Do Foxconn's revenue slowdown portend trouble ahead for Apple?

Do Foxconn's revenue slowdown portend trouble ahead for Apple?

Summary: Hon Hai, the company also known as Foxconn, has been seeing a steep slowdown in revenue and one analyst argues that Apple sales may not live up to expectations.

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Hon Hai, the company also known as Foxconn, has been seeing a steep slowdown in revenue and one analyst argues that Apple sales may not live up to expectations.

JMP Securities analyst Alex Gauna downgraded Apple from market outperform to market perform on the argument that Foxconn and Apple sales track each other closely.

Gauna writes:

We are reducing estimates and downgrading Apple from Market Outperform to Market Perform to reflect risk associated with the notable deceleration in its primary manufacturing partner Hon Hai (Foxconn) that was emerging even prior to the amplified uncertainty created by developments in Japan. Hon Hai sales growth decelerated from 84% y/y in the month of December to 37% in January and then again to 26% in February, or levels that are tracking well below the >70% y/y sales growth consensus is looking for in the March quarter and >50% in June.

Gauna says that he doesn't know why Foxconn sales are coming up short, but it could mean Apple's iPhone sales are merely in line with expectations and the product transition to the iPad 2. I'd be heavily that the iPad 2 transition is a big reason for the Foxconn slowdown.

In addition, Apple is also likely to see a Japan hit. Apple gets 6 percent of its sales from Japan as well as components such as flash memory and hard drives.

All Apple content.

Topics: Enterprise Software, Apple

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27 comments
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  • That analyst is ignorant; Apple's share in Foxconn production is only about

    1/3, so there is absolutely no way to derive from Foxconn's sales what happened to production for Apple.<br><br>Besides, not only Foxconn assembles goods for Apple.
    DDERSSS
    • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

      @denisrs It's actually less than that. Its 21%.
      kent42
      • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

        @kent42

        I have a hard time thinking that it is even as high as 21%. Foxconn is a HUGE company (somewhere around 1 million employees now) with it's fingers in an awful lot of pies.
        SlithyTove
    • Yet Apple's stock dropped close to 5% on the news

      @denisrs
      Which would indicate that apple is likely the reason. Other companies appear to have dropped in reference to the market itself, not the Foxconn news.
      Tim Cook
      • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

        @Mister Spock So news comes out that Foxconn sales have dropped and an analyst speculates it's due to lower than expected sales by Apple and you are for some reason surprised their stock dropped 5%? What did you think would happen, it was going to skyrocket? I am no analyst but based on what he said I find next to no reason to come to the same conclusion he did and have to wonder if there is a vested interest somewhere to put the blame on Apple without any proof or facts to back it up.
        non-biased
    • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

      @denisrs nice post
      www.awwgame.com
      lariosshow
  • Well it &quot;could&quot; mean any number of things.

    Foxcomm does not deal with Apple only as I understand it. Foxcomm might be loosing some of Apple's business? Foxcomm might be loosing some business for the others it deals with? Foxcomm might be hurt from the Japanese problems that have occurred of late... I.E. supply/parts issues. The list goes on and on and on as to what it could be. It could mean that Apple sales are off as well but the point here is we just don't know and it's a bit early to tell anything solid at this point.

    Pagan jim
    James Quinn
  • Lucy...

    Among Foxconn's clients we find:<ul><li>Amazon</li><li>Microsoft</li><li>Samsung</li><li>Nokia</li></ul>
    Rumors abound that Zune manufacturing might cease. How's the Galaxy Tab doing? How 'bout those Nokia phones?

    Has Apple signed a second manufacturer of iPads or iPhones?

    There are too many unknowns in this equation. The analyst who downgraded Apple has some 'splainin' to do.
    Robert Hahn
    • I heard that Foxconn doesn't make the Zune

      @Robert Hahn
      http://www.betanews.com/article/Toshiba-Manufacturing-Microsoft-Zune/1156523848
      Will Farrell
    • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

      @Robert Hahn
      Zune is made by Toshiba, not FoxConn.
      Ram U
    • Not at all. He owns some stock and wants to

      sell short. That's all.
      fr_gough
  • By the way

    Once upon a time there were several creatures called Tabletons that ate special flowers called NAND flashers. There was one very big Tableton and several smaller Tableton, but there were plenty of NAND flashers to go around so no one went hungry.

    Then one day a monster named Godzilla flooded all the NAND plants in the Land of the Rising Sun. And there were no longer enough to go around.

    Who do you think got to eat the remaining NAND flashers once the Tabletons started fighting over them? The big Tableton, or all the small ones?
    Robert Hahn
  • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

    Hon Hai subsidiary Foxconn also manufactures for (among others) Acer, Asus, HP, Dell, Nokia, Sony, and Samsung. All of those companies are experiencing big slowdowns in sales growth, in part because of Apple's effects on their markets! The JMP analyst?s analysis is deficient.
    deasys
    • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

      @deasys

      The picture is more complicated than you paint. Acer was pinned to the wall on shipments by the iPad, but Dell just had it's best quarter in something like 10 years. The sales pressure on systems from HP, Dell, et all had much more to do with the recession than Apple though Apple is obviously a concern.

      Futhermore, if this was just a case of Apple supplanting the others that should have zero effect on Foxconn since it just does business for everyone.
      SlithyTove
  • Good time to buy Apple

    The analyst is smoking crack or some other illegal drug. Buy Apple now.
    Keith Porter
  • (wages) Or maybe...

    Their revenue is going down because they just tripled the wages of their employees...

    -M

    PS: Duh? (No offense)
    betelgeuse68
    • Uh-oh

      @betelgeuse68 Mister Dictionary Person doesn't think you know what the word "revenue" means.
      Robert Hahn
      • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

        @Robert Hahn

        Robert, if you start charging your customer MORE to cover your base costs they could elect to go ELSEWHERE thus IMPACTING YOUR REVENUE.

        Foxconn isn't the only game in China...

        -M
        betelgeuse68
  • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

    Apple should set up manufacturing units in US and make some jobs back home.
    VoicesInTheHead
    • RE: Do Foxconn's revenue slowdown portend trouble ahead for Apple?

      @VoicesInTheHead And disrupt their profit margins???

      Designed by Apple in California
      Made by sweatshop labor in China
      Upsold by a 300% margin to Americans
      Captiosus