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Apple making cash payments to lock-in supplies, block rivals

updated 12:20 pm EDT, Thu April 7, 2011

Company aims for 'three cover guarantee'

Apple is becoming aggressive when it comes to securing components for its products, says Ticonderoga Securities' Brian White. The analyst claims, for instance, that following the earthquake and tsunami in Japan, the company immediately sent executives to suppliers to guarantee a steady flow of parts. It has in fact been offering suppliers upfront cash payments, according to White.

Contacts in Taiwan claim that the company is trying to secure component production using a "three cover guarantee," meaning capacity, stock and price. The policy could be harming Apple's rivals, as supplies were already in contention prior to the earthquake and without such strict demands. RIM's PlayBook is alleged to have been delayed by a month because of Apple touchscreen demands.

During its Q1 results call in January, Apple revealed that it had forged a $3.9 billion component deal. It did not say who the deal was signed with, or even what kind of parts it had secured. It is widely believed, however, that the arrangement is for displays, which have become absolutely essential to the company because of the iPhone and iPad.






by MacNN Staff

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Comments

  1. eldarkus

    Joined: Dec 1969

    +12

    nice

    Nice to have that much cash on hand to secure such things.. glad the board is keeping that much $$ on hand :)

  1. Flying Meat

    Joined: Dec 1969

    +11

    Absurd title

    The intention, I'm sure, is to lock in supplies. There is a possible/probable side effect of rivals not being able to do the same, since Apple leapt first. I doubt the title's implication that they did it with an intention to block rivals.

    Explicit evidence to the contrary would be required to support the unnecessarily inflammatory implication.

  1. JeffHarris

    Joined: Dec 1969

    +5

    Competitors?

    Apple has been doing this for years.
    Apple is not a predatory entity like Microsoft, so the author should another tack instead of hit-whhorrring.

    As far as the iPod and iOS devices go, Apple really has no serious competitors.

  1. Feathers

    Joined: Dec 1969

    +4

    Absurd or Actionable?

    I'm with Flying Meat on the absurdity of the title but I would go further. Whilst paying money to secure supply is entirely legal, paying money to "block out" competitors would be anti-competitive and illegal under international trade agreements including GATT. So, if MacNN are accusing Apple of an illegal act, it is not just absurd, it is possibly actionable. The fact that one outcome comes as a consequential by-product of the other does not mean that it was in any way intended. I'd love to see MacNN try to prove or defend any of this in court. Too bad it wasn't Lamo who said it!

  1. TheGreatButcher

    Joined: Dec 1969

    0

    Cash is king.

    Cash is king. That hoard that media outlets sometimes criticizes gives Apple enormous flexibility.

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