Share This Page

Demand weak for iPhone5, report says

| Tuesday, Jan. 15, 2013, 12:01 a.m.

Apple stock declined to the lowest price in 11 months after the Nikkei newswire reported that production of the iPhone was cut on weak demand.

Apple ordered about half the 65 million iPhone 5 displays it originally targeted for this quarter, Nikkei said, citing an unnamed executive at a component maker. Manufacturing curbs have been widely known since December, according to Steven Milunovich and Mark Moskowitz, analysts at UBS AG and JPMorgan Chase, respectively.

Last month, Apple cut production by about 30 percent, which may be the result of inventory rebalancing or lower consumer demand, Milunovich wrote in a research report on Monday. Order cuts may also be due to suppliers becoming more adept at building the latest iPhone, reducing the need for Apple to order excess parts, Moskowitz wrote in a note to clients on Monday.

“The bigger message related to any potential order cuts could be that iPhone 5 manufacturing yields and thereby gross margin are on the rebound,” Moskowitz said. He said that his projection for 25 million iPhone 5 units to be sold in the quarters ending in December and in March will be exceeded under the scenario Nikkei reported.

The stock fell 3.6 percent to $501.75 in New York, the lowest closing price since Feb. 15. Apple extended its decline to 28 percent since hitting a record high in September.

Bethan Lloyd, a spokeswoman for Apple in the U.K., didn't return calls seeking comment. Among Apple suppliers in Asia, representatives from Sharp , Japan Display and Hon Hai Precision Industry declined to comment.

“Order cuts appear to be old news,” Milunovich wrote. He said he reduced his iPhone sales estimates in December after checks with suppliers indicated a reduction in the number of phones being made.

IPhone sales could be slowing because smartphones are already common in developed markets, where Apple is strongest, said James Cordwell, an analyst at Atlantic Equities Service in London.

“We're getting close to saturation,” said Cordwell, who rates Apple shares “overweight” and doesn't own any. “The real growth is going to come from emerging markets, and Apple's share in emerging markets is much lower than it is in other markets at the moment due to such high prices.”

Apple is also facing increasing competition from manufacturers using Google's Android software, including Samsung. Android phones are gaining users in emerging markets because they are cheaper than the iPhone.

Research In Motion, the maker of the BlackBerry smartphone, is trading at its highest level in almost a year amid signs that demand for the iPhone may be waning.

RIM's stock rose 10 percent to $14.95, following a 14 percent gain on Jan. 11. Shares of the Waterloo, Ontario-based company have gained 26 percent this year.

“The iPhone is no longer unique, fashion fatigue will transpire and the rich price premium will be impossible to sustain,” Per Lindberg, an analyst at ABG Sundal Collier in London, wrote in a research report on Monday.

First-quarter iPhone shipments may decline 25 percent from the previous period, Peter Yu, an analyst at BNP Paribas, said today in a note. Analysts' average second-quarter revenue estimate for Apple may drop by about $4 billion to $5 billion and the earnings-per-share projection may decline by $1 to $1.50, Abhey Lamba, an analyst at Mizuho Securities USA, said in a report.

The iPhone may be facing supply chain constraints as Apple shortens its product cycle to introduce new models more frequently, Walter Piecyk, an analyst at BTIG LLC, said in an interview.

“It takes a manufacturer time to do it efficiently,” he said. “An iPhone sold in the March quarter is more profitable than an iPhone sold in the December quarter.”

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.