'Apple slashing iPhone 5 component orders': Is it time for shareholders to worry?

'Apple slashing iPhone 5 component orders': Is it time for shareholders to worry?

Summary: Has the shine worn off the iPhone, or is the report that Apple has slashed iPhone 5 component orders by half simply a work of fiction?

TOPICS: Apple, iPhone

Unconfirmed reports suggests that Apple has cut in half its orders for iPhone 5 screens for the January to March quarter, and this caused shares in the company to fall below the $500 mark because of fears that demand for the handset is weak.

According to The Wall Street Journal orders for iPhone 5 screens for the current quarter have, according to sources, "dropped to roughly half of what the company had previously planned to order."

Should shareholders start to worry? I don't think so.

In a little over a week Apple will release its quarterly financial results for the lucrative December holiday quarter, where analysts expect the company to announce record sales of between 43 to 63 million iPhones. The last quarter only covered nine days of the iPhone 5 launch, so the bulk of the increased sales from the launch of this new handset will fall into the December quarter. Apple's best quarter to date was the quarter following the release of the iPhone 4S, where the company sold over 37 million handsets.

If Apple has sold around 50 million iPhones over the last quarter, then that's an incredible level of market penetration, taking total sales of the handset top over 300 million.

So far, there doesn't seem to be much to panic about.

But suggestions that Apple is ordering half the screens that it had initially planned to could be seen as signs that the shine has worn off Apple's flagship handset. Problem is, the rumor doesn't make sense, especially the bit about cutting orders by "roughly half."

What bothers me about the report is the total lack of numbers, just that the orders have been cut. But without context it is meaningless. Did Apple expect to sell another 50 million iPhones, or 40 million, or 30 million? Without this original figure, the report is virtually meaningless.

I think that there are a number of possible explanations for the cut:

  • Apple is cutting screen orders by about half for this quarter compared to the December quarter. This would make sense, as 25 million iPhone sold would be quite a solid figure;
  • Apple seriously misjudged how many screens it would need and the company is having to make drastic last-minute adjustment to orders. This seems the least likely to me. Apple has a lot of experience when it comes to controlling the supply chain, and having to cut orders by this much would indicate that someone dropped the ball;
  • The rumor is false, and there simply is no cut.

As is always the case, we'll have to wait and see how this plays out, but if I were an Apple shareholder, this unattributed report wouldn't be enough to make me panic. My money would still be on Apple knowing its business better than any unnamed supply chain source.

Topics: Apple, iPhone

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  • So far 2 articles

    on an unconfirmed rumor. Slow news day?
    • Funny when an "unnamed supply chain source"

      shows a leaked picture of the "soon to be released [product]" here, all the bloggers are ready to jump on board, the accuracy of the"supply chain source" not an issue, as the picture is good enough for them to use to point out the exiting features comming in the next [product].

      Lest it be disappointing news for Apple, and then it becomes some "unnamed [unreliable] supply chain source".
      William Farrel
      • Most of media bloggers reported this "slashing orders" nonsense in face ...

        ... value.

        So media is consistent with their lust for whatever random hearsay -- no matter if it makes even slightest sense or not (like this time).
      • Will, I read a rather good critique for this incident on BGR

        That article points out that both the iPod Touch and the iPhone 5 use the same display yet both of those two sources failed to mention that fact.

        What was most interesting to find out is that the WSJ report altered it's original story in the following manner (according to BGR)

        Perhaps the weirdness of the math is why the current version of the WSJ article no longer cites the 65 million unit figure. Sometime between Sunday at 8:00 p.m. EST and Monday at 7:00 a.m., the Journal decided to drop the number from its article. But if the 65 million number is not right, is the estimate for halving March orders correct, either?

        Personally, I found it a rather strange article to publish and I suspected that it's sole purpose was to artificially manipulate Apple stock before the Q4 results are published.
      • What do you call it...

        When a source is unammed? It's just amazing that anonymous and unconfirmed reports and speculation about their meaning can have this huge an impact on the market. Even if the screen order report is accurate, the reason given for the cut was clearly speculation at best. Honestly, do you believe Apple reported to their manufacturing partners that demand was weak? I seriously doubt it. I believe this is another attempt at manipulating the market.
        • The market doesn't churn on reality...

          ...but on speculation, rumor, and perception. That can be good at times for any specific corporation, or bad based on speculative trends. But, rest assured, it is rarely based on 'best product'. Believe me. I've been long on some big corporations based on 'best burger' evaluations for far too long.
          • The absolute next lesson..

            Dividends... You'll learn this term as well, as many new investors do. Think of it as getting paid back to invest. No one in their right mind invests long term, (nor could they cover investments long term) without a percentage of return. Doing so is stagnating at best, or at worst placing all eggs into one basket. Money churns money, not hope and belief. Sitting on one stock long-term with high-hopes and a belief is simply not the way of today.
    • Fox News

      Fox News just did a piece on this with 3 financial "experts". Mostly speculation, the most interesting one a cheaper iPhone which will reduce sales of the 5. Knowing Apple they figure the higher volume of less expensive phones will increase, not decrease profits, if the speculation is accurate.
      • Phil Schiller has said they are not doing the cheaper phone

        And that rings true for me. They already have two cheaper models - the 4 and 4s.
  • Different name

    Still the same sad scared little man behind "seanconnery007".
  • Sell or buy

    Is this reporter telling us Apple shares would go back to their recent height. Hence, it is good time to buy their shares and sit on it? I hope he is not going to short me. I think Apple has reached the summit. It was too lucky to beat walk man and be great at first phase of smartphones. This products have majored and have too many competitions.

    Therefore, the only reason why one would expect Apple shares to go back to their recent summit is to come up with another killer app with smart device. And the chance of this happening again are really very challenging.

    So what is the way-out, if you happened to heavily invested in Apple shares? Just get ready for interesting ride! When you are making decisions, never become depend on reports like this guy, who appear to be emotionally connected to Apple. Think about how easily and seamlessly you can hedge your investment, before it is too late. That is all you need to think about.

    For Apple products consumers, I think the cut down of Apple's orders would not have any impact on your devices. The less they sell, the more interesting your current devices will be. After all, you chose to pay a premier for a devices that does not talk to non-apple devices. Apple has made a fortune out of few and even if you run way from Apple, Apple would not shed tears for you. After all,
    you would reduce the burden on them in supporting your devices.
    • Buy low! Sell high!

      "Interesting" article and attendant discussion. I purchased Apple at about 230 in 2010 and was fortunate enough to sell just after it pulled back a bit from 700. (I have never owned MSFT - they have been flat for 5 years while AAPL has seen 500% growth) Will I buy again at this low 500s level? Not sure yet. But what I am sure of is that no part of my financial analysis will depend on an article from a tech author or random comments - however well-reasoned they may seem.

      Just here for the entertainment. Carry on.
      Carl Johnston
  • Typical Quarter for Apple after xmas

    Could be any number of reasons.

    1) Ok, the sales may have really dropped.
    2) Could be explained by the sales drop that is typical and expected in the quarter after christmass.
    3) Apple has really pushed on getting the iPhone 5 out to all of the countries much faster. Could be that the initial onslaught of orders has been met.
    4) iPhone 5s?
    5) More suppliers then the press knows about? Could there be yet another provider of parts that was not added into the mix?
    6) Bogus Rumor.
  • 'Apple slashing iPhone 5 component orders': Is it time for shareholders to

    It depends on when they bought their shares whether they should worry or not. If they bought it below the $500 then no worries, if they bought it above it then they should be worried. We'll see a couple of analysts chime in to try to artificially inflate the stock so they can sell and break even.
    • I doubt it.

      I seriously doubt we'll "see a couple of analysts chime in to try to artificially inflate the stock." This stock is owned by huge institutions and hedgies. The stock is not easily swayed by anyone trying to artificially manipulate this stock. If fundamentals change, the stock moves.
      Carl Johnston
  • Where have you been?

    "Is it time for shareholders to worry"

    Shareholders have already been worried. That's why Apple's stock has been dropping for 4 months straight.
  • Time to face some facts...

    Time to take your heads out of the sand, fanboys. You know deep in your hearts that Apple isn't on its way up, anymore. The death Steve Jobs and the lackluster iPhone5 are simply milestones in a slow descent. There's just too much stiff competition out of there for an overpriced phone to hold a major market-share. The iPhone had a great run, but that was back when there weren't any real alternatives.

    Look, there isn't a physcially better-built phone on the the market, but in an era when we replace our phones every 1-2 years, build-quality has become less of an issue; features is what we crave, and Apple has been too slow to offer new ones.

    Expensive, beautiful, and a little behind the curve won't cut it ...not in the mainstream phone market; Samsung offers tons of features at an affordable price, and that's where the lion's share of buyers will go. Apple will continue to appeal to niche, higher income users, but they will see a steady decline in market-share in the coming years.

    Another problem for Apple is the fact that carriers may heavily subsidizing the iPhone if sales begin to slow. This has always been an issue with carriers and Apple. If carriers lower their subsidies, iPhones sales to the middle-markets will plummet.
    • what "lackluster iPhone5" sales?

      The iPhone 5 is a stellar device especially compared to the gooney BAP (Big A** Phone) like the GS3 and GN2. Likewise, if web analytics are valuable at all, they point to record sales of the iPhone 5 (as in far in excess to any family of Samsung phones).
      • how do either of you...

        ... know what apple's sales volumes are for iphone5... they havent been released yet. all we know is there are rumors that apple cut its production.
      • .

        you are entitled to what you think is a stellar device... maybe if you had bigger hands you wouldn't be so shy of the larger screen devices. I like them. the gs3 sold more units worldwide than the iphone last quarter... so a lot more people like them too...

        compare all you want, the numbers don't lie.