The Great European iPod Famine.

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Author: Matlack, CarolVella, Matt

APPLE AT THE CROSSROADS

While U.S. shoppers had no problem getting theirs, in most of Europe the digital music players were scarce before Christmas

Gerald and Maria Magella stare wistfully at a black iPod nano encased in a Plexiglas bubble at the FNAC electronics store on the Champs Elysees. The Magellas, visiting from Brazil, have spent three days scouring Paris for a nano. Like every other store they've visited, FNAC is sold out, and the display model isn't for sale. "Try back in a few weeks," says a store clerk.

Maybe the Magellas should have vacationed in the U.S. Last month, as Apple Computer's (AAPL) hot little digital-music player was flying off shelves in the U.S., many retailers warned that supplies could run out before Christmas. But in the end, most American shoppers seem to have gotten their nanos -- while Europeans often went home empty-handed.

ASTOUNDING INCREASE.

Major retailers in France and Germany started running out of nanos in mid-December, and many are still waiting for fresh supplies of the most popular model, the black 4-gigabyte. "With some luck, we might get a new delivery by mid- to end-January," says Antonio Bellini, a sales assistant at the KaDeWe department store in Berlin.

While Apple hasn't yet reported fourth-quarter sales, it's already clear that the iPod was one of this holiday season's megahits. Citigroup Global Markets analyst Richard Gardner recently raised his estimate of fourth-quarter iPod shipments to 12.5 million, up an astounding 173% from the year-earlier quarter. That's based on zooming sales of the nano, and stronger-than-expected demand for the recently introduced fifth-generation iPod, which can play videos as well as handle music and photos.

All in all, it's clear Apple did a remarkable job in supply-chain management to get as many iPods to market as it did -- and yet it still came up a bit short of demand. "I don't know if it was by design or it was unintentional, but demand is just that good," Gardner said in a December interview.

TESTY RELATIONSHIPS.

Did Apple, by underestimating demand, lose millions in potential sales? That didn't seem to be the case in the U.S., where even during peak shopping weeks, customers usually could find nanos at Apple's 132 company-owned retail outlets. Apple stores in Europe also had ample supplies, but it has only five outlets in Europe, all in Britain. And while Apple's flagship British store, on London's Regent Street, was fully stocked through the holidays, some other British retailers ran out of the most-popular models, says Daren Siddall, a London-based analyst with the Gardner Group consultancy.

That seems to mirror the situation in the U.S., where electronics retail chains have long had a testy relationship with Apple. They've complained that the Cupertin [Calif.] company not only shipped them far fewer nanos than they requested but also refused to give detailed delivery forecasts, making it difficult to plan inventory and marketing. Apple declined to comment on the nano shortages or on details of its relationships with retailers.

In Europe, supplies started dwindling well before Christmas. By Dec. 15, bloggers on www.macbidouille.com, a French site for Macintosh aficionados, were reporting that Apple France had warned merchants that it had run out of iPods and could not guarantee further deliveries for the holiday season. Outlets of Germany's two biggest electronics retailers, MediaMarkt and Saturn, report that stocks ran out in early December and haven't yet been replenished.

BRAND DOMINANCE.

Britain generally seems better supplied: Electronics retailer Dixon's says it has a range of iPods available, though some models are sold out. Apple's online store in Britain says it can ship a 4-GB nano within five days, compared to a two-week wait on the French site. In the U.S., the 4-GB ships within 2 days. The 4-GB costs a lot more in Europe, too: $335 at current exchange rates, compared with only $249 in the States.

Even if Apple lost out on some pre-Christmas sales, it can take consolation in the fact that most disappointed customers didn't settle for competing brands. Mathieu Charpentier, who heads the digital-music department at the Champs Elysees FNAC, says he gave up trying to persuade shoppers to buy music players made by other manufacturers. "We can't sell a customer who wants an iPod another player," he says. Maybe if European shoppers are very, very good, they'll get their nanos by Easter.

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By Carol Matlack and Matt Vella