Daily Management Review

Shares of Apple supplier Laird Plunge as it Warns of Sharply Lower Profit


Shares of Apple supplier Laird Plunge as it Warns of Sharply Lower Profit
The shares of Apple Inc supplier Laird Plc were shot down by as much as 50 percent after the company cited a slowdown in smartphone sales and "unprecedented" pricing pressure.
The company said that these factors would lead to it posting a sharply lower profit for the year as expected by the company.
More than 420 million pounds from Laird's market capitalization were wiped off by the selloff. This also marks the worst single-day drop for the stock.
The performance materials division, which makes parts for the iPhone and other smartphones, has come under doubt of analysts and investors due to the significant profit warning by the company.
Companies and analysts are of the view that the world wide phenomena of people changing mobile phones less frequently in most developed markets have potentially resulted in slowing down of smartphone sales growth since a historic jump in the sale of the devices in 2010.
And consequently the suppliers have been dealt a blow as this slow down in sale growth has pushed and prompted the smartphone makers to demand lower prices from suppliers.
The growth rate of the sale of smartphones for 2016 has been predicted at only 7 percent by Technology research firm Gartner. In a report by the firm in June, it said that this growth would be a rate that is half of that in the previous year. The improvement it had expected in its performance materials unit would be delayed, Laird, which makes chips used in Bluetooth devices, said on Wednesday.
About one third of the revenue of the unit is composed of the contracts with mobile device makers. The influence of the sale of iPhones becomes critical as analysts have speculated that about 17 percent of the company's total revenue in 2015 was provided by its supplies to Apple Inc.
There has been a subdued welcome in terms of sale figures for Apple's iPhone 7, which went on sale last month. In what is the second consecutive quarterly fall for its flagship product of eh world’s richest tech company, iPhone sales fell 15 percent in the third quarter on the overall.
According to a company-compiled consensus, the full-year underlying pretax profit is expected to be well below what the average analyst estimate of 75.5 million pounds and would come in at around 50 million pounds ($61 million), Laird said.
In the third quarter ended Sept. 30, based on a constant currency basis, the revenue in the performance materials unit fell 5 percent, the company has also said. in any of the previous years, no guidance for the full year had been given by Laird. This firm is an official supplier to Apple and is on Apple's official list of suppliers.
At its performance materials unit, the company would take measures to reduce costs and manage cash, it has also said.
Laird appointed CFO Tony Quinlan as chief executive on Sept. 5 after the company lost its top boss to British aerospace and defence company Cobham Plc in August this year.