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Drop in iPhone sales hasn’t hurt Jabil

Margie Manning



Photo by Przemyslaw Marczynski on Unsplash

Revenue jumped nearly 13 percent at Jabil Inc. in the quarter that ended May 31, despite a decline in iPhone sales, the flagship product of Jabil’s biggest customer, Apple Inc.

Weak demand for iPhones was offset by gains in other parts of Jabil’s business, including its healthcare collaboration with Johnson & Johnson.

The results underscore the progress Jabil has made in diversifying its markets and products, said Mark Mondello, CEO of Jabil (NYSE: JBL), the largest company headquartered in St. Petersburg. The company reported $43.4 million in net income, or 28 cents a share, on revenue of $6.1 billion for the just-ended third quarter of its fiscal year.

See the complete earnings release here.

Jabil designs and manufactures products for dozens of companies and has more than 100 facilities, but about half of its 44 million square feet of total space is in China. While trade tensions are rising amid President Donald Trump’s plan to impose additional tariffs on Chinese imports, Mondello said on a conference call with analysts that very few of Jabil’s customers are moving existing production out of China.

Mark Mondello, CEO, Jabil

“I believe this decision made by those customers is based on three factors,” Mondello said. “One, the deep-rooted mature supply chain that’s foundational to China. Two, many of our customers don’t see a reasonable payback associated with such a move. And three, a decent percentage of our China revenue is for final consumption in geographies other than the United States.”

If customers change their minds, Jabil is better positioned than most companies of its kind to accommodate them, because all its factories are linked with a common IT system, Mondello said.

Jabil makes iPhone casings and other products in China for Apple, and that company accounted for 28 percent of Jabil’s $22.1 billion revenue in its last fiscal year.

Apple (Nasdaq: AAPL) saw a 30 percent decline in iPhone shipments in the first quarter of 2019, and now holds just 11.7 percent of global smartphone market share, down more than 25 percent from a year ago, Axios reported.

Jabil’s mobility business — the segment that includes smartphones, tablets and accessories — showed continued weakness in the just-ended quarter, Mondello said. But new business wins, including the collaboration Jabil announced last year with Johnson & Johnson Medical Devices,  are picking up the slack.

Jabil now has added five J&J sites and the employees who work at those locations, with more sites and employees still to come. Jabil forecasts $800 million to $1 billion in revenue from the business in fiscal year 2020.

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