--IPhone seen softening in current quarter
--Component suppliers' stocks also drop on news
--Analysts say Apple needs to expand iPhone market to sustain
growth
(Updates with closing prices)
By Drew FitzGerald
Apple Inc. (AAPL) shares fell below $500 Monday for the fist
time since February after a report of weaker-than-expected iPhone
demand deepened a pessimistic sentiment that has dogged its stock
for months.
The latest stock drop came as signs of weaker iPhone 5 sales
during Apple's January-March quarter prompted the Cupertino,
Calif., company to cut orders for screens and other handset
components, according to a Wall Street Journal report that cited
people familiar with the situation.
Strong sales of Apple's newest handset are considered key to
maintaining growth for the world's most valuable publicly traded
company. Apple has diversified its product lineup with products
such as a lower-priced version of its iPad tablet, but iPhone
remains its most profitable big-ticket device.
Apple shares hit a low of $498.51 shortly after the open, but
the stock quickly rebounded above $500 and closed 3.6% lower at
$501.75 Monday. The slide extends the stock's nearly 30% decline
since September, when bullish expectations surrounding the iPhone
5's launch propelled the stock above $700.
Shares of Apple's suppliers took a hit, too. Chipmaker Qualcomm
Inc. (QCOM) fell 1% to $64.24, while Cirrus Logic Inc. (CRUS) shot
down 9.4% to $28.62. Qualcomm makes wireless radio chips found in
millions of handsets, including the iPhone 5. Cirrus, a producer of
audio chips, makes more than half its revenue from Apple
devices.
The slide in Apple shares had an outsized impact on the Nasdaq
Composite, which fell more than comparable equity indexes. Nasdaq
fell 8.1 points Monday, compared with 1.4 for the Standard &
Poor's 500. The Dow Jones Industrial Average closed up 18.9 points.
Apple's current weight in the Nasdaq Composite is 10.2%.
Initial reports of the iPhone 5's launch ironically focused on
limits to supplies, as Apple stores repeated their ritual of
selling out initial iPhone 5 inventories within hours at some
locations. Changes to the iPhone 5's design made it hard for some
suppliers to keep up with initial demand, according to reports.
Apple is still expected to report it sold millions of iPhone 5s
during the quarter that ended in December, though its current
quarter is now in doubt. Sanford Bernstein analyst Alberto Moel
said the company might have made particularly large iPhone 5 orders
to suppliers for the October-December quarter because of earlier
concerns about manufacturing difficulties.
The company is expected to report the results for its December
quarter, the first of its fiscal year, on Jan. 23.
Analysts also point to longer-term worries about Apple's ability
to continue posting double-digit sales growth in richer countries.
Apple has been working to expand sales in developing countries such
as China, which Chief Executive Tim Cook visited last week.
IPhones are popular in China but still viewed as too expensive
by middle-class consumer standards, and Apple has yet to sign an
iPhone distribution deal with China Mobile Ltd. (CHL, 0941.HK), the
world's biggest mobile carrier with more than 700 million
subscribers.
Apple also is developing a lower-end iPhone that could launch as
early as this year, people briefed on the matter told The Wall
Street Journal. The phone, which would target a broader swath of
consumers through its lower selling price, could help the company
defend its slice of the smartphone market against encroachment from
phones running Google Inc.'s (GOOG) competing Android platform.
Other suppliers felt the fallout from Apple's headlines Monday.
Skyworks Solutions Inc. (SWKS), which reportedly gained a bigger
footprint in Apple's supply chain with the iPhone's newest design,
dropped 1.7% to $21.01. Chip maker TriQuint Semiconductor Inc.
(TQNT) slid 1% to $5.10.
Jabil Circuit Inc. (JBL), a supplier of the iPhone's metal
casing, fell 1.9% to $19.54; parts maker Maxim Integrated Products
Inc. (MXIM) dropped 1.6% to $29.15; and camera-sensor manufacturer
OmniVision Technologies Inc. (OVTI) declined 1% to $14.70.
--Juro Osawa contributed to this article.
Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com
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