It seems like yesterday that Apple became the world’s first $1 trillion company.
The shine has come firmly off with this morning’s profit warning, with – at current prices – market capitalisation now hovering around $682.9 billion; a stiff fall.
Some market analysts, like Goldman Sachs’ senior equity analyst Rod Hall [pdf] went as far as to compare the company to Nokia in a note to clients late Wednesday.
Nokia became reliant on customer upgrades amid market saturation a decade ago, but as the economy slowed, customers delayed replacing their phones, he noted, as reported by CNBC’s John Melloy. (Today’s high-end smartphone market is similarly saturated and macro headwinds are blowing.
Apple Suppliers Hit by Profit Warning
Apple’s CEO Tim Cook has blamed a “particularly sharp” contraction in Greater China’s smartphone market for the change in outlook, although he tried to put a positive spin on the warning, saying revenue outside of the company’s iPhone business grew by almost 19 percent year-over-year and has less exposure to emerging markets.
Investors took fright however and European suppliers were left bruised in trading today, including Guildford’s Dialog Semiconductor and Cardiff’s IQE, which manufacture a wide range of products for the smartphone market, including haptic drivers, VCSEL wafers and 3D sensing applications.
The former fell nearly 10 percent in early trading before recovering somewhat, while the latter was down five percent. (Dialog declined to comment. IQE had not responded as Computer Business Review went to press.)
Chip stocks Advanced Micro Devices (- 7 percent), Nvidia (-4.7 percent), Skyworks (-7.2 percent) and Qorvo (-7.7 percent) were all sharply lower following the Apple warning.
Apple’s stock has lost 8.3 percent over the past 12 months through Wednesday, while the Dow Jones Industrial Average has fallen 6.3 percent. Based on today’s numbers, Apple is set to go from the US’s most valuable to fourth most valuable company.
Tim Cook said: “We can’t change macroeconomic conditions, but we are undertaking and accelerating other initiatives to improve our results. One such initiative is making it simple to trade in a phone in our stores, finance the purchase over time, and get help transferring data from the current to the new phone. This is not only great for the environment, it is great for the customer, as their existing phone acts as a subsidy for their new phone, and it is great for developers, as it can help grow our installed base.”
“Warning flags were flying,” William Fleckenstein, a Seattle-based money manager who has shorted Apple for the last three months, told Bloomberg.
“You could see the deterioration in the lack of unit growth over the last couple of years and the market share loss. It was only the mania that held the thing together and now that finally blew.”
Fleckenstein warned that Apple may be a “value trap” if it fails to take steps to regain market share, such as lowering prices or innovating new products, especially if the global economy slows.