Is it the China slowdown or is it just Apple?

Adjust Comment Print

Apple now forecasts $84 billion Dollars (about $114 billion CAD) in revenue for the first quarter of 2018, a number that already sits below estimates of $91.5 billion ($124 billion CAD) based on BES data from Refinitiv, according to Reuters.

CNN published a letter from Apple chief executive Tim Cook on Wednesday (Jan. 2) that warns investors to expect lower margins in the first quarter due to a plunge in sales over the Christmas period.

When compared to the estimates provided by Apple to its investors in November, the revenue amount took a drastic nosedive, while the "other income/(expense)" category went through the roof, reaching approximately $550 million from an initial estimate of $300 million.

Cook also admits that iPhone upgrades weren't as strong as expected even in "some developed markets".

Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and we are on track to achieve our goal of doubling the size of this business from 2016 to 2020. As Q1 progressed, traffic to Apple retail stores and its channel partners in China declined.

Worker killed after lion escape from North Carolina wildlife conservatory
A 22-year-old zoo worker was killed in North Carolina on Sunday after being attacked by a lion at a wildlife park. Black was attacked and killed by the animal on Sunday, according to the Caswell County Sheriff's Office.

Later in the missive, however, Steve Jobs former right-hand man would admit that the iPhone has also fallen short of expectations, both in its emerging and established markets around the world.

"If we have a successful negotiation with China then Apple's sales and everybody else's sales will recover", he said, before predicting that USA economic growth would continue to be strong. For Apple, this quarter actually ended on December 29, 2018. Cook chalked it up to multiple factors, including macroeconomic challenges, fewer carrier subsidies and reduced pricing for iPhone battery replacements.

Cook said the slowing in China's economy was made worse by "rising trade tensions with the United States". Apple shares fell as much as 9.6 per cent as the market opened in NY on Thursday. This isn't unprecedented, but it might come as a bit of a shock to those investors that've seen quarter after quarter of big iPhone sales and revenue aplenty across the board for the company.

A timeline illustrating Apple share prices in 2018.

In the meantime, Apple's older iPhone 7 and iPhone 8 models remain available for consumers who don't want to break the bank for a new iPhone. "If we have a successful negotiation with China, then Apple's sales and everybody else's sales will recover". Cook wrote that slower iPhone sales account for much of the revenue decline in Apple's first fiscal quarter.

Comments