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Apple's Next Big Thing

And the shipments would have been even lighter if not for the new iPod nano . Apple shipped more than a million units of the flash-based nano in the last 17 days of the quarter, which means that shipments of its other iPod models came in lower than the number the company posted in its third quarter.

But company officials refused to acknowledge that iPod shipments were disappointing. Regardless of the Street's predictions, iPod sales met Apple's own internal expectations, said Tim Cook, executive vice president in charge of the company's worldwide sales and operations. And Cook said the iPod numbers reflect Apple's move to wind down shipments of the iPod mini during the quarter. (Apple replaced the mini, previously its most popular iPod model, with the nano.)

The nano apparently has been a huge hit, but that could be a double-edged sword for Apple. The company ended the quarter with a "mammoth backlog" of nano orders, according to Cook. Blaming the situation on supply constraints, he added that he couldn't forecast when the company would be able to meet demand for the product, meaning that Apple could potentially miss out on sales during the all-important holiday season.

Still, company officials tried to put the situation in the best light. "The issue is a beautiful issue: Demand is staggering," Cook said on the call. "We're working as fast as possible to get as many out there as we can."

But as hot as the nano has been, sales of other iPods were likely disappointing. According to Cook, despite the backlog on nano orders, Apple ended the quarter with channel inventory within -- though toward the low end -- of its targeted range of 4 weeks to 6 weeks. Although Cook declined to comment on the inventory situation or sales of other iPod models, the overall inventory situation suggests that Apple could have surplus inventory of its top-of-the-line iPods or its low-end iPod shuffles.
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