Results – Earnings Call Transcript – Seeking Alpha.

Still, the message did not get through to everyone:

However, the supply chain impact on Apple from Japan’s earthquake, tsunami and nuclear power crisis is the culprit behind the only product line that came in below expectations – iPad. Apple sold 4.7 million units of iPad, vs. analysts’ expectation of 6 million.

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The shortfall in iPad units was explained by Tim Cook as ramp-up challenges:

“Let me mention a few things for you to consider, Toni. First off, product transitions are never simple. And as you can probably appreciate, we are in a position that we have to call them for many, many weeks in advance in terms of how many of the current product we want to produce and the dates at which we will announce the new product. We drew the channel down on the current product or the original iPad, I should say, by 570,000 units during the quarter. And we added at the end of the quarter 170,000 of the new iPad 2s although most of that was in transit at the end of the quarter. And so the net reduction was 400,000. And so our sell-through was above 5 million for the quarter. And again, this has to be planned quite a ways in the future. I think the key point here is —

[also the dates, just to remind you, we set out an invitation to the event toward the end of February. We had the event in early March. We placed the unit on sale in the United States on March 11 and our quarter ended about 2 weeks thereafter. And so there was some expectation of a new product, and we would have obviously factored that into our thinking about the product transition as we plan the number of the original unit to build.]

And so I think the key point here is that I’m extremely pleased with the progress that we were making on the manufacturing ramp. We have gotten off to a materially better start and produced a lot more units than we did on the original ramp of the first iPad. And when we’re so confident with our ability to supply that we’ve already put on 25 additional countries at the end of March, and we’ll be placing on 13 more next week and we’ll do even more as we stepped through the quarter.”