Today: Reports of production cutbacks due to weak demand send Apple (AAPL) stock diving to lowest point in nearly a year. Also: Hewlett-Packard (HPQ) and Dell both gain, though for different reasons, and Facebook's rise ends ahead of Tuesday's event.
Apple stock hits lowest point since decline began after reports
Apple stock fell lower than $500 Monday for the first time in nearly a year, as reports said that weak demand for the Cupertino company's iPhone had forced a cutback in component orders.
Nikkei and The Wall Street Journal reported Monday morning that Apple had chopped its orders for iPhone screens in half, though the numbers they used are in dispute, while also dropping orders for other smartphone parts. The Journal, citing unnamed sources, reported that the reason was weaker-than-expected demand for the company's iPhone, its most profitable product.
Reports of decreased orders for iPhone parts have been surfacing periodically in the past month, as analysts conducting checks with Apple's Asian suppliers have noted the changes. Citibank noted the change in December, while downgrading Apple's stock, saying "It is unlikely that Apple is cutting orders in a 'great' demand environment."
However, as analysts cited by name in the Journal story pointed out, such decreases would be typical in the post-holiday quarter, when demand typically drops, and problems with production of the iPhone 5 after it launched in September likely forced Apple to increase orders by larger amounts. Neither news source offered proof of weaker demand nor sales of the iPhone in the fourth quarter.
Despite rational reasons for decreased component orders and previous reports of the move, Apple stock still took a beating, falling lower than $500 early in the session for the first time since February and closing slightly higher than that mark, at $501.75. Shares declined 3.6 percent on the day, damaging stock indexes that rely heavily on the world's most valuable company.
Apple investors fear that weak demand for the iPhone could have caused a weaker-than-expected holiday-shopping quarter in regards to iPhones, which produce the majority of the company's profits because of their large margins. It also could be a sign that Apple is still having issues with production of its popular consumer devices, and is therefore unable to reliably predict its needs.
"Our checks with supply chain contacts close to the situation identified a very different cause (than demand): a slower ramp in the manufacturing of iPhones and iPads (reflecting some quality control issues) and insufficient production lines," Longbow Research analyst Joane Feeney told Reuters. "Rather than ordering more components and having inventory build up further, Apple put component suppliers on notice to hold off, for the time being, on further shipments until it expanded its production lines -- which it plans to complete by the end of the quarter."
Concerns about demands and production come as Apple continues to face a burgeoning Samsung, which overtook the company in smartphone sales in the third quarter and announced Monday that it had sold 100 million Galaxy-branded smartphones.
The companies continue to battle it out in court, but Samsung's ability to compete with Apple in the marketplace has helped send the company to "bear market" territory, with Apple's share price now down more than $200 from the all-time high reached on the day it launched the iPhone 5 in the United States, Sept. 21. At the end of Monday's session, Apple stock had declined 28.8 percent from its peak price.
HP keeps PC title, Dell may go private as both soar on Street
"As Apple goes, so goes the market," NorthCoast Asset Management fund manager Frank Ingarra told Bloomberg News, but indexes managed to avoid large losses during Apple's steep drop thanks to other tech companies picking up the slack.
The Dow Jones industrial average -- among the three major U.S. stock indexes, the only one to not include Apple -- actually gained Monday, as its important Silicon Valley component took a big leap. Hewlett-Packard, the Palo Alto tech giant, gained 4.9 percent Monday after Gartner, which reported that HP had fallen behind Lenovo in personal-computer sales in the third quarter, announced that HP had taken the crown back in the fourth quarter and was the global leader in PCs for 2012. Unlike Gartner's previous report, Monday's lined up with rival research firm IDC's findings, helping HP continue a 2013 turnaround: After dropping 44.7 percent in 2012, the stock has gained 19 percent so far this year.
HP's biggest American rival, Dell, had an even better day, though for a different reason: After a Bloomberg News report that the Texas company was investigating a deal that would take it private, shares jumped fast enough to halt trading for a short time. By the end of the session, Dell shares had increased 13 percent, although many analysts doubted that Dell would actually take the plunge off the public markets.
San Jose networking giant Cisco (CSCO) also had a strong day, gaining 2.4 percent after Reuters reported that it was seeking to buy a security-software company, while also revealing that the company had tried to buy Palo Alto Networks before the Santa Clara company went public last year; Palo Alto Networks dropped 0.9 percent. Netflix's (NFLX) wild positive ride of the past three months continued, as the Los Gatos company gained .1 percent after signing yet another content deal, with this one giving it more Warner Bros. television shows and cartoons from Cartoon Network.
Despite those gains, the Standard & Poor's 500 and tech-heavy Nasdaq indexes declined slightly on the day, and the SV150 index of Silicon Valley's largest tech companies fell much harder, with a 1.1 percent decline.
Facebook's rise hits roadblock ahead of big event
Facebook fell Monday as observers gear up for a mystery event at the company's Menlo Park headquarters Tuesday. As analysts attempt to guess what Mark Zuckerberg has up his sleeve -- the latest scuttlebutt is that it will likely be a consumer-oriented mobile product, possibly search-related -- the bounce Facebook received from announcing the event started to dissipate.
Facebook announced the event Tuesday, and its stock shot up more than 5 percent the next day, pushing the price higher than $30 for the first time in nearly six months. Since then, Facebook stock continued to climb until Monday, when investors perhaps realized that Facebook's announcement may not live up to the hype, which has been big. As Wedge Partners analyst Martin Pyykkonen wrote, whatever Facebook announces "needs to be innovative, significant and very much focused on monetization" to justify the buildup.
For live coverage of Tuesday's event from Mercury News reporters Dan Nakaso and Brandon Bailey, go to www.siliconvalley.com at 10 a.m.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 8.13, or 0.26 percent, to 3,117.50
The blue chip Dow Jones industrial average: Up 18.89, or 0.14 percent, to 13,507.32
And the widely watched Standard & Poor's 500 index: Down 1.37, or 0.09 percent, to 1,470.68
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, the Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.