So take a moment and imagine you are in the product manager's shoes at Google and you're tasked with forecasting how many Nexus 4's will be needed. If you guess 'high' you end up with HP's Touchpad fiasco, or Motorola's Xoom, too much product. Since you've probably borrowed the money to buy the parts to build the stuff and you have to pay it in 90 days, you need to get stuff, sell it, and then get the money to pay off the money you borrowed.
Building a million phones like this probably costs in the neighborhood of $200M - $250M. That is a pretty sizable chunk of cash to be hanging out there 'in the float' as it were. Sloshing around that much capital is like driving a fully loaded big rig truck on a wet highway, you don't want to enter any turn with too much speed, the 'bad' outcome is really bad.
So of the two options, "leaving money on the table" because someone who wanted to buy your gear couldn't, and "missing your wall street guidance" because you're carrying inventory for longer than you wanted, the former is the much better choice. At the limit its horrible but if you're going to err, and your error bars are large, you want to err on the negative side not the positive side. On the negative side you just don't make as much money as you might have wanted to, on the positive side you don't make the margins you need to make on the product.
I mean, even the iPhone 4 has 32GB!
I ordered a Nexus 4 8GB.
I live in a 3rd-world country where 3G connections are either expensive or unreliable. Also, we don't have access to all the excellent streaming sites like Spotify or Hulu.
So yes, I need all that space for my music collection :)
I realize I'm also somewhat unusual in this respect.
You'd be surprised. Many games, these days, can take up to 1GB for program and data files. My iPhone 4 with 16GB was so maxed out, it'd often refuse to upgrade more than one app at a time because of insufficient space.
The size of the retina apps is just insane. I compiled my first app (a small music app) around the time the 3GS came out and it was only 1MB. Now, even a simple game clocks in at 30MB.
The fact of the matter is that if the Nexus 4 sold out in less than an hour, then they must not have even had stock to sell to the people that signed up for "notification".
Another thing to consider (and this was true of the Nexus 4 and later updated in the article) the article said they 'sold out' but Google didn't. The authors interpreted not being able to get to a sales page as being 'sold out' but later discovered that there was some order rate management going on where the 'overflow' went to the 'coming soon' page and repeated attempts would eventually get you a page you could order from.
Logistics management is a tricky thing, if you are good at it you can pretty much name your own salary because its trivially easy to 'show' how much you are worth with basic accounting techniques. If the company has the volume you can literally say "If you hire me I'll save you $700,000 a year, I'll actually save you $1,000,000 a year but I'm going to keep $300,000 of it as salary."