The hotly anticipated iPhone generated a great deal of attention and initial sales were brisk. But as reported, the demand was less than some had anticipated. People familiar with the company said at the time that Apple were prepared to sell out the 1 million phones it had ready for its weekend debut.

Last week, AT&T reported that it had activated 146,000 iPhones in the second quarter consisting of less than two days of iPhone sales. Analysts had expected anywhere between 200,000 to 700,000 units would be sold in that period. Activation glitches seemed to have contributed to the lower than expected results.

Apple said iPhone sales were off to a great start and the company booked 270,000 iPhones sold in its fiscal third quarter which ended June 30.

Apple also predicted it would sell 1 million iPhones by the end of September. Observers say the $600 phone may enjoy a big sales pick up around the holidays during the crucial gift giving season.

Apple shares fell $3.58 to $137.85, while telco partner AT&T saw its stock drop 18 cents to $39.59.

Apple's chip vendors could also see some jitters if the rumors are true. Analysts have identified some of the key component suppliers as Broadcom ( BRCM), Texas Instruments ( TXN), Marvel ( MRVL), Micron ( MU) and Skyworks ( SWKS), among others.

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