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Weak Apple iPhone demand precipitates share price drop

by Mark Tyson on 15 January 2013, 09:45

Tags: Apple (NASDAQ:AAPL), Samsung (005935.KS), PC

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Apple shares were almost at a 12 month low as the stock market closed in New York last night. The share price dropped about 3.5 per cent yesterday settling at $501.75 by close of trading, the intraday low was $498.51. In September the California based tech giant’s shares were valued at over $700. Reports coming from Japan about Apple cutting orders with iPhone 5 screen suppliers triggered the latest fall. Investors are already nervous about the prospect of Apple’s results, due next week. “Analysts’ consensus forecast is that Apple will post a year-over-year decline in earnings for the first time in a decade,” reported the FT.

Reports from Japan’s Nikkei said that Apple has halved orders for iPhone 5 screens, from an initial plan of 65 million to about 33 million, which will be used to manufacture phones during Q1 2013. Apple suppliers such as Sharp, Cirrus Logic and ACC Technologies all suffered share price drops following yesterday’s revelation (down 7 per cent, 4.2 per cent and 9 per cent respectively). The component order cut is seen as a warning flag that iPhone 5 sales are not as good as they could be.

Rival Samsung

Apple’s main rival in the smartphone arena, Samsung, has had a run of record results and it looks like the South Korean firm now has the greatest market momentum. Only yesterday we saw Samsung’s news that it had sold 100 million flagship Galaxy S smartphones. Last week Samsung pre-announced Q4 2012 profits of £5.2 billion.

The next iPhone

It is possible that the iPhone 5 screen orders have been reduced early as Apple prepares to launch its successor earlier than originally planned. This would allow Apple “to better compete with Samsung's frequent release of new devices” suggests the FT. If this is the case, it puts a positive spin on the screen order reduction news, but is obviously not what stock market investors think is happening right now.

HEXUS Forums :: 34 Comments

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Apple will shoot themselves in the foot if they release a successor early. What with increasing size against their previous plans and bringing out an iPad mini they appear to be losing their core customers. I know of a fair amount of people who are fed up of their iPhones and the majority jumped ship to Galaxy S 3's!
Thats a pretty steep drop, also quite surprising. I know a lot of people with 4 and 4s who dont see the point in upgrading but more and more people have seem to started buying the 5. Reality is that it doesnt really offer users anything new i guess whereas android, with its greater choice of handset, is starting to look more appealing. Windows 8 is probably stealing a bit of the market share aswell.
If Apple adopt the more frequent renewal cycle for hardware then it is only natural that they will sell fewer of each iteration of their device. But the cut in orders is a clear sign of reduced sales as it is based on a projection of sales. If the sales were as hoped, they would not stop production. It's akin to PC tech companies not releasing new generations while inventories of old tech are depleted (because they still sell).
That they feel the need to release again so soon means they are ‘feeling’ they are at risk of losing the momentum in new device prestige.
Still goes against their principles though doesn't it. It's things like this that are putting people off Apple. The change in dock connector was a big deal breaker for a lot of people I know, and as everybody else has settled near enough on micro-usb that has become appealing
If they perhaps stopped the whole “walled garden” approach with peripherals and apps being forced to go through expensive approval processes (less so the apps but still…) and competed on a level playing field I think they might find they have more business.

When the rest of the world is going open source and they are running screaming in the other direction though I think they can expect to push themselves further into a rather unwelcome niche.

At least with the laptops they offer VERY good build quality and you can slap windows on there if/when the gravy train stops.