Opinion: Apple cuts iPhone manufacturing?

Fact or FUD?

Roll up, roll up for the amazing post-Christmas Apple-FUD-frenzy as weird tales spread, claiming it has cut iPhone production....

Buy on rumor

...Just like it does every year.

You see, it remains a wonder to sentient life why people get so excited about this. After all, as we all know, every consumer is made of money and we’re all eager to burn a few thousand dollars more as we get past the huge spending frenzy that is the so-called “season of goodwill."

The story as I see it always goes like this:

  1. Apple sells lots of iPhones at Christmas.
  2. Apple cuts iPhone manufacturing after Christmas.
  3. Apple stimulates further iPhone sales with OS upgrades, new deals and intoxicating accessory launches (Apple Watch 2 in March).
  4. Apple ships new iPhones in Q3/4.

Q4 transition

Think about it this way – Q4 is Apple’s best iPhone quarter and production often falls in subsequent quarters. Yet, all the same, Apple stock is being hammered on the strength of analyst statements claiming a 30 percent decrease in Apple’s iPhone orders since Yuletide.

Why does this surprise anyone? (It calls to mind the great 'Apple Must' debates of 2014.)

It’s good that it does, of course. After all, incredibly wealthy investors didn’t get where they are today by buying stock on good news. And this new tale has trimmed a few dollars off Apple’s stock price. That’s great news for someone with a suitcase full of cash to pump into AAPL stock until September, but not such a great deal for you and I. At around $100 per share, you need a lot of surplus cash if you’re going to realize the built-in profit accumulated by dropping $2-5 per share on these tales of iPhone weakness.

Imagine if you got hold of 100,000 Apple shares – you’d be seeing an instant $200k-$500k profit the moment Wall Street sees sense and stock values straighten out -- as (with Apple) they nearly always do. The skill is in being able to pick the shares up at the bottom of the slump.

Old rope

It’s money for old rope. I’m sure there are millions of people who could be quite good at making money this way, if we only had the cash to risk and the kind of connections it takes to know when stories like these are coming. And that’s before you even stop to think about long- and short investment models.

To my mind there’s little reason to panic. Apple hasn’t announced its Q1 iPhone sales yet, but it will at the end of the month; its press release today tells us of “record-breaking holiday season sales for the app store”.

“In the two weeks ending January 3, customers spent over $1.1 billion on apps and in-app purchases, setting back-to-back weekly records for traffic and purchases. January 1, 2016 marked the biggest day in App Store history with customers spending over $144 million. It broke the previous single-day record set just a week earlier on Christmas Day,” the company said in its press release.

However, don’t expect miracles

Decoding Apple’s latest PR may make things seem OK, but there’s no reason to be complacent. You’d have to be blind, blinkered or stupid to think global economic uncertainty, decline in China and austerity across European markets isn’t taking a little fizz out of the party and I suggest almost every consumer electronics firm is affected. (Which is probably why Apple’s strongly focused on enterprise markets). All the same I’m not ready to dust off the Apple Death Knell Counter yet (or ever). Apple has plenty of plans in the pipeline to help keep the iPhone fires burning – but any softness in the Apple business will inevitably be reflected across the industry – and given the slim margins enjoyed by so many in tech, that is worth fretting about.

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Copyright © 2016 IDG Communications, Inc.

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