Apple Cuts Orders for iPhone Parts

Apple Inc. AAPL -3.57% has cut its component orders for the iPhone 5 because of weaker-than-expected demand, people familiar with the situation said Monday, indicating sales of the latest smartphone haven't been as strong as anticipated.

Apple's orders for iPhone 5 screens for the first quarter, for example, have dropped to roughly half of what the company had planned to order, the people said.
The Cupertino, Calif., company also cut orders for components other than screens, one of the people said.

Customers stood outside a KDDI Corp. outlet prior to the launch of the Apple Inc. iPhone 5 in Tokyo in September.

Apple cut orders for iPhone 5 components on lower-than-expected demand. The WSJ's Juro Osawa talks about whether sales of Apple's latest smartphone are slowing. 

Apple has set the agenda for the smartphone market since it released its first iPhone in 2007.
But South Korea's Samsung, which sells Android-based models at various price points, has overtaken the U.S. company as the world's largest smartphone vendor by market share. Demand also is growing for inexpensive smartphones from Chinese makers such as Huawei Technologies Co.
While the popularity of iPhones and iPads has been boosting Apple's earnings and investors' expectations over the past few years, there have been concerns in recent quarters about how long the growth can continue. Apple's stock, which peaked at about $705.07 in September, was down 3.2% at $503.70 in midday trading Monday in New York.

Apple held 14.6% of world-wide smartphone shipments in the third quarter, down from a peak of 23% in the fourth quarter of 2011 and the first quarter of last year , according to IDC.
Samsung's market share, meanwhile, rose to 31.3% in the third quarter, compared with 8.8% in the third quarter of 2010. The Korean company said this month that it expects to report another record operating profit for the fourth quarter of last year, capping its best year ever amid strong sales of its Galaxy line of smartphones. The company expects an operating profit of between $8.1 billion and $8.5 billion for the quarter.

Analysts continue to cite multiple explanations for a potential trim to orders unrelated to demand, including the ebb of flow of Apple's supply chain and a strong holiday quarter.
Brian Blair, an analyst with Wedge Partners, says order cuts are typical after the holidays. He also noted that Apple uses multiple suppliers for individual parts making across the board cuts difficult to assess.

He estimates that Apple, which reports earnings for the December quarter on Jan. 23, sold 50 million iPhones during the quarter, ahead of average analyst estimates around 47 million.
Sanford Bernstein analyst Alberto Moe, said Apple may have made particularly large iPhone 5 orders to suppliers for the fourth quarter because of earlier concerns about manufacturing difficulties with some components such as screens.
Citigroup C -0.28% last month lowered its rating for Apple to "neutral" from "buy," citing concerns about cuts to iPhone orders. The brokerage noted that a sharp increase in iPhone 5 production during the fourth quarter may have left Apple with more inventory than expected. Still, it also said that "good not great" demand is likely a factor behind the order cuts.
"It is unlikely that Apple is cutting orders in a 'great' demand environment," Citigroup analysts said in the Dec. 16 report.
The iPhone 5, released in September, represents Apple's effort to maintain its strong position amid intensifying competition. The model comes with a longer, four-inch screen than the 3.5-inch screens in previous iPhone models.
Japan's Sharp Corp., 6753.TO +12.63% Japan Display Co. and South Korea's LG Display Co. 034220.SE -2.20% are the three suppliers of the screens, according to people with knowledge of the matter. When the iPhone 5 was introduced, there were concerns that suppliers might not be able to produce enough to keep up with demand.
Apple's cut in orders may affect first-quarter sales of component makers, some of which are largely dependent on the U.S. company. The fact that some iPhone components are highly customized makes it difficult for suppliers to find alternative buyers in a short time frame. Sharp, one of the screen suppliers, has been struggling with a cash crunch and losses from its television-set operations.
Japan's Nikkei reported Monday that Apple has slashed its orders for iPhone 5 components.

Obama Warns Republicans on Debt Limit

WASHINGTON—The next phase in the bitter, two-year-long battle between the White House and congressional Republicans began in earnest Monday, with President Barack Obama and GOP leaders digging in over spending and the debt limit.

Mr. Obama, speaking at a hastily called news conference, sought to blunt any momentum gathering around congressional Republican plans to use the vote on raising the debt limit as leverage in coming budget fights, saying it is "irresponsible" and "absurd" to even consider defaulting on U.S. debt in an attempt to extract spending cuts from Democrats.

The president said the threat of default already is harming ...

Bernanke: 'We're Not Out of the Woods' Despite 'Fiscal Cliff' Deal

Although the "fiscal cliff" deal made "some progress" in resolving the nation's debt problem, "we're not out of the woods yet," Federal Reserve Chairman Ben Bernanke said Monday.

"We are approaching a number of other fiscal critical watersheds," Bernanke told the University of Michigan's Gerald R. Ford School of Public Policy. "We have the funding of the government, we have the so called sequester…and we have the infamous debt ceiling which will come into play."

Echoing comments made earlier in the day by President Barack Obama, Bernanke said raising the debt ceiling merely gives the government the ability to pay its existing bills.

"It doesn't create new deficits, it doesn't create new spending," he said. He said it was like a family deciding that to save money, it won't pay its credit card bill.

"It's very, very important that Congress take necessary action to raise our debt ceiling to avoid a situation where our government doesn't pay its bills," Bernanke said.

(Read More: Geithner Letter Warns Congress: We Will Hit the Debt Ceiling Soon)
The Fed chairman also said it would actually be better if the country didn't have a debt ceiling.
"I don' think that's going to happen, I think it's going to be around," Bernanke added, "but I do hope Congress will allow the government to pay its bills, not raise the possibility of default , which would be very costly for our economy, and then address very seriously these fiscal issues."

While some progress was made in working out the country's fiscal problems with the tax deal beginning of January to extend tax cuts for all American families earning less than $450,000 a year, Bernanke said the big challenge remains finding long-run debt sustainability without unduly hampering the U.S. economic recovery.

He said that the fiscal cliff probably would have created a recession in the U.S. this year, but some of that risk has been avoided.

Most U.S. Stocks Fall as Apple Slump Tempers Dell’s Rally

Most U.S. stocks fell, after a two- week gain in the Standard & Poor’s 500 Index, as a slump in Apple (AAPL) Inc. tempered Dell Inc. (DELL)’s rally on buyout talks.

Apple, the most valuable company, sank 3.8 percent on reports it curbed iPhone production on weak demand. Dell surged 13 percent as two people with knowledge of the matter said the company is in discussions with private-equity firms.