Stern Agee analyst Shaw Wu trimmed his outlook for sales of the Apple Inc. (NASDAQ:AAPL)’ iPad, because fears that the iPad Mini would cannibalize sales are coming true.

iPad Mini

Apple Inc. (NASDAQ:AAPL)’s iPad sales for the December quarter were reduced this morning by Wu, citing supply constraints on the Mini, and lower build rates for the new fourth generation iPad, “likely due to some cannibalization” from the Mini.

“iPad mini demand remains strong,” analyst Shaw Wu wrote in a research note, “but shipments appear limited by supply constraints. On the other hand, build plans for iPad appear to have been reduced, likely due to some cannibalization by iPad mini.”

It has been predicted for some time that the iPad Mini would cannibalize a portion of sales of the new iPad. Wu’s revisions to his predictions see unit sales for the quarter go down to 23.5 million units – down from the previous prediction of 25 million. Wu notes that this is more in line with the range of Wall Street consensus of sales in the 23-24 million region.

For Apple Inc. (NASDAQ:AAPL)’s iPhone sales, Wu made a minor revision, changing his forecast from 47.3 million up to 47.5 million. The consensus for unit sales of the iPhone is in the region of 45-46 million units. Wu put this slight increase down to “improving yields and availability of iPhone 5 and thus improving profitability.”

Reflecting this, he has inched up his gross margin forecast to 38.7 percent from 38.5 percent, in order to reflect these better yields and the shift towards iPhone.

Wu also noted that Apple Inc. (NASDAQ:AAPL) shares will likely remain volatile through to the end of 2012, due to a number of non-fundamental factors; for example profit taking ahead of a potential tax hike in 2013.

“However, we believe as we enter 2013, investor sentiment will likely shift back to fundamentals,” said Wu.

Talking about the iPhone 5 and the new generation of iPads, Wu said: “We are at the beginning of two big product cycles,”

“That will likely last 3-5 quarters and see margins poised to improve with greater scale and improving yields. In addition, we will likely see margin accretive mid-cycle refreshes in the 2013 second half.”

Wu also believes Mac sales for the December quarter will be around 5 million units – a dash below the consensus of sales in the range of 5.2 to 5.3 million units sold.

Overall revenue for the quarter is predicted by Wu to be $54.4 billion, down from $54.6. His forecast for earnings per share stays at $13.70 per share. For the September fiscal year Wu predicts revenue of $192.6 billion, down from $193.4 billion. Wall Street’s consensus is for $192.4 billion. Wu’s earnings per share forecast for the fiscal year, again, stays at $49.50.

Apple Inc. (NASDAQ:AAPL) shares were up this morning by $3.77, to $545.16 – equivalent to 0.7 percent.