So what happens to those wire, chip and sensor makers when Apple gives them the boot? The answer to that question might be found in the dismal quarterly results released Tuesday by OmniVision Technologies Inc. (NASDAQ:OVTI), a company that makes imaging sensors used in smartphone, tablet and notebook cameras.
Earlier this month, OmniVision, based in Santa Clara, Calif., reported sales had declined substantially for the just-ended quarter. Apparently, OmniVision, which had produced the camera imaging sensor on earlier versions of the iPhone, lost the bid to continue manufacturing that component to Sony. While the company has not admitted this fact, only referring to losing orders from several customers in several market segments during a conference call with investors Tuesday, the consensus among Wall Street analysts following the company indicates this is the case.
The end result? OmniVision's revenues plummeted for the quarter, dropping 9% when compared to the same quarter a year ago, to $217.9 million. Net income dropped by nearly a third, as the manufacturer was forced to take a huge write-down on now obsolete technology.
And it would have been even worse if the company hadn't engineered its cash flow statement, taking more than $18 million in additional loans and stiffing its own suppliers for more than $25 million in owed payments over the last three months, not to mention tacking on $9 million on its balance sheet's Goodwill column to inflate total company equity.
One line in the balance sheet, however, is all investors might need to draw a conclusion on the health of the company. OmniVision inventories of unsold products skyrocketed in the just-ended quarter, rising more than 134 percent to $250.5 million.
Shares of OmniVision, after hitting a 52-week low of $10.15, were selling for $10.40 during mid-morning trading on NASDAQ, down 79 cents, or 7.06 percent, from Tuesday.
The cautionary tale is out there. While working for Apple might be a dream many companies aspire to, losing that big contract is an undiluted nightmare.