One of the reasons Apple was down $4 on Wednesday and down over $16 at its low (and possibly one reason it was down over $6 on Thursday) was Jabil’s poor guidance for its February quarter. Two of the reasons given on the conference call were the company’s disengagement with Blackberry and the second was “demand changes in a segment of its DMS business” which the market (probably correctly) assumes was Apple especially with the evasiveness of management’s answers to questions. (Note that my family and I own Apple shares).
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Apple is Jabil’s largest customer
Apple accounted for 13% and 19% of Jabil’s total revenue in fiscal 2012 and 2013, respectively, while Blackberry generated 10% and 12%. Cisco was 13% and 10% in fiscal 2011 and 2012, respectively, but was under 10% in fiscal 2013.
Jabil’s DMS (Diversified Manufacturing Segment) segment accounted for 45% of Jabil’s total company revenue ($18.3 billion) for fiscal 2013, which ended last August. Within the DMS segment Specialized Services was 29% of total revenue, Industrial & Energy was 10% and Healthcare & Instrumentation was 6%.
Source: Jabil’s fiscal fourth quarter financial results slide presentation
On the conference call Jabil management said that DMS’ revenue should be down 25% year over year. If the share of Jabil’s business was the same in the February quarter as it was in fiscal 2013 this means that if Blackberry’s revenue went to zero (was 12% in fiscal 2013) that the company’s Apple revenue would decline from 19% down to about 6%.
Everyone seems to agree that Jabil was a major producer of iPhone 5c components. Given what seems to be 5c sales underperforming expectations it shouldn’t be much of a surprise if 5c suppliers guide down for the next quarter. I believe this is the type of situation that Tim Cook was talking about in an earnings call that one can read too much into one supply chain datapoint and that you can get a false read on what is going on at Apple.
Jabil’s shortfall is not necessarily positive for Apple
There are a number of articles that postulate that this is actually positive for Apple since the 5s is outselling the 5c. I don’t necessarily buy into that argument. While the 5s is outselling the 5c from all indications just because the 5c is selling below plan doesn’t mean the 5s is selling above it. It could be but maybe Apple planned for robust 5c and 5s sales and the 5c just isn’t performing to plan.
There have been multiple positive indicators on Apple’s quarter
Brian White at Cantor Fitzgerald tracks multiple Taiwanese companies to gauge the supply chain and obtain datapoints on how Apple’s business is trending. When Hon Hai reported its November results last week White’s “Barometer” showed that the sales of the companies in it rose 19% month over month vs. an average of 6% for the past 8 years and was the best November ever.
Counterpoint Technology Market Research released its October smartphone market share survey results showing the iPhone 5s as the leading smartphone worldwide. It also found that Apple quadrupled its share in the Chinese market.
BCN is a Japanese company that tracks consumer electronic device sales in Japan. It publishes data on a weekly basis and at the beginning of December Apple’s iPhone 5s and 5c are in the first nine positions and 11 of the top 14.
Canaccord Genuity’s Apple analyst, Michael Walkley, monthly survey of the four major wireless carriers (AT&T, Verizon, Sprint and T-Mobile) showed Apple’s iPhone 5s has the #1 position at all four carriers with the 5c being in third place also at all four.
Dialog Semi, a German power management IC supplier to Apple who supposedly receives about 70% of its revenue from Apple pre-announced a positive December quarter outlook by increasing its revenue guidance from $270 to $295 million to $310 million.
Overall Jabil’s poor guidance is not what one wants to hear, but I think the other datapoints that are showing up means you can take Jabil’s situation with a grain of salt.
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