San Francisco: Apple Inc. dropped below $400 for the first time since December 2011 after one of its audio-chip suppliers, Cirrus Logic Inc., reported an inventory glut that suggests iPhone sales may fall short of analysts’ expectations.
Apple’s shares declined 5.3% to $403.62 at 1:58 pm in New York, and earlier touched $398.11, the lowest intraday price since 22 December 2011. Cirrus, which makes sound components for the iPhone and iPad, is an indicator of demand for Apple’s top-selling products, according to Peter Misek, an analyst at Jefferies & Co.
We blame Apple for losing its mobility mojo, Vernon Essi, Jr., an analyst at Needham & Co., wrote in a research report on Wednesday. This was simply an inventory overbuild for the iPhone 5 relative to Apple’s forecast.
Apple’s stock has fallen more than 40% from a record in September amid concerns about slowing profit and sales, narrowing margins and intensifying mobile competition. While the iPhone is the top-selling handset, Samsung Electronics Co. has become the leading overall provider of smartphones by introducing a variety of devices with different designs and prices.
Apple is reducing expectations, Misek said in an interview.
After Apple on 23 January reported its slowest profit growth since 2003, more than 20 analysts lowered their price targets, according to data compiled by Bloomberg. Wednesday’s stock slump is the biggest since 24 January, when Apple tumbled 12% following the earnings report.
For the fiscal second quarter, which ended in March, they’re predicting an 18% decline in net income to $9.5 billion—the first decrease since 2003.
The results may be even worse that those expectations, according to Toni Sacconaghi, an analyst at Sanford Bernstein & Co. He lowered his iPhone estimate for the quarter, which ended in March, to 34.2 million units, from 35.2 million. Sacconaghi also reduced his iPad projection by 1 million to 18.5 million units.
Apple is set to report earnings on 23 April, when the company is also expected to provide an outlook for the current period.
Cirrus on Tuesday reported preliminary fiscal first-quarter net revenue of as much as $170 million, less than analysts’ average $197.3 million estimate, according to data compiled by Bloomberg. Because Cirrus relies on Apple for most of its revenue, this suggests that the iPhone maker told the chipmaker to anticipate fewer orders, Misek said.
Cirrus will record a net inventory reserve of $23.3 million for the fiscal fourth quarter, which ended in March, the Austin, Texas-based company said in a statement on Tuesday. Most of that—$20.7 million—is from a high-volume product from one customer, Cirrus said, without naming the client.
Apple accounts for more than 90% of Cirrus’s revenue, according to supply chain estimates compiled by Bloomberg.
Steve Dowling, a spokesman for Apple, and Jo-Dee Benson, a spokeswoman for Cirrus, didn’t immediately respond to a requests for comment.
After commanding a premium for most of the past decade, Apple is trading at a discount of 40% to the Standard & Poor’s 500 Index on a price-earnings basis, according to data compiled by Bloomberg.
Apple may raise its current quarterly dividend payout of $2.65 by 13% to about $3 a share, for an indicated yield of 2.6%, according to a Bloomberg projection. That would give it one of the highest yields among peers, after Intel Corp. and Microsoft Corp. Bloomberg analysts take into account the payouts of other large technology companies, Apple’s projected earnings for next year and the amount of money on its balance sheet.
Chief executive officer Tim Cook, who reinstated Apple’s dividend and announced a $10 billion buyback in March 2012, faces mounting pressure to take bolder steps to pay out more of Apple’s $137.1 billion in cash and investments. Investors including David Einhorn’s Greenlight Capital Inc. are pushing for more money as growth slows and competition from rivals such as Samsung intensifies.
Apple has said it’s in active discussions over how to manage the cash, and considering buybacks or a higher dividend among other options. Bloomberg
Lisa Rapaport in New York contributed to this story.