Apple warns investors to expect weaker profit, blaming China's worsening economy


It appears that fewer people are buying the iPhone than expected and as a result, Apple had to revise its earnings for its fiscal 2019 first quarter. It now expects revenue of $84 billion, well below the prior range of $89 billion to $94 billion that it projected in November. Whether the reasons were political or purely economic, Apple's stores and channel partners in China saw significantly reduced foot traffic.

Cook lowered the company's revenue guidance for the three months that ended December 29, to about $84 billion from as much as $93 billion.

The reckoning came in a letter from Apple chief executive Tim Cook to the company's shareholders released after the U.S. stock market closed Wednesday.

"While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be", Cook said.

For Q1 2018, Apple had posted record revenue of $88.3 billion and it was mostly driven by the iPhone X which had surpassed their expectations.

Cook also acknowledged that consumers in other markets are not buying as numerous latest iPhones, released last autumn, as Apple had anticipated - a factor that could stem from a starting price of $1,000 for Apple's top-of-the-line iPhones.

He said Apple's surprise revenue warning is "simply a sign of the times for Apple".

China's "economy began to slow there for the second half", Mr Cook said during an interview with CNBC on Wednesday afternoon.

An electronic screen displays the Apple Inc. logo on the exterior of the Nasdaq Market Site following the close of the day's trading session in NY, on August 2, 2018. The news sent Apple's stock plunging after hours.

A Washington lobby group representing Apple, Google, Samsung and other global tech giants has called on the Trump administration to end the "mutually damaging trade war" with China after America's most recognised tech brand became the latest example of collateral damage amid ongoing Sino-US trade tensions. Last fall, Apple unveiled the iPhone XS and iPhone XS Max, which offered modest upgrades like a faster processor and, in the case of the Max, a big size increase. He then goes on to blame several factors that are beyond Apple's control and repeatedly insists that its new products are actually succeeding so well that they've often been in short supply. Our top models, iPhone XS and iPhone XSMax, shipped in Q4'18-placing the channel fill and early sales in that quarter, whereas past year iPhone X shipped in Q1'18, placing the channel fill and early sales in the December quarter.

One thing Cook didn't mention in his letter is Apple's declining market share in China and the rise of domestic rivals like Huawei and Oppo.

In December, Bloomberg News reported the company was facing a "fire drill" to boost iPhone sales, which led the company to aggressively market the product at lower than actual prices. The company said wearables sales grew by nearly 50% over last year's holiday quarter, the Apple Watch and AirPods being especially popular this year.