Apple Update: Should Avoid Supply Disruptions that Hit Intel
Intel (NASDAQ:INTC) recently lowered its revenue outlook for Q4 2011 by $1 billion from previously estimated $14.7 billion to $13.7 billion. [1] The company blamed this shortfall on the supply shortage of hard disk drives resulting from floods in Thailand. This is an issue that impacts all PC makers, and hence HP (NYSE:HPQ), Dell (NASDAQ:DELL) and Apple (NASDAQ:AAPL) should also get affected. However, we believe that Apple has proven in the past that it cant manage supply chain related issues better than its rivals and so we don’t expect much of an impact for its Mac line.
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Apple continues to overcome supply chain issues
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In the past, Apple has overcome its supply related issues which includes shortages of both labor and materials at its plants in China and the Japanese earthquake leading to a squeeze in raw material supply (see Apple Eyes $430 as Component Prices Improve). According to an in-depth report by Bloomberg BusinessWeek, Apple will continue to enjoy operational efficiency through upfront cash payments offered to its suppliers as “strategic weapons” to secure a significant advantage over its rivals. [2] By managing the supply chain efficiently, the company is in a better position to negotiate its terms with suppliers.
Apple should be able to maintain Mac sales growth
The overall PC market growth is expected to be slow due to slowing demand and supply chain related issues such as a shortage of hard disk drives mentioned above. However, given the negotiating power that Apple has over its suppliers, it should be able to maintain its Mac sales growth resulting in market share gains. At most, Apple might have to pay more to secure the supply of raw material through its suppliers. This could have a slight effect on the margins for its PC segment, but the market share gain should offset that loss.
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Notes:- Intel’s Fourth-Quarter Revenue to Be Below Expectations Due to Hard Disk Drive Supply Shortages, Intel Press Release, Dec 12 2011 [↩]
- Apple’s Supply-Chain Secret? Hoard Lasers, Bloomberg BusinessWeek, November 3rd, 2011 [↩]