Three-minute chat that wiped billions off stocks

A three minute conversation on stage at UBS AG’s Global Technology Conference in San Francisco helped wipe more than $190 billion from global stocks.
Lumentum Holdings Inc. makes lasers for 3D facial recognition used by major smartphone makers, with Apple Inc. its key client. On Monday, the company announced a 17 percent cut in its December-quarter revenue outlook. That triggered a plunge in shares of Apple and its suppliers, and reverberated through stock markets in the US and Asia.
In its press release earlier that day, Lumentum mentioned a recent client request to cut shipments. But as the question hints, and the answer shows, this wasn’t some competitive dynamic working against the company. The client, Apple, cut its own outlook. And Coldren goes on to note that you can’t really split the issue of excess inventory and weaker demand. They’re related. This is something I warned about back in August, and something that the market is once again learning to deal with.
As a relatively new vendor to Apple, it’s possible that Lumentum hasn’t learned to play the supplier game.
Around the middle of every year you’ll see a string of press reports claiming that Apple has expectations for how many iPhones it’ll sell that year. The source of that news is invariably suppliers. Neither the manufacturer nor Apple itself knows how many devices customers will actually buy.
What Apple is really telling its vendors is how many units they should be prepared to make. From over a decade covering the sector, I’ve learned that this client tends to ask for a lot more than may be needed. Experienced suppliers know how to adjust to Apple’s early optimism.
With sales concentrated so early on in the product cycle, any bottlenecks in supply have the potential to hurt iPhone sales. As i-Day approaches, Apple may sometimes rush suppliers in order to get more devices on the shelves so they can soak up any early demand.
But as Lumentum just discovered, that excitement can disappear quickly. And with it go hopes that the tech bull market can resume.

— Bloomberg