April 17 (Bloomberg) -- Apple Inc. dropped below $400 for the first time since December 2011 after one of its audio-chip suppliers, Cirrus Logic Inc., reported an inventory glut that suggests iPhone sales may fall short of analysts’ expectations.
Apple’s shares declined 5.5 percent to $402.80 at the close in New York, and earlier touched $398.11. Cirrus, which makes sound components for the iPhone and iPad, is an indicator of demand for Apple’s top-selling products, according to Peter Misek, an analyst at Jefferies & Co.
“We blame Apple for losing its mobility mojo,” Vernon Essi, Jr., an analyst at Needham & Co., wrote in a research report today. “This was simply an inventory overbuild for the iPhone 5 relative to Apple’s forecast.”
Apple’s stock has fallen 43 percent from a record in September amid concerns about slowing profit and sales, narrowing margins and intensifying mobile competition. While the iPhone is the most popular handset, Samsung Electronics Co. has become the leading smartphone provider by introducing a variety of devices with different designs and prices.
“Apple is reducing expectations,” Misek said in an interview.
In the months since Apple’s record close on Sept. 19, the Standard & Poor’s 500 Index has gained 6.4 percent. After commanding a premium for most of the past decade, Apple is trading at about a 40 percent discount to the index on a price-earnings basis, according to data compiled by Bloomberg.
Among the 86 CEOs in the S&P 100 who have been in their jobs at least a year, Apple Chief Executive Officer Tim Cook has led the tenth-worst performance relative to the index over the course of his tenure, with Apple lagging by 12 percentage points, according to data compiled by Bloomberg Rankings as of yesterday’s close. Hewlett-Packard Co. CEO Meg Whitman topped the list, underperforming by 29 points.
After Apple on Jan. 23 reported its slowest profit growth since 2003, more than 20 analysts lowered their price targets, according to data compiled by Bloomberg. Today’s stock slump is the biggest since Jan. 24, when Apple tumbled 12 percent following the earnings report.
For the fiscal second quarter, which ended in March, they’re predicting an 18 percent decline in net income to $9.5 billion -- the first decrease since 2003.
The results may be even worse that those expectations, according to Toni Sacconaghi, an analyst at Sanford Bernstein & Co. He lowered his iPhone estimate for the quarter, which ended in March, to 34.2 million units, from 35.2 million. Sacconaghi also reduced his iPad projection by 1 million to 18.5 million units.
Apple is set to report earnings on April 23, when the company is also expected to provide an outlook for the current period.
Cirrus yesterday reported preliminary fiscal first-quarter net revenue of as much as $170 million, less than analysts’ average $197.3 million estimate, according to data compiled by Bloomberg. Because Cirrus relies on Apple for most of its revenue, this suggests that the iPhone maker told the chipmaker to anticipate fewer orders, Misek said.
Cirrus will record a net inventory reserve of $23.3 million for the fiscal fourth quarter, which ended in March, the Austin, Texas-based company said in a statement yesterday. Most of that -- $20.7 million -- is from a high-volume product from one customer, Cirrus said, without naming the client.
Apple accounts for more than 90 percent of Cirrus’s revenue, according to supply chain estimates compiled by Bloomberg.
Cirrus may have excess inventory after overestimating how many chips Apple would order, or because Apple is switching to a cheaper alternative, according to Andy Hargreaves, an analyst at Pacific Crest Securities.
“It’s clear that Cirrus’s revenue from Apple is going down, but it could be because Apple doesn’t need their part,” Hargreaves said in an interview.
Steve Dowling, a spokesman for Apple, and Jo-Dee Benson, a spokeswoman for Cirrus, didn’t respond to a requests for comment.
Apple may raise its current quarterly dividend payout of $2.65 by 13 percent to about $3 a share, for an indicated yield of 2.6 percent, according to a Bloomberg projection. That would give it one of the highest yields among peers, after Intel Corp. and Microsoft Corp. Bloomberg analysts take into account the payouts of other large technology companies, Apple’s projected earnings for next year and the amount of money on its balance sheet.
Cook, who reinstated Apple’s dividend and announced a $10 billion buyback in March 2012, faces mounting pressure to take bolder steps to pay out more of Apple’s $137.1 billion in cash and investments. Investors including David Einhorn’s Greenlight Capital Inc. are pushing for more money as growth slows and competition from rivals such as Samsung intensifies.
Apple has said it’s in active discussions over how to manage the cash, and considering buybacks or a higher dividend among other options.
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