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Supplier Reveals Things Apple Keeps Secret

This article is more than 10 years old.

Don’t expect to hear the word “Apple” (AAPL) uttered at Cirrus Logic’s (CRUS) earnings conference July 25, as Cirrus executives and analysts are well-trained to treat that huge customer as he-who-must-not-be-named. But if you listen closely, you might glean something about Apple that the secret-prone giant wouldn’t itself divulge.

Cirrus makes high-end audio chips, and some 82% of its revenues in the fiscal year ended March 30 came from Apple, a little financial research reveals: SEC requirements beyond Apple’s control required the disclosure in the latest Cirrus 10k, which also notes that Apple work contributed 62% and 47% of revenues in the two previous fiscal years respectively. Otherwise, Cirrus executives go to great lengths to avoid the A-word, keenly aware of the tight non-disclosure agreements Apple requires of all its suppliers. Analysts have learned to carefully substitute “your largest customer” for “Apple” in their public questions, or to contort their inquiries in ways to obscure the name.

Nevertheless, with so much revenue dependent on Apple, Cirrus’ results better reflect Apple’s than those of any other public company. Its share price, as seen in a stock chart, has gone right down with Apple’s as concerns emerged over Apple’s ability to continue producing new high-end gadgets. Industry analysts often follow Cirrus’ fortunes for hints on the state of Apple’s business. (Cirrus executives rarely use i-words either, but it makes audio chips for iPhones, iPads and iPods.)

CRUS data by YCharts

For example, a Cirrus CEO revelation about profit margins recently pretty much confirmed analysts’ suspicions that Apple would launch a lower-end iPhone in September. Cirrus CEO Jason Rhode told analysts at Barclays Global Technology, Media and Telecommunications Conference in May that a recent decline in his company’s typical 50%-plus profit margins would last into the second half of the year, down to the mid-40s range. The smartphone market had become very competitive, he said, and it was under pricing pressure. Apple is widely expected to launch this year both an iPhone 5S and another new model (possibly called iPhone 6). But in typical Apple style, it has confirmed nothing about launch dates, features or pricing.

CRUS Gross Profit Margin TTM data by YCharts

In the past, Apple watchers have looked to Cirrus’ revenue projections to help formulate predictions about Apple, such as dates and sizes of iPhone and iPad launches. These are details Apple itself typically withholds.

CRUS Revenue TTM data by YCharts

Apple hosts its own earnings conference on July 23, two days before Cirrus. Perhaps Tim Cook will tell you everything you want to know there. If not, Cirrus’ results might make reading the tea leaves just a little bit easier.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com. You can also request a demonstration of YCharts Platinum.