Are Apple’s sales turning rotten? Apple has reduced production orders for the iPhone and iPods twice in the last two months, and research analysts think the move is a sign of poor sales. Sure, you’d expect sales to slow once all the early adopters have jumped aboard, but these decreases are more than expected. So, one of three things is probably happening:

• An iPhizzle. The iPhone has peaked, everyone who wanted one has coughed up the money, and no one else is jumping on board. Maybe frustration with the iPhone’s limitations (*cough* AT&T *cough*) is finally starting to make a dent in sales. Besides, the iPhone isn’t the hottest new gadget anymore — love it or hate it, that title goes to the MacBook Air right now, and Macs are practically flying off the shelves. Sales are slumping worst for the iPod Touch, which never really caught on. The Touch is a crippled iPhone that doesn’t make phone calls and, even worse, is totally dependent on WiFi for Internet connectivity. It even costs almost as much as the iPhone, which is a heck of a lot more than other iPods with more storage. In fact, the only advantage the Touch holds over the iPhone is that it has no pesky contract.
• An iPhortification. Apple just doubled the storage capacities of both the iPhone and the iPod Touch, putting the top models at 16 GB and 32 GB respectively. Maybe the reduced production just reflects a drop in the old smaller-capacity units so the new models can come roaring out. Or maybe Apple figures that they’d rather hit up potential buyers for more money, so they’re creating a temporary scarcity until the higher-priced new models flood the market. On the other hand, you’d think increased production of the new models would be included somewhere in these figures that the research analysts are getting so excited over.
• An iPhaster. Before AT&T announced recently that they were expanding their 3G network, the idea that Apple is getting ready to launch a 3G iPhone would have been wishful thinking. Now it’s earned an upgrade to hopeful thinking. 3G isn’t going to help the poor Touch, though.

Personally, I don’t know what to think about the iPhone. I’m leaning towards a mixture of #1 and #2. I don’t think the iPhone is in any danger of crashing and burning, but entering the cell phone market with one device is not exactly easy, and the early adopter effect may have caused a bigger dropoff than Apple expected. Any way you spin it, though, it looks like the Touch is toast.

Wait, suddenly it all makes sense! Clearly, Apple is conserving resources so they can buy Yahoo!.