Was the Latest Apple Sell-Off Premature?
Shares of Apple (NASDAQ: AAPL) took a light beating this morning after word leaked that Foxconn had stopped all hiring for the month of February. The manufacturer, which is responsible for producing almost all of Apple's products, said that it would not resume hiring until the end of March.
Foxconn denied reports that the hiring freeze was caused by a slow down in production for the iPhone 5. Instead, the manufacturer said that it was due to receiving too many employees after the Chinese New Year break.
While this may sound like the typical response of a corporation that wants to escape any and all negative press, the beauty of Foxconn's response is that it sounds downright plausible. If Foxconn had said that it would not hire any new employees this spring or that it had no idea when it would hire again, investors would have a good reason to panic. However, it seems unfair (if not irrational) to do so now.
Foxconn produces an extremely large number of items. In addition to iPhones and iPads, the manufacturer also produces game systems for Nintendo (OTC: NTDOY), electronics for Sony (NYSE: SNE), computers for Dell (NASDAQ: DELL) and select items for Nokia (NYSE: NOK). Amazon (NASDAQ: AMZN) and Cisco (NASDAQ: CSCO) have also enlisted in Foxconn's services, along with numerous others within the tech business.
Despite this, investor attention is fixated on Apple. If Foxconn has a production issue, it absolutely must involve the iPhone or iPad. It could not possibly have anything to do with Nintendo's Wii U, which sold so poorly that Nintendo dropped its sales expectations by more than a million units. Dell experienced significant declines last year, but there is no way that had an impact on Foxconn. That would be impossible.
Of course, the impossible is more often "possible" than people -- particularly investors -- realize. While Apple is closely tied to Foxconn (it is the firm's biggest client), investors should stop assuming that every problem the manufacturer encounters is caused by or directly relates to an iDevice.
Those who are inclined to believe that Apple caused the hiring freeze should remember this: Foxconn produced enough iPhones for Apple to sell 47.8 million units last quarter. Demand will inevitably be lower during the winter quarter -- that is the nature of this industry. However, by announcing that it will hire additional employees at the end of March, it could indicate that Foxconn plans to produce a new iDevice at that time.
That item could be the rumored iPhone 5S, the next iPad Mini or something the world has never seen before.
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