Apple Shares Tumble After CEO Tim Cook Issues Revenue Downgrade

Apple Shares Tumble After CEO Tim Cook Issues Revenue Downgrade

Within just two months, China, the world's largest smartphone market, has turned from a growth driver to a weak spot for Apple.

In an open letter to investors published last night, Apple cut its revenue forecast for the busy Christmas quarter by 7.8 percent. "iPhone, in particular, was very strong double-digit growth there".

But the uptick didn't continue.

Apple CEO Tim Cook took the rare step of lowering its sales guidance for the holiday quarter, saying the company had underestimated the challenges in China.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China", Cook wrote. In November, the company said it would stop reporting unit sales of iPhones, iPads and Macs beginning in fiscal 2019.

Many analysts and investors had anxious about a slowdown in iPhone sales since the company said in November it would stop disclosing unit sales data for its phones and other hardware products.

"While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, USA dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements", Cook conceded. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. Trade tensions between Beijing and Washington have also intensified with tit-for-tat tariffs.

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Apple isn't the only company facing difficulties in a slowing Chinese economy and escalating trade tensions. In an interview with CNBC on Wednesday, Cook said less subsidies from carriers also caused people to buy fewer iPhones, although he acknowledged it "didn't all happen yesterday".

Apple suppliers' shares tumbled on the news. He said China's smartphone market is feeling a particularly tight squeeze.

But there were other factors in slowing iPhone sales, as well.

Trying to see the glass half full, Cook noted that other divisions of Apple have risen by 19 percent year over year.

Apple's tech peers saw modest declines in a down market but not on the same scale as the Apple sell off. Netflix was just barely into green territory. China is Apple's third-largest market after the USA and Europe.

A user argued that Cook's mentioning of the battery drama serves as proof that it was Apple's strategy from the beginning to fire up the sales by damaging the performance and battery life of older models.

Some analysts, however, questioned the impact of Apple's own actions, such as its unyielding pursuit of high selling prices for its products. "A lack of clear innovation in product design and functionalities compared to its predecessors and the high prices dampened the purchasing passion of Chinese consumers for the iPhone XS series", Flora Tang, an analyst at Counterpoint Research, wrote in November.

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