Apple CEO Tim Cook has told investors the company won’t be making as much money as it expected over the crucial holiday quarter. Lower than expected iPhone sales, particularly in China, have led the tech giant to slash its revenue forecasts, causing Apple shares continue to decline from their peak in October last year.
Apple shares have fallen over 39 per cent since a 52-week high on October 3, 2018, representing a $US452 billion loss in market capitalisation, according to CNBC, which notes Apple “just lost a Facebook” — Facebook’s market cap is currently around $379 billion — and, like 496 of the S&P 500, smaller than Apple’s recent downgrade.
Much of the damage occurred this week when Apple revised its revenue expectations down to approximately $US84 billion for Apple’s fiscal 2019 first quarter. In a letter to investors, Cook blamed a “challenging quarter” on softening emerging markets — mainly China — and poor iPhone sales.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook said.
The Apple CEO noted China’s economy had begun to slow in the second half of 2018 and, in a thinly veiled jab, said Trump’s trade war with China also bore some responsibility for the poor performance.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” Cook said.
Revenue from iPhone sales was also revised down. Again the Chinese market was singled out but in developed markets “iPhone upgrades also were not as strong as we thought they would be”.
Despite the struggles, Cook maintains that Apple has a “bright future” in China because of the country’s innovative developer community and Apple’s strong following there. Cook also pointed out Apple’s other products were still booming. Categories outside of iPhone like Apple services, Mac, iPad, Wearables/Home/Accessories combined to grow almost 19 per cent year-over-year, according to Cook’s letter.
Cook largely blamed macroeconomic factors for the company’s woes, but Apple may have also hit a price wall with its consumers — at least when it comes to phones.
2018 saw the most expensive iPhones in history despite only incremental upgrades. In Australia, top-spec iPhones now set you back over $2300. The price tag and the lack of new features are causing consumers to think twice about upgrading.
Phone users now hold on to their handsets for around three years before upgrading, up from a typical two-year lifecycle in 2014, according to the Washington Post. Research from Telsyte also suggests many Australian consumers are holding on to their phones until 5G enabled devices are are available.
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