Apple Supplier Laird Plunges on ‘Brutal’ Price Competition

  • Expected pick-up in smartphone-related orders later than usual
  • Parts maker highlights increased margin pressure due to prices

Laird Plc dropped the most on record after the supplier to Apple Inc. pared its outlook, citing “brutal” price competition from Asian parts providers and sluggish demand from the mobile industry.

Competitors in Asia are driving down prices, leading to continuous rounds of negotiations with customers, Chief Executive Officer Tony Quinlan said on a conference call. Laird fell 49 percent to 158.40 pence in London, slashing its market value by more than 400 million pounds ($492 million).

The London-based company, which makes tiny metal parts like battery contacts, springs and speaker covers for smartphones, predicted annual pretax profit of about 50 million pounds, about 32 percent below the average analyst estimate.

“Something is changing in the industry and we don’t have full visibility,” said Thomas Rands, an analyst at Investec. Executives at Laird don’t “seem to have their head around it at the moment, which is enabling their competitors to be more competitive on price.” 

Quinlan declined to name Apple on the call, referring only to the company’s “big customer.” Apple lists Laird as a supplier on its website, as does rival Samsung Electronics Co.

CEO’s Departure

Former Laird CEO David Lockwood left in August to take the top job at defense contractor Cobham Plc, and he was replaced by Quinlan, the former chief financial officer.

“Lockwood’s departure was unsettling given the monumental task the company had in front of it to meet second-half targets,” Berenberg analyst Benjamin May said. With total debt of 348 million pounds, “the company could be forced into a situation where it needs to review its capital structure more carefully.”

One big Laird shareholder, which asked not to be named, said it would support the company if it opts to raise money via a shareholder rights issue, saying its wireless business needs continued investment to remain competitive. Laird declined to comment on any financing plans.

After a weak first half, the company said it had expected an improvement that did not materialize. Apple said in July that it sold 40.4 million iPhones in the three months ended June 25, down 15 percent from a year earlier and 21 percent from the previous quarter. Samsung has been roiled by problems with its Galaxy Note 7 phone, which it stopped making after a number of the devices caught on fire.

Poor Visibility

The problem with the Note 7 “hasn’t helped,” Quinlan said, though the impact on Laird has been “relatively” small.

Revenue in the third quarter was up 29 percent to 207 million pounds, but that was lifted by acquisitions and by favorable currency conversion rates after the U.K.’s vote to leave the European Union. On an organic basis at constant rates, sales were down 4 percent.

— With assistance by David Hellier, and Oliver Sachgau

    Before it's here, it's on the Bloomberg Terminal.