Apple’s stock tumbles on rumors of production cuts
Some of the shine rubbed off Apple Inc.’s stock Tuesday after unconfirmed rumors circulated on Wall Street that the company might cut production of either its iPhone or iPod devices.
Apple shares dropped $9.67, nearly 7%, to $131.76, the biggest one-day drop in more than two years.
Analysts said excitement around the iPhone, which went on sale June 29, had made Apple’s stock especially volatile. Its shares are up nearly 60% since the iPhone was announced in January.
“Everyone is on the Apple bandwagon,” said Scott Kessler, an analyst with Standard & Poor’s Equity Research who rates the shares “hold.” “Everyone owns the stock. Everyone loves the stock. There’s nothing wrong with that, but it increases the likelihood of a pullback if there’s uncertainty or disappointment.”
The rumors about changes in production could be related to the iPhone, Kessler said, or they could reflect coming changes in Apple’s product lineup.
“Apple doesn’t comment on rumors and speculation,” Apple spokeswoman Jennifer Bowcock said.
When Cupertino, Calif.,-based Apple reported its quarterly financial results last week, company executives said they expected to sell 1 million iPhones by the end of the current quarter and 10 million by the end of 2008. Apple sold 270,000 during the first two days the phone was for sale.
A more minor contributor to the stock drop could have been a copyright infringement lawsuit filed by the music publishers for Eminem, alleging that Apple violated copyrights by selling the rap musician’s music on Apple’s iTunes online music store.
Eight Mile Style and Martin Affiliated said that although Apple had a contract with Eminem’s recording label, Universal Music Group, for the rights to the sound recording, Apple had not negotiated with the publishers, who hold the copyright to the lyrics and sheet music.
The suit was filed in U.S. District Court in Detroit.
Typically, the record company owns the sound recording and the songwriter, represented by a publisher, owns the musical composition and lyrics. Many musicians sell their publishing rights to labels, but Eminem has held on to the publishing rights through Eight Mile Style and Martin Affiliated.
In 2004, Eminem sued Apple for using one of his songs in an iPod TV commercial. The following year, Eminem’s publishing companies also sued to stop five companies from selling the rapper’s songs as cellphone ring tones. Both suits were settled out of court.
Entertainment lawyers said more artists and publishing companies might file similar suits against online music retailers such as Apple, which said Tuesday that it had sold 3 billion songs.
“This is the tip of the iceberg,” said Owen Sloane, an entertainment lawyer with Berger Kahn in Marina del Rey. “The problem is Apple pays a flat fee to the labels. Publishers are complaining they are not being paid.”
An Apple spokesman declined to comment on the suit.
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