Will Apple’s Fate Be Decided By Key Suppliers?

Cirrus Logic (NASDAQ:CRUS) seems to have let Apple (NASDAQ:AAPL) and investors in both companies down figuratively and literally. The chip supplier didn’t quite meet estimates for its quarterly earnings, and that was the source of the trouble; its earnings miss caused reverberations felt by shares of both companies.

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Cirrus Logic supplies chips for some Apple products, and its earnings results apparently had a widespread impact as both Cirrus Logic and Apple had their stock prices negatively affected. This makes for an effective example of just how deeply connected tech companies are.

The company’s quarterly results didn’t really warrant all the trouble. Cirrus Logic actually showed rather impressive growth, with fourth quarter revenue growing 87 percent to $206.9 million in preliminary results reported Tuesday night. The problem was that the estimate fell short of analyst expectations by about $3.3 million.

But that might not have been the only factor making investors, Cirrus Logic, and in turn, Apple frown. Cirrus Logic announced in the report that the company will take its “net inventory reserve of $23.3 million, of which approximately $20.7 million is due to decreased forecast for a high volume product.” That’s the point where the connection to Apple could have been made, as the high volume product could be one of Apple’s devices, and Cirrus Logic may be expecting reduced sales of the device…

Cirrus Logic’s first quarter ends in June, and the company expects revenue between $150 million and $170 million, which once again falls below estimates, which are at $182.38 million according to analysts polled by Thomson Reuters.

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The result of Cirrus Logic’s report were hits for the company and Apple. While Cirrus Logic was the heaviest hit, with shares falling about 13.5 percent to $18.54 after the announcement, Apple was also off 3.6 percent, bringing its stock price to $410.85 — its lowest point since January. The stock fell even further later Wednesday morning, dropping to around $407.50 late Wednesday morning.

Canaccord Genuity analyst Bobby Burleson dropped his price target for Cirrus Logic from $30 to $25. Apple may see some changes to expectations in the short term, although its current low share price might prove tempting for investors looking to get on board before the next series of iDevices come out later this year.

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