Reduced iPhone 5 Order Rumor Sends Apple Shares Below $500

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Reports that Apple has slashed its iPhone 5 orders were reflected in Apple’s plummeting stock Jan. 14.

Investors were reacting to reports by The Wall Street Journal and Nikkei that the company has significantly cut back on iPhone 5 component orders due to weak demand. Shares of Apple stock dipped below $500 in early trading Monday morning.

Rumors are circulating that the company has cut “roughly half” of its orders for the four-inch display of its latest Smartphone as well as for other components. The cut back, thus far, is only for in the current quarter, which ends in March.

Apple is to announce its earnings for the recently concluded December quarter next week. The company’s holiday sales — especially for the iPhone 5 — are expected to be at the $50 million mark.

One analyst says the Apple hysteria is unnecessary.

J.P. Morgan analyst Mark Moskowitz said in an investor note Dec. 20 that although reports have pointed to a 20 percent drop in Apple’s March-quarter supply chain orders for the iPhone 5, he believes there is a reasonable explanation and other analysts are panicking for no reason.

“Downshifting from ‘white hot’ order activity does not mean the world is ending,” Moskowitz is quoted by CNet.

It is likely Apple pushed its suppliers in the beginning to increase manufacturing of the new phone, and the downshift in orders is simply an aftereffect, he said.

“We also think that the supply chain adjustments could imply that manufacturing yields on iPhone 5 have improved, which means Apple’s gross margin profile could rebound to 40 percent, which would be a positive,” Moskowitz said.

That would support Apple’s assertions its initial deterioration of profits is due to the start up of several major products, all of which needed sizeable startup production investments, according to the CNet report.

Some analysts say Apple needs to come out with some popular products next year to keep the company from floundering. Moskowitz, however, believes Apple’s present slate of products, the iPhone 5 in particular will do well for the company.

“We acknowledge the increasing level of competition in the market, including Samsung, Google, HTC, and Lenovo,” Moskowitz said. “Overall, we continue to believe that Apple can deliver a 12-18 month upgrade cycle with the iPhone 5. The new device is not a pocket hog or battery hog, relative to other competitive LTE-capable devices. Further, the iPhone 5′s LTE performance separates the device from the iPhone 4S, which means that a meaningful upgrade cycle in the installed base stands to manifest in the coming year.”

According to CNet, Moskowitz anticipates Apple will sell 45 million iPhones in the coming quarter.

 

 

 

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Reduced iPhone 5 Order Rumor Sends Apple Shares Below $500

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