Apple blames revenue slump on slowing Chinese economy as iPhone sales slow

Apple blames revenue slump on slowing Chinese economy as iPhone sales slow

IT

Concern about the pace of growth in China, the impact of the USA tariff war and the general state of technology valuations all got an airing in the reaction to Apple's warning.

The announcement comes on the heels of a recent Chines court ruling to halt the sale of some iPhones in China, after a petition from chipmaker Qualcomm accused Apple of patent violations.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China", Apple CEO Tim Cook wrote in a press release published Wednesday.

Cook admitted, "iPhone upgrades also were not as strong as we thought they would be".

Apple said Wednesday that demand for iPhones on the market is declining and its revenue guidance for its fiscal 2019 first quarter, which ended on December 29, 2018, was revised downward.

The selloff in Apple dragged its market capitalization below that of Alphabet Inc and set the stock for its biggest intra-day percentage fall in nearly six years.

"This is not a catastrophe nor is it a sign that Apple is losing its grip on the smartphone market but merely a misjudgment by Apple with regard to how much money people will pay for an iPhone". But Cook specifically said then that he "would not put China in that category" of countries with troubled growth. FedEx Corp., Starbucks Corp., Tiffany & Co. and Daimler AG are also finding it harder to sell their wares in the world's second-largest economy.

Apple CEO Tim Cook this week told investors that the main drag on the firm's performance in China had been a sharper-than-expected slowdown in the country's economy, exacerbated by the impact of trade tensions between Washington and Beijing. Stocks went into a steep slide Thursday after Apple sent a shudder through Wall Street with word that iPhone sales in China are falling.

He is calling for them to move manufacturing to the USA, however. Apple's stock dropped by almost 10 percent once trading resumed.

Even the "budget" iPhone in the new lineup, the iPhone XR, has a starting price of $749-meaning that the iPhone's entry-level pricing is now equal to what its high-end pricing had been just two years ago.

A Chinese court has also issued a preliminary injunction banning some Apple phones, part of a legal battle with chip maker Qualcomm Inc. The Nasdaq lost 202 points, or 3 percent, to 6,463.

Cook attributed much of the "shortfall" in the outlook to struggles in China that he pinned on the economy and "rising trade tensions" with the U.S.

Shares of US-based suppliers and chipmakers including Cirrus Logic Inc, Skyworks Solutions Inc, Analog Devices, Broadcom Inc, NXP Semiconductors NV and Micron Technology Inc were all down in morning trading. Natural gas fell 0.4 percent to $2.95 per 1,000 cubic feet. USA crude rose 1.2 percent to $47.09 a barrel in NY and Brent crude rose 1.9 percent to $55.95 a barrel in London. The British pound fell to $1.2630 from $1.2690.

In other commodities trading, wholesale gasoline rose 1.8 percent to $1.35 a gallon and heating oil climbed 2.4 percent to $1.74 a gallon.

  • Terrell Bush