Apple's Q2 Earnings Foreshadowed by Weak Foxconn Results

  on April 10 2013 2:08 PM
Apple iPhone 6
The latest buzz around the so-called iPhone 6 rumor mill is that Apple may double the phone’s Retina Display resolution to 1.5 million pixels. Reuters

Is Apple (NASDAQ: AAPL [FREE Stock Trend Analysis]) about to a report a disappointing quarter?

The Cupertino, California-based tech giant will report its fiscal 2013 second quarter results on April 23. This is exactly three months after the company reported a record-breaking first quarter, selling 47.8 million iPhones and 22.9 million iPads.

Apple's first quarter sales (which encompasses the holiday shopping season) are often higher than the company's second quarter results. Even so, the Mac maker increased its sales during the last three Q2 periods: 2010, 2011 and 2012.

Apple sold 35.1 million iPhones during the second quarter of 2012, dwarfing the sales of Q2 2011 (18.65 million) and Q2 2010 (8.75 million).

This could be where the problem comes in. Investors will only continue to believe that Apple is a growth company if it can sell a significantly larger number of iPhones in the second quarter. The company could get away with selling 35 million units -- at least then it would not have fallen below its own sales record. Anything less would be considered a disaster.

Disaster may be unavoidable, however.

According to Reuters, Hon Hai Precision Industry (the company that owns Foxconn, Apple's chief manufacturer) experienced a 19 percent sales decline during its first quarter.

Foxconn's Q1 results cover the January to March sales period. The decline is being blamed on the iPhone, which (along with the iPad) is believed to account for as much as 60 to 70 percent of Hon Hai's revenue.

Hon Hai's announcement comes at a time when analysts and investors are expecting the worst from Apple.

"It just looks like the wheels are falling off [at] Apple," Bob Auer, the Senior Portfolio Manager of SBAuer Funds, LLC, told Benzinga.

"What we're looking for is a bad March quarter, frankly, that's below where the consensus is now, even though you've had massive cuts continually," BTIG analyst Walter Piecyk told CNBC.

Those who are making money on Apple are doing so by shorting the stock.

That said, Apple has a history of beating its own sales records. While the company may not be able to fulfill Wall Street's expectations, it could still strike gold by announcing another record-breaking quarter.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis@benzingapro.com. Follow him @LouisBedigianBZ

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