Is the latest Apple sell-off premature?

Foxconn denies reports that the recent hiring freeze is linked to a slowdown in production for the iPhone 5.

By Benzinga Feb 20, 2013 3:00PM

The Apple Inc. logo is displayed on the back of the new MacBook Pro David Paul Morris, Bloomberg via Getty ImagesBy Louis Bedigian 

Shares of Apple (AAPL) took a light beating Wednesday --  down 1.75% in early afternoon trading -- after word leaked that Foxconn had stopped all hiring for the month of February.  


The manufacturer, which is responsible for producing almost all of Apple's products, said that it would not resume hiring until the end of March. Foxconn said the freeze was not connected to Apple or any other customer, but was due to an influx of too many employees after the Chinese New Year break.


While this may sound like the typical response of a corporation that wants to escape any and all negative press, the beauty Foxconn's response is that it sounds downright plausible. 


If Foxconn had said that it would not hire any new employees this spring or that it had no idea when it would hire again, investors would have a good reason to panic. However, it seems unfair (if not irrational) to do so now.


No manufacturer is infallible. Even during the glory days of American manufacturing, Ford (F) and General Motors (GM) occasionally halted production to save a few bucks.


Foxconn produces an extremely large number of items. In addition to iPhones and iPads, the manufacturer also produces game systems for Nintendo (NTDOY), electronics for Sony (SNE), computers for Dell (DELL) and select items for Nokia (NOK). Amazon (AMZN) and Cisco (CSCO) have also enlisted Foxconn's services, along with many other in the tech world.


Despite this, investor attention is fixated on Apple. If Foxconn has a production issue, it absolutely must involve the iPhone or iPad. It could not possibly have anything to do with Nintendo's Wii U, which sold so poorly that Nintendo dropped its sales expectations by more than a million units. Dell experienced significant declines last year, but there is no way that had an impact on Foxconn. That would be impossible.


Of course, the impossible is more often "possible" than people -- particularly investors -- realize. While Apple is closely tied to Foxconn (it is the manufacturer's biggest client), investors should stop assuming that every problem the company encounters is caused by or directly relates to an iDevice.

 

Those who are inclined to believe that Apple caused the hiring freeze should remember this: Foxconn produced enough iPhones for Apple to sell 47.8 million units last quarter. 


Demand will inevitably be lower during the winter quarter -- that is the nature of this industry. However, by announcing that it will hire additional employees at the end of March, it could indicate that Foxconn plans to produce a new iDevice at that time.


That item could be the rumored iPhone 5S, the next iPad Mini or something the world has never seen before. 


 More from Benzinga

VIDEO ON MSN MONEY

1Comment
Feb 20, 2013 10:35PM
avatar
It's time to end the love affair with Apple and realize there are better product alternatives at better prices.  Their marketing ploy of constant rumors to fuel speculation of the next big product is getting old.  It is also time for certain financial writers to stop the Apple hype in hope of getting investors to start buying this stock to get the price back up.  I believe Jim Jubak said Apple was going to $1000 a share back when it was a $700 so just another case of ill given advice.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

MARKET UPDATE

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
Market index data delayed by 15 minutes

[BRIEFING.COM] The stock market ended the Thursday session on an upbeat note with blue chips showing relative strength for the second consecutive day. The Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%) settled ahead of the Russell 2000 (+0.2%) and the Nasdaq Composite (+0.1%). It is worth mentioning the benchmark index posted its fourth consecutive gain, registering a new record closing high at 1992.38.

Equity indices climbed out of the gate thanks to early strength among ... More


Currencies

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.