Apple’s Slowdown

Apple’s new CEO, John Ternus, has learned from the best. The script for his first earnings call on Monday was so full of marketing palaver about Apple products, and so lacking in information, that Ternus’ predecessor, Tim Cook, must have been glowing with pride. Perhaps after seeing investors freak out last week when other big tech firms reported earnings squeezed by AI investments, Ternus was determined to bore Wall Street into submission.

Alas! Finance chief Kevan Parekh woke listeners from their Ternus-induced slumber by projecting 7% to 10% growth in revenue for the December quarter, a marked slowdown from the 12% growth in the September period. Meanwhile, he projected a drop in Apple’s gross margin, thanks to rising costs of memory. Apple shares promptly traded down, falling as much as 4% in after-hours trading. Parekh blamed limited component supplies for the expected revenue slowdown: Apple can’t make as many of its devices as it could sell. But that may not be the only explanation.

In the September quarter—which is usually a quiet one for iPhone sales because shoppers are waiting for the new model—iPhone sales surged 17%, the company reported Monday. The likeliest explanation is that buyers opted to grab the 2025 model rather than wait for the iPhone 18 Pro, which came out in late September, both because Apple had hinted at a price increase and because chatter suggested the new phone would be only marginally better than the 17 Pro. Assuming that’s true, iPhone Pro sales will be weaker in the December quarter than is typically the case.

Sure, Apple’s new foldable phone, the Duo, which went on sale in late October, should offset the slowdown in the Pro. But as the Duo retails for $2,000-plus, roughly double the price of regular iPhones, consumer demand is likely limited. It also probably won’t help that social media has been full of complaints about cracking screens in the Duo. Apple will surely iron out the hardware kinks over time, but there have been so many reports of the problem that some buyers will likely hold off for now.

Apple’s revenue outlook is likely not the biggest worry for investors. The company is still grappling with soaring memory prices, as well as the reality that it can no longer dictate to chipmakers the volume of chips it wants delivered, thanks to AI chip designer Nvidia grabbing much of the manufacturing capacity. Meanwhile, growth in Apple’s services business is slowing as a result of a tougher market for mobile gaming and regulator-forced changes in the company’s App Store business. Apple’s business remains solid, but things are bumpier than they have been.

Lumentum’s Not So Marvell-ous Deal

Investors are in a skeptical mood right now. Take their reaction to Marvell Technology’s announcement on Monday that it would buy Lumentum by issuing a large bunch of its shares. Unfortunately, Marvell shares tanked 12.7% on Monday. Lumentum’s shares ended up falling even further, closing well below the theoretical value of Marvell’s offer.

What’s going on? Lumentum is certainly a hot property—its revenue nearly doubled in its last fiscal year, thanks to the popularity of the lasers it sells, which can move data within data centers faster than copper wires. But investors are jittery about the staying power of the investment surge in AI data centers, which makes them nervous about Lumentum’s prospects. Indeed, while Lumentum shares rocketed as high as $1,100 last month, from below $200 a year ago, the stock traded down in recent weeks to $840 by Friday.

Marvell may not have won over investors with its frothy marketing pitch that the combination of the two companies would be more than the sum of the parts. Marvell does a bunch of things, including chip design, but it has been expanding in the optical connection business. In a presentation to investors on Monday, it estimated its total addressable market—the potential size of the business it could get—at $400 billion, while it put Lumentum’s TAM at $90 billion. Together, the two have a TAM of $550 billion, Marvell CEO Matt Murphy claimed. Yes, 1+1=3.

Amusingly, Marvell—perhaps anticipating the investor reaction—came up with a novel way of calculating the value of the deal for shareholders. Marvell claimed the terms “implied” an enterprise value for Lumentum of $115 billion, which it said represented a price per Lumentum share of $1,132. That looks too high, though. Using Friday’s close, Marvell’s deal values Lumentum at closer to $90 billion (and lower on Monday).

How did Marvell get to $115 billion? My colleague Valida Pau hears that Marvell might be calculating the number by using its price of $251 a share from last Wednesday, before Bloomberg and The Information reported the talks. That seems a bit of a stretch.

Given that Marvell has told Lumentum shareholders they’ll get 4.5 Marvell shares for each Lumentum share they own, there’s no need for that kind of mental gymnastics. Simply look at the Marvell price and do the math! As of Marvell’s close on Monday, the value of the offer was $771.08 a share, or below $80 billion in total.