What’s Behind Apple’s Torrid Start to the Day?

iphone5Apple (NASDAQ:AAPL) shares fell below $500 during premarket trading on Monday after several news reports said the company had cut back on orders of iPhone 5 components because sales of the device were below expectations.

The Nikkei newswire as well as The Wall Street Journal said the company had cut productions orders for LCD screens at Japan Display, Sharp, and LG Display (NYSE:LPL) by half from an initial total of 65 million for the January to March quarter. Orders for other iPhone components, including processors, had also been cut, the reports added.

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Sales of the iPhone 5, which was released in September, have reportedly not been as strong as Apple had anticipated. According to an IDC report, Apple claimed 14.6 percent of global smartphone shipments in the third quarter of last year to Samsung’s (SSNLF.PK) 31.3 percent. The iPhone maker had held a 23 percent share in the fourth quarter of 2011 and the first quarter of 2012, its highest numbers ever.

Strategy Analytics has now forecast Samsung to sell 290 million smartphones this year against the iPhone’s 180 million. The Korean company is expected to launch the step-up version of its ultra-successful Galaxy S III in the next few months. Among the features being predicted for the new S IV are an unbreakable screen, high-definition quality resolution of 440 pixels per inch, and a stronger processor.

Apart from Samsung, its single biggest rival, Apple has also faced strong competition from other Google (NASDAQ:GOOG) Android manufacturers, including HTC and Motorola. In China, its fastest-growing market, Apple has had to deal with the growing demand for cheap smartphones from local firms such as Huawei Technologies. There was buzz last week that Apple was considering creating a cheaper version of the iPhone for cost-conscious markets such as China and India.

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Apple shares dipped as much as 4.5 percent before the markets opened on Monday. They were down just under 3 percent just before the start of regular trading. The company ended Friday at $520.30 and is now down 26 percent from record highs in September. The news also hurt shares of Apple suppliers such as Cirrus Logic (NASDAQ:CRUS) and Qualcomm (NASDAQ:QCOM).

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