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Apple iPhone 4 sets record sale pace despite gaffe

LOS ANGELES/NEW YORK (Reuters) – Sales of Apple Inc's latest iPhone blew away expectations despite an embarrassing ordering malfunction that turned away many would-be buyers, sending its shares nearly 3 percent higher on Wednesday.

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Apple said it sold more than 600,000 of its iPhone 4, a record for just a single day of preorders. That put the device on track to surpass sales of its previous iPhone as well as its iPad tablet computer, and sounded a strong challenge to rivals like Nokia, which warned of weaker-than-expected sales at its phones unit.
But Apple apologized on Wednesday for having to halt sales temporarily after the surprising volume of online interest overloaded order and approval systems and supplies ran out. Exclusive U.S. carrier partner AT&T Inc said sales will resume as soon as inventory becomes available. Analysts have raised concerns that Apple supply shortages the company, for instance, had to delay the international launch of the iPad after it ran into component deficits would drive impatient buyers to rivals.

The company, and AT&T, have also incurred several technical and public relations embarrassments this year, including a security breach on the iPad that exposed the email addresses of key public figures, and a felony investigation into a lost or stolen iPhone prototype. The Apple faithful, however, appeared unconcerned. Analysts said the pace of sales put the new iPhone on track to surpass sales of the previous model, about 1 million units of which moved in its first three days. Apple unveiled the slimmer, $199 iPhone 4 last week, kicking off its fastest-ever global product roll-out to try to stay a step ahead of rivals like Google Inc in a red-hot smartphone market. (For a Reuters Insider story see The device boasts a higher-quality screen and longer battery life, video chat via Wi-Fi, and a gyroscope sensor for improved gaming. "It's a two-year replacement cycle. There are going to be a lot of people upgrading from the 3G, as well as incremental additions from new customers," Gleacher & Co analyst Brian Marshall said.


Shares in Apple, still hovering near a lifetime high, were up 2.6 percent to $266.33 in afternoon trade. AT&T stock slipped 0.2 percent to $25.47. AT&T said orders of the iPhone 4 on Tuesday the first day of online preorders were 10 times higher than for the iPhone 3GS last year. It said it chalked up more than 13 million visits to its website on Tuesday, including customers checking to see if they were eligible to upgrade to a new phone. It said that the number of eligibility checks was three times higher than its previous record for a single day. Hudson Square Research analyst Todd Rethemeier said the sales numbers were good news for AT&T, especially because of widespread expectations that bigger rival Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc, will soon be able to sell iPhones as well. "It means they're locking up customers into new two year contracts. Nobody knows when Verizon's going to the iPhone, but there's a lot of speculation this will happen." he said. "Anything At&T can do to lock up customers now is a good thing."

The iPhone 4 is scheduled to hit stores on June 24. Apple's website said on Wednesday morning that pre-ordered phones would be shipped by July 2. It had previously promised shipments by June 24. Apple apologized for the ordering snafu, asking frustrated would-be buyers to "try again." But AT&T said the availability of inventory would determine whether it could resume taking orders. "We apologize to everyone who encountered difficulties, and hope that they will try again ... once the iPhone 4 is in stock," Apple said in a statement.

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