Apple, Garmin Slumps May Point to Larger Problem

Garmin is a classy brand with models often selling for more than $300. This makes it eerily like Sony Ericsson, a high-ASP handset brand that just warned about a huge sequential volume decline -- from 30.8 million units in the 2007 fourth quarter to 22 million in the 2008 first quarter.

Zut Alors

Further depressing data points come from Apple's European operator partners. T-Mobile just slashed the price of the 8 GB iPhone from 399 euros to 99 euros, bundled with a high-end monthly plan. It's the kind of gigantic price cut high-end phones almost never have to endure.

Apple has been loudly trumpeting it will not sell the iPhone at a low price in order to protect its exclusive brand. Apparently, something has forced Steve to make a U-turn here -- most likely the need to dump inventories ahead of the 3G iPhone launch. The European inventory management of the iPhone has clearly been thrown out of whack.

Orange just shed some new light on the situation. It announced it has sold roughly 100,000 iPhones in France since last November. The problem here is that Orange announced on Jan. 4 that it has sold 70,000 iPhones. This implies that the iPhone sales in France, one of the biggest and most affluent phone markets in Europe, were around 30,000 in the first quarter of 2008.

It now looks like Orange sold 70,000 iPhones in the first four weeks -- and less than half of that during the following three months. This would mean that the original iPhone has been a jaw-dropping flop in France.

If the same holds true for Germany, it would explain T-Mobile's panicky 75% price cut for the 8 GB iPhone. Interestingly, mobile carriers in Spain and Italy have refused to carry the iPhone entirely, probably indicating they took one look at the French numbers and bolted.

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At time of publication, Kuittinen had no positions in the stocks mentioned, although holdings can change at any time.

Tero Kuittinen is managing director and senior analyst for Avian Securities, a brokerage firm specializing in technology companies. Although Kuittinen is an employee of Avian Securities the statements above are being made in Kuittinen's personal capacity and are in no way are the statements of Avian Securities, nor attributable to the company. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Kuittinen appreciates your feedback; click here to send an email.