John Paczkowski

Recent Posts by John Paczkowski

Analysts Cast Doubt on Supply Chain Chatter That Rattled Apple (UPDATED)

Apple suffered an unusually brutal morning on Wall Street today after J.P. Morgan analyst Gokul Hariharan, who covers the company’s Asian manufacturing partners, suggested Apple may be scaling back the production of the iPad.

Shares in the company, which have been charting new all-time highs recently, fell $8.21, or 2 percent, to $396.09 in early trading following the report, which claimed supply chain vendors indicate a 25 percent cut for fourth-quarter iPad sell-in orders.

A nasty bloodletting, and unmerited according to a few other analysts. Piper Jaffray’s Gene Munster, for example, dismissed J.P. Morgan’s report as a misinterpretation of supply chain noise.

“Following our recent trip to Asia we remain confident in our iPad estimates for the September and December quarters of 10.0m and 12.0m, respectively,” he said in a note to clients. “While we heard chatter of supply chain order reductions, the absolute sell-in figures for 2H CY11 likely remain well above our estimates. We also note that previous calls based on sell-in or supply chain data have, for the most part, proven to have very little correlation with Apple’s results vs. consensus.”

Susquehanna chip analyst Chris Caso also raised an eyebrow over J.P. Morgan’s claims, arguing that what we’re seeing is a scheduling adjustment, not a cut.

“We believe chatter regarding iPad production cuts are misleading — we have seen pull-ins, not cuts,” Caso said. “We have noted recent comments by competitors discussing iPad production cuts for 4Q. Our recently published AAPL supply-chain checks noted a sequential decline in 4Q iPad builds from 17 mln-19 mln units in 3Q to 11 mln-13 mln units in 4Q. However, the 4Q sequential decline was accompanied by an increase in 3Q builds, leading us to conclude that production was likely pulled-in from 4Q to 3Q. We believe AAPL has attempted to accelerate production in 3Q to ensure product availability for the holidays. In addition, we expect AAPL will need to modulate production of iPad2 to prepare for iPad 3.”

In other words, don’t pay too much attention to supply chain noise. J.P. Morgan’s Apple analyst Moskowitz isn’t. He hasn’t changed his iPad numbers and, according to the note that inspired today’s sell-off, “does not expect the supply chain adjustments to result in downside to his estimates.”

UPDATE: Later Monday afternoon J.P. Morgan issued a second research note on rumored iPad production cuts, this one written by Moskowitz. Its gist: Apple is fine.

“A recent alert on Hon Hai Precision from our J.P. Morgan Asia colleague Gokul Hariharan has the equity markets worried about Apple,” Moskowitz wrote. “Mr. Hariharan’s report focuses on how Hon Hai could be impacted by potential iPad sell-in order cuts. This alert is not the view of the US IT Hardware team. As referenced at the end of the Hon Hai alert, our estimates for Apple remain unchanged, and we do not expect any downside risk.”


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