Here We Go Again- Analysts Reading the Supply Chain Tea Leaves

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It feels like it was just last year that we were right here. Analysts, bloggers, the tech press, and even the mainstream financial press thought they had Apple this time. The iPhone X was a dud. The fall was happening and they all called it. Except it didn’t. And they didn’t. Hell, it wasn’t even last year. It was earlier this year.

Some scrambled for cover while the smart ones just threw up their hands and admitted they had it wrong, but anyone with any sense could see what really happened. The press blew it, but boy Warren Buffett didn’t.

Apple is the where they are as a company today because Tim Cook is probably best supply chain manipulator in the history of Capitalism. Good luck predicting what a guy who’s been more than two steps ahead of the industry for a decade is up to. You guys are so good at it. Can you feel my eyes rolling right now? I hope so.

So we are right back to square one again this week. Apple supplier Lumentum warned it’s investors of a rough patch ahead, and suddenly Apple is in trouble. Take this and add in a negative sales projection from Ming-Chi Kuo, which is once again based on, ding, ding, ding, you guessed it, the supply chain, and you have Apple stock chaos. Again.

Of course, one only has to read the ever level-headed Philip Elmer-DeWitt to get some instant perspective. You see, one of the big reasons for this latest stock tumble is an assumption that is completely incorrect:

Apple fell on the assumption that bad news for Lumentum spelled bad news for iPhone unit sales.

The fact that Lumentum’s chief competitor, Finisar, was the happy beneficiary last year of a $390 million investment from Apple’s Advanced Manufacturing Fund was not mentioned in the Wells Fargo note I excerpted Monday morning. Nor was it mentioned in the accounts posted by Reuters, CNBC or any of the other stories Google turned up, including this morning’s Wall Street Journal ($).

It was one of my readers, not the Journal, CNBC or Reuters, who spotted a report of the ribbon cutting last summer for Finisar’s new VCSEL manufacturing facility in Sherman, Texas. (A factory soon to be owned by Pennsylvania-based II-VI—pronounced “two six”—another VCSEL supplier that scooped up Finisar only last Friday for $3.2 billion in cash and stock.)

Is it possible that iPhone sales will decrease this year? Sure. Could the analysts finally be right? Probably not. Even if they end up with the correct outcome, history has proven their complete ineptitude when it comes to predicting how or what Apple is doing. If they get this right, it will be due to nothing but sheer luck. Bet on them at your wallet’s peril.


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