UPDATE 1-Analyst says Apple may cut iPhone production

(Adds Apple declining comment, background)

SAN FRANCISCO, Nov 3 (Reuters) - Apple Inc (AAPL.O) may cut iPhone production by more than 40 percent in the fourth quarter of 2008 compared to the third quarter, as consumer demand slows, according to FBR Capital Markets analyst Craig Berger.

He said in a report on Monday that his recent checks suggested iPhone production would fall by more than the previously anticipated 10 percent sequential decline, calling his findings a "good proxy for broader consumer demand."

An Apple spokesman declined comment.

Apple reported a stronger-than-expected 26 percent rise in quarterly profit last month, spurred by sales of the iPhone. Apple sold 6.89 million iPhones in the quarter, outpacing BlackBerry maker Research in Motion Ltd (RIM.TO).

NPD Group analyst Ross Rubin said that if Berger was correct, a 40 percent drop in iPhone production would be dramatic. He noted that in the midst of a weak economy, consumers may be reluctant to buy the iPhone because they don't want to pay for data service charges when using it.

Analyst Van Baker of Gartner Research said that a 40 percent cut may not be as bad as it sounds if Apple had already ramped up delivery of the iPhone to countries outside the United States.

Such a cut "could end up painting an ugly picture, but not as ugly as it seems on face value," Baker said.

Apple shares edged closed down about 1 percent at $106.96, whereas the Nasdaq composite index rose about 0.3 percent. (Reporting by David Lawsky; Editing by Lisa Von Ahn, Bernard Orr)