Apple Inc. (AAPL): Foxconn Freeze Affecting Stock Price?

Apple Inc. (NASDAQ:AAPL) stock, which already took a huge hit last month when its earnings report came in as “disappointing” (where an all-time best in revenue is somehow disappointing is a topic for another day), the stock has slid a little bit more the last couple days when some news came out Wednesday that the company’s largest supplier of components for devices, China-based Foxconn, was imposing a hiring freeze for at least a month – which goes against what the company has traditionally done about this time every prior year.

The Apple Inc. (NASDAQ:AAPL) stock is taking the hit, but why? There seems to be two conflicting report as to the reason for the freeze. The Financial Times reports it one way, while Bloomberg takes a different tack. Should either reason affect Apple stock, or is this just reaction to misinformation?

Apple Inc. (NASDAQ:AAPL)Both the Financial Times and Bloomberg agree on the initial news report that revealed that Foxconn, which provides components for several tech companies – but is the biggest supplier for Apple – but the two news outlets provide different reasons for the freeze. The Financial Times cites anonymous sources in its story, suggesting that Apple Inc. (NASDAQ:AAPL) has lowered it orders for components for the iPhone 5 due to dropping sales demand. “Foxconn’s demand for workers this year was as low as that in 2009,” a source said in the Financial Times piece.

On the other hand, Bloomberg cited in its report that the freeze is simply because the company has seen much higher employee retention following the Chinese New Year. Foxconn has generally seen about 75 to 80 percent of their workers return following the Lunar New Year break in past years, but the company is reporting employee retention this time of more than 90 percent. Foxconn has increased wages and lowered work hours in recent months after audits from Apple and some labor rights groups who have been pushing for better work conditions.

What do you think? Why is Apple Inc. (NASDAQ:AAPL) taking a hit with its stock? Is there good reason – is the hiring freeze due to iPhone 5 orders, employee retention, or both? Let us know your thoughts in the comments section below.

DISCLOSURE: I own no positions in any stock mentioned.

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