Mobile

Foxconn’s big earnings miss means potential problems for Apple’s Q2 earnings in 2 weeks

Above: Foxconn's Shenzhen factory

Image Credit: Image by Imaginechina/Corbis

Hon Hai Precision Industry, better known as Foxconn, reported an almost 20 percent drop in earnings in the past quarter. The problem, apparently, is lower than expected iPhone sales.

What does that mean for Apple earnings, coming up in two weeks?

Sixty to 70 percent of Foxconn’s revenue is dependent on assembling Apple iPhones and iPads, Reuters says, and a drop in demand resulted in sales dipping from $33 billion in the fourth quarter of 2012 to $27 billion in the first quarter of 2013.

That’s clearly not great news for Apple, which will be reporting quarterly earnings on April 23.

But it’s also a little surprising, given that according to ComScore numbers released just recently, Apple’s Apple’s U.S. iPhone sales are up 11 percent this past quarter. Which could mean that the international mobile market, already dominated by Android, has increasingly pivoted away from Apple.

Credit Suisse analyst Kulbinder Garcha said recently that competition is heating up and that iPhone sales will be only 38 million units. While that’s up from Q2 2012 numbers of 35.1 million, it’s a massive drop from Q1 2013′s 47.8 million. And DisplaySearch raised an alarm in February that Apple’s iPad sales are shifting massively to the cheaper iPad Mini — which could be disastrous for both Apple’s revenue and margin numbers.

Foxconn’s drop, however, could also mean that Apple is diversifying its supplier list. The company does have 748 suppliers, mostly in China.

The Wall Street consensus projections for Apple’s Q2 are in the $42.5 billion range. Even if Apple hits that, however, it would signal a slowing of the company’s growth rate. And even hitting it would likely be a disappointment for an increasingly unsatisfiable Wall Street, which hit Apple’s stock hard even for its last quarter, in which Apple reported a monster $54.5 billion in revenue and $13.1 billion in profit.

Apple’s earnings in two weeks will tell the tale.

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