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What's with the Nasty Hiccup in Apple's Mac Orders to Suppliers?

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Yesterday Apple's stock price took a nose dive on the news that consumers were likely holding back on iPad mini purchases in the hope of gaining a better deal with Apple's next generation product. Apple's upstream supply chain sources pointed to a 20-30% decline in shipments. What we didn't notice yesterday was that a second report published later in the day pointed to a nasty hiccup in Apple's Mac hardware inventory too.

The second report posted by DigiTimes stated that Apple had reportedly stopped placing component orders for its Mac series of products recently and related upstream suppliers so far have not yet received any word about when Apple will resume its orders.


The suppliers originally expected to finish digesting their Mac inventories in April, but are now stranded waiting for further instructions from Apple. The sources revealed that Apple's Mac orders to the supply chain dropped to almost nothing after the Lunar New Year holidays. Apple had high hopes for its Mac product lines and placed aggressive orders at the end of 2012; however, the company is now badly affected by the decision.


Being that Apple hardly misestimates its shipment forecasts, the sharp order drop may imply that Apple has underestimated the PC industry's weak status and its iPad products are affecting the PC industry more seriously than it expected. We reported on April eleventh that the PC sector had tanked to a 20 year low due to Microsoft's Windows 8 being a failure.


In the past, Apple usually gave its suppliers its shipment forecast for the upcoming quarter (12 weeks), but the company did not provide a shipment forecast for the second quarter and some suppliers are concerned that shipments may not resume until late May.


At the moment there are more questions than answers. Last June Tim Cook emailed a customer stating that "Although we didn't have a chance to talk about a new Mac Pro at today's event, don't worry as we're working on something really great for later next year."


So – can Apple's current drop in Mac components relate to an all-new Mac Pro on the way earlier than expected? Can the high demand for iPads really be cannibalizing the Mac faster than expected or is the PC sector just really in a crater? Yes, there are more questions than answers.


While on the surface it may look like more bad news for Apple, I think it's a little too early to jump to conclusions as to why this is happening at this point in time until we're further into the quarter. I say that in-part because I'm starting to question whether these awfully noisy "upstream suppliers" have an agenda. Think about it: What are the chances of Apple having iPad mini and Mac problem leaks in the same day from "upstream supply sources"? It makes me wonder if a certain dirty trickster isn't taking their propaganda campaign to yet another level.


Yet at the end of the day, no matter how you slice it, Apple's shareholders are taking it on the nose and Apple's traditional silence on rumors is just fueling the fire.


What are your thoughts on this?


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What you said at the end was something I was thinking too. I think Tim Cook already addressed this point of not putting too much faith into a single single supplier of a single component, because even if the data is true, it doesn't mean much in the grand scheme of Apples massive supply chain due to yield rates, switching suppliers/components, etc. Yet the investors still fall for it everytime. So you really gotta wonder if someone with no integrity isn't pulling a few strings behind the scenes.

Dear Sir:

In mid-2010 the antenna was front page news. Apple responded. In early 2012 the Chinese supplier issue was front page news. Apple responded. Today the stock price is front page news. And yet silence so far.

Apple's stock price has become a major PR problem. People think what they want to believe. It's called Confirmation Bias.

Stock price --> belief about the company --> thinking about the company --> media coverage of the company --> brand of the company --> halo.

Stock price down 50% --> fear --> negative thinking --> negative supplier/employee/media leaks --> brand tarnished --> competitors products.

So this is a PR issue. It's getting bigger each day.

The most ingenious solution would be a major stock buyback. Share buybacks create permanent value. Everyone benefits equally: current employees, current owners, future employees, future owners. Higher cash flow numerator / lower share count denominator = greater value for each share of ownership. Someone please get Tim Cook a copy of "The Outsiders: Eight Unconventional CEOs". Plus it's tax efficient as Apple wouldn't pay 40% of the cash to the government as income taxes.

The financial community (not wall street, smart people) has folklore that Apple is a poor capital allocator. Let's home Tim Cook and Peter Oppenheimer can prove us wrong. The way I see it:

Apple is a great capital allocator --> stock price rises --> belief in Apple --> positive thinking ("I do love this X") --> positive media coverage (no more negative leaks) --> brand rejuvenated --> halo.



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