With Apple’s stock down 10% today and scaling back parts orders, you might wonder if Apple is in trouble. Trouble? Nope, just smart supply-chain management.
With Tim Cook at the helm, Apple has a master of the supply chain keeping them on course. With just-in-time delivery of parts and components, you have to hedge your bets. Order too much and you have stuff you have to get rid of, too little and you have constrained inventory. My guess is now that the iPhone 5 and other devices, but not the iPad mini, are at solid inventory levels, Apple is just pulling back from pre-holiday build ups.
Forbes has the lead post on the stock drop and orders—Apple Cuts Parts Orders, Analyst Says; Stock At 10-Month Low—and these are the points people are focusing on:
Misek writes in a research note that iPhone component suppliers “have seen large order cuts” over the last 24-48 hours. He also notes that “assembly execution issues are taking longer to resolve than expected.” In response, he cut his gross margin forecast for the December quarter to 39% from 40%, which is still above the Street consensus at 38.6%, and he reduced his forecast for calendar Q1 iPhone shipments.
The analyst adds that he sees no demand issue for the iPhone 5, noting that there is still no inventory at retail, and he adds that he has not detected any finished goods inventories at suppliers. He adds, however, that the iPhone 5 launch in China has so far been “surprisingly muted,” but that light store traffic might be a reflection of snowy weather and pre-ordering.
So, demand is fine, but devices are harder to build. So if it takes longer to build an item you don’t need as many parts per day as you expected, so you know you don’t need as many parts on hand as you first thought, so you don’t order as many. Why have a backlog of parts when they will just sit there?
I think it’s fun for people to over-analyze Apple and every move it makes, but the fact is they are selling some of the most popular products on the planet right now, dominate digital downloads, and have a boatload of cash in the bank. I’m going to venture that Apple is in good shape to weather just about any storm for the next year or so.