John Paczkowski

Recent Posts by John Paczkowski

Apple Stock Slide Could Cost It the Market Cap Lead

apple_crownTuesday is proving to be another brutal day for Apple on Wall Street. The company’s shares, which briefly slipped below $500 on Monday, continued their downward slide Tuesday, drifting below that mark once again. They touched $483.80 in early morning trading, their lowest point in about nine months.

That’s a long way from the all-time high of $702.10 they hit last September. If Apple’s stock continues along this downward trajectory, the company may soon cede its title of world’s largest company by market cap to Exxon Mobil, which it surpassed about a year ago. Apple’s current market capitalization is about $456 billion. Exxon’s is near $407 billion, and its shares have lately been on the rise. Obviously, there’s still quite a gap between the two, but if reports of weaker-than-expected sales of the iPhone 5 continue to dog Apple, or they prove true when the company next reports earnings, who knows?

For what it’s worth, there continues to be disagreement over just what is happening around iPhone 5 component orders. While some research houses, like Nonomura, have cut their Apple estimates to reflect the allegedly weaker-than-expected sales of the iPhone 5 reported by the Nikkei and The Wall Street Journal, others have taken issue with those reports, arguing that the reduction in component orders has nothing to do with weak demand. Said Wedge analyst Brian Blair, “… To suggest that iPhone demand has been halved sequentially from December is simply erroneous.”

That may well be the case — keep in mind earlier this month both Verizon and AT&T reported strong iPhone sales. And we’ll find out one way or the other when Apple reports earnings. But it’s worth noting that there are other explanations for a cut in iPhone 5 component orders. For one thing, estimates of 65 million iPhone units for the quarter were fantastically high to begin with, and suggestions that they’ve been suddenly halved seem dubious. That said, that theory makes a bit more sense if Apple ordered 65 million iPhone displays at a time when manufacturing yields were low, and then reduced the order when yields improved.

Another possible explanation: The reduction in orders is the result of a coming switch in display technology. Sources close to Apple tell AllThingsD that the company has been evaluating IGZO displays for use in its iOS devices, though they declined to say what the results of that evaluation have been. Finally, Apple could simply be ramping down component orders in preparation for production of the next iPhone.

All reasonable explanations, I think. We’ll find out which, if any, is the most accurate, on Jan. 23.

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