Apple admits it is going to miss iPhone sales

Posted January 11, 2019

Apple on Wednesday lowered its forecast to $84 billion in revenue for its fiscal first quarter ended December 29, below analysts' estimate of $91.5 billion, according to IBES data from Refinitiv.

In a letter to investors from CEO Tim Cook on Wednesday, the company lowered revenue guidance to 84 billion US dollars, down from the 89-93 billion dollars range it had previously projected.

"We did not foresee the magnitude of the economic deceleration, particularly in Greater China", Cook wrote.

"We believe the economic environment in China has been further impacted by rising trade tensions with the United States". This turned out to have a significantly greater impact than we had projected. Nevertheless, the relatively poor earnings performance has depressed Apple's share price by about 8% recently, and may have had a knock-on effect on other tech stocks.

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China is now experiencing an economic slowdown, with GDP growth expected to hit 6.5 percent for the year, the lowest growth rate since 1990. "We don't view the Apple pre-announcement as a canary in the coal mine for emerging markets at large", says Bhansali.

The fact that Apple took the dramatic step of halting trading is an indication that the company was taken by surprise by the iPhone sales shortfall.

Services generated over $10.8 billion in revenue in Q1, growing to a new quarterly record in every geographic segment.

He noted that China's economy started to weaken in second-half 2018.

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But Cook also mentioned fewer carrier subsidiaries on new iPhones, as well as the dramatically lowered battery replacement price for older models (due to Apple's iPhone slowdown drama from late 2017), as contributing factors. Based on our best estimates of how these would play out, we predicted that we would report slight revenue growth year-over-year for the quarter.

"And what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy", Cook said in an interview with CNBC.

He points to tensions between China and the USA as contributing to the problem, but insists that Apple's future in the country is "bright". Those include "consumers adapting to a world with fewer carrier subsidies, USA dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements", Cook wrote.

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business.

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