Apple trouble? Another iPhone supplier disappoints

Published Tue, Oct 27 201511:38 AM EDT

Another day, another disappointing report from a supplier to the iPhone. Knowles , a microphone maker, fell more than 15 percent Tuesday after saying the prior evening that sales this quarter may fall short of Wall Street forecasts. UK-based Dialog Semiconductor , a maker of power management chips for the iPhone, lost a fifth of its value in European trading Monday after saying something similar in an earnings pre-announcement. Dialog gets 75 percent of its sales from the iPhone, according to estimates. Other suppliers like Skyworks Solutions , Avago , and Cirrus Logic are down 4 percent or more so far this week. If the companies that supply parts to the iPhone are disappointing investors, does that mean Apple will as well when it reports quarterly results after the close Tuesday? While yesterday's warning from Dialog was clearly due to iPhone demand, according to analysts, it was unclear whether the Knowles miss was because of this as well. And the company didn't give enough clues to make that conclusion on its conference call either, instead focusing on China and Samsung during that discussion. "We see moderating growth from Chinese customers," Jeffrey Niew, Knowles' chief executive officer, said on the call Monday, according to a FactSet transcript. He added, "I would just highlight that one specific customer which I'm not going to go into details at within China is probably more problematic than the rest in terms of bringing down the China growth number." Knowles shares were near the lows of the day as of 11:24 am in New York trading, down 16 percent. "We believe the modest shortfall in guidance versus consensus related to lower revenues at Samsung and Nokia," Robert Labick of CJS Securities wrote in a note to clients Tuesday after the call. Read More Bad omen for Apple report as supplier shares sink On the call, Knowles, spun out from conglomerate Dover Corp. last year, did signal slowing smartphone demand in Asia, something Apple shareholders should also worry about. "The other issue that we're facing here is at the Korean OEM (original equipment manufacturer), they had their launch quarter midyear in July for the Note and the Edge Plus. And now we see kind of a slowdown," CEO Niew said on the call. Read More Tech earnings boom due to cloud. How to play it The Knowles situation is a little more of a mystery than Dialog's warning and the Street commentary that came after. "Based on our conversation with the company (Dialog Semiconductor), we believe the lower than expected third quarter/fourth quarter sales is driven mainly by lower than expected unit demand at Apple," JPMorgan's Chetan Udeshi wrote in a note to clients Monday following Dialog's announcement. Shares of Apple were about little changed in midday trading Tuesday. So it's hard to say with certainty at this point whether iPhone sales will come up short or not tonight, but these announcements can't make Apple shareholders comfortable going into the report.

A customer checks an iPhone 6s at an Apple store.

Chesnot | Getty Images

Another day, another disappointing report from a supplier to the iPhone.

Knowles, a microphone maker, fell more than 15 percent Tuesday after saying the prior evening that sales this quarter may fall short of Wall Street forecasts.

UK-based Dialog Semiconductor, a maker of power management chips for the iPhone, lost a fifth of its value in European trading Monday after saying something similar in an earnings pre-announcement. Dialog gets 75 percent of its sales from the iPhone, according to estimates.

Other suppliers like Skyworks Solutions, Avago, and Cirrus Logic are down 4 percent or more so far this week.

If the companies that supply parts to the iPhone are disappointing investors, does that mean Apple will as well when it reports quarterly results after the close Tuesday?