Inside Today's Brutal Apple Sell-Off

Amid a broadly downbeat day on the market, shares of Apple (NASDAQ: AAPL  ) are getting clobbered, down 5.1% as of 2:30 p.m. EDT. That puts the Mac maker at fresh 52-week lows and prices not seen since December 2011.

The biggest contributor to the drop was audio codec supplier Cirrus Logic's (NASDAQ: CRUS  ) preliminary results, which hit the wire last night. The company said it expects last quarter's revenue come to about $206.9 million, falling shy of the $210.2 million consensus estimate.

In addition, Cirrus is recording a net inventory reserve of $23.3 million, which includes $20.7 million related to a "decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components." With Apple being the company's biggest customer by far and iPhones being the highest-volume product that Cirrus supplies components for, there's little doubt as to where the weakness is coming from.

Inventory reserves are created ahead of inventory writedowns, so Cirrus is expecting to take a loss on some of its inventory. The reserve is a high-end accounting estimate that's used while the company calculates its figures more specifically. Cirrus expects its gross margin to get hit by more than 10% (because the inventory reserve is charged as part of cost of goods sold).

Investor sentiment over Apple's near-term prospects have soured over the past few months as the company enters a lull in its product cycles and consumers potentially delay purchases in anticipation. The implication is that iPhone shipments are weak, which is directly impacting Cirrus Logic's top line and will subsequently put a dent in Apple's as well, even though Cirrus acknowledges that there's a migration to newer products taking place.

Apple reports earnings next Tuesday, and Cirrus will follow suit with its own full results next Thursday. Investors won't have to wait long to get more clarity on how the two are faring.

Amid Apple's sell-off, you're probably wondering whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons both to buy and to sell Apple, as well as what opportunities remain for the company (and your portfolio) going forward. To get instant access to his latest thoughts on Apple, simply click here now.


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Comments from our Foolish Readers

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  • Report this Comment On April 17, 2013, at 3:05 PM, Jjkiam wrote:

    Tim Cooks gotta go!!! Never seen a CEO completely ignor the total collapse of the stock and make only one comment "I don't like it" . Wow this is leadership? What has he done that hasn't resulted in more stock sell offs? Visit China and then we see a targeted Govt backed smear campaign. A series of humiliating apologies. Complete indecision on how to utilize the enormous shareholder cash equivalents for almost as long as the stock has been in decline.

    Opening his mouth about how full the Apple pipeline is and then not have anything to show for months and months. Not aggressively try to change the momentum of negativity surrounding the company since it started in late September by the market and soon the consumer who begins to believe that Apple is losing . Every public appearance has resulted in more stock sell offs.

    Open comment to Apple Board Start acting in the fiduciary interests of the shareholders you are supposed to represent ! And get a CEO who can walk and chew gum at the same time. This has gone on way too long. Either that or face shareholder suits to force change. Disgraceful !!!

  • Report this Comment On April 17, 2013, at 4:46 PM, jordanwi wrote:

    You know the product cycles. You know the products. You know the nature of the market. Trying to oust Tim Cook for apologizing? I know it stings, but don't be stupid. Who's going to replace him? Balmer?

  • Report this Comment On April 17, 2013, at 4:54 PM, SyDVooh wrote:

    AAPL is "in a lull in its product cycle?" Duh. It's a cycle, and by the end of this summer there will be a slew of new products. Tim Cook is doing a superhuman job as AAPL CEO. Supply chain optimization, (Tim Cook's major field of expertize, the reason Steve Jobs chose him for his replacement), will see a major change of suppliers. Samsung and others who ripped off AAPL product designs and tech secrets, will be gone. This reorganization has taken some time, yet it was necessary to ensure future AAPL profits. We can only thank the AAPL bears, for providing us with this wonderful buying opportunity, for long term AAPL investors.

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