Apple drops revenue guidance after slowing sales in China


Apple said it now expects revenue of around $84bn, down from an earlier estimate of between $89bn and $93bn.

Wall Street is still reeling after Apple's disappointing first quarter (Q1) expectations.

With a company as large and dominant as Apple, any uncertainty or concern in the company reverberates quickly and sharply throughout the company's supply chain. "First, the different timing of its iPhone launches, which would affect its on-year compares". The iPhone is the most important Apple product and brought in around 60 percent of the total revenues.

Apple's first instance of revised earnings guidance since 2002 has the potential to rattle the financial markets as it puts the spotlight on China's woes and the dependence of the largest USA companies on strong growth in the world's second-largest economy. The AirPods and the MacBook Air were also constrained. "This turned out to have a significantly greater impact than it had projected". In late December, the promotional program for the new models went live in China, adding one major perk: users in China cannot only trade in their old iPhones, but also Android phones made by Apple's major competitors in China, including Huawei, OPPO and Xiaomi.

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook's comments on the impact of the US trade tensions with China "might be a dig at (US President Donald) Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they've made over the past year".

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While Cook said the main factor for the weakening iPhone demand is the trade war between the United States and China, many believe the high prices of the 2018 iPhones are actually what convinced many potential buyers to hold on to their purchases. "The government-reported GDP growth during the September quarter was the second lowest in the last 25 years", wrote Cook. It's clear that the economy began to slow there in the second half and I believe the trade tensions between the United States and China put additional pressure on their economy. The company also sees the traffic to retail stores and partner sellers in China declining in the quarter. And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp.

Apple's stocks fell by 10 percent Thursday in the wake of the company cutting its quarterly revenue outlook for the first time in two decades. In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow nearly 19% on-year.

"Bernstein Liebhard wrote in their press release: "[On] November 1, 2018 during Apple's fourth quarter 2018 conference call, CEO Tim Cook stated that '[o] ur business in China was very strong last quarter.

Jain also thinks the announcement is due to Apple-specific problems, including lack of product innovation and differentiation versus Chinese rivals.

Both are not optimistic about emerging markets and see a slowdown.