Apple stock falls below $400 on supplier woes

Apple shares fell below US$400 (A$387) yesterday for the first time since December 2011 after a chip supplier's revenue forecast hinted at weakening demand for the iPhone and iPad.

The stock dropped below US$400 briefly before bouncing back to end 5.5 percent lower at US$402.80, losing more than US$22 billion of market value in a single day.

Cirrus Logic, which makes analog and audio chips for the iPhone and iPad, warned of a reduced product forecast from one customer which it did not name. Over 90 percent of its business comes from Apple.

The surprise warning fueled fears that demand for the iPhone - which makes up more than half of Apple's revenue - is falling faster than expected as the market is flooded with cheaper phones.

Apple will report quarterly results next week. Analysts say Cirrus Logic's reduced outlook lends weight to arguments that consumers' love affair with the iPhone is waning as challengers such as Samsung  vie for their attention.

"This is a tough environment. Apple is in transition between products," said Michael Yoshikami, a portfolio manager at Destination Wealth Management, which owns about 50,000 Apple shares. Cirrus's warning "makes it more likely Apple's not going to surprise on upside."

Since its September 2012 peak, Apple has lost 40 percent of its market value or more than US$280 billion - slightly more than Google's entire capitalisation - battered by worries about the effect on Apple's industry-leading margins if it's forced to do faster updates of its products to keep up.

Nerves

Investors are growing increasingly nervous about Apple's growth prospects.

Shares of other chip makers and Apple suppliers, including Qualcomm, Avago Technologies, Broadcom and Skyworks, fell between 2 and 6 percent on a day that saw broad weakness in financial markets.

Goldman Sachs analyst Bill Shope said Apple's momentum could weaken further before it launches new products later this year.

In the past week, analysts had reduced their estimates for Apple's March quarter revenue on average to US$42.53 billion from US$42.68 billion. Following Cirrus' warning on Tuesday, some think Apple's results could miss those already reduced expectations.

Apple is expected to report a 9 percent increase in quarterly revenue, with net profit expected to decline 17 percent to US$9.59 billion, or US$10.08 a share, for its fiscal second quarter, according to average analysts' estimates.