Apple Faces Cold Christmas

One of the problems behind the 3G delay, says Entner, is that the speedier HSDPA, or high-speed downlink packet access, network technology has much higher power demands -- requiring new bigger, stronger batteries.

Optimists had figured the price cut and product shuffle, while sudden, was part of a bigger plan to make way for a higher priced 3G iPhone on the eve of the holiday buying season.

But without a 3G iPhone to fit that story line, some investors and industry watchers are worried that the smooth-as-silk Apple operation may have hit a rough patch with its mobile phone strategy.

"They expected, internally, higher sales than they have seen" for the iPhone, says one industry strategist. "So they decided to cut the price to stimulate demand."

Apple says it is on track to hit its 1 million units sold goal this month, a respectably strong performance for a new device that carried a $600 price tag.

But that means Apple so far has failed to sell out the 1 million phones it was prepared to supply in the first week of its introduction -- signaling to industry experts that there was a limited demand for the "revolutionary" new device.

The failure of the iPhone to sell out early in its run is "an unpleasant shock" for management, says one industry source.

Of course, a big key to Apple's full year 2008 goal of selling 10 million phones is success in Europe. And though three wireless partners are close to signing on, the absence of a 3G phone, says one Apple investor, will likely be seen as a negative data point.