Apple Warns of Quarterly Revenue Shortfall

Roman Schwartz
January 3, 2019

Apple shares slid some 7.6 percent in after-hours trade on the news. The weaker holiday period - a critical one in which most of its iPhones are sold - will fan the flames of the growing belief that Apple is struggling with iPhone fatigue, and sales may be on a downward slide.

Cook told CNBC that Apple products have not been targeted by the Chinese government, though some consumers may have elected not to buy an iPhone or other Apple device because it is an American company.

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.

So according to Cook, it's kind of China's fault that Apple isn't making quite as many buttloads of money as it expected, and it's also kind of Trump's fault. Analysts surveyed by FactSet forecast more than $91 billion.

The S&P 500 and Nasdaq also closed in the green, rising 0.13 percent and 0.46 percent, respectively.

A slew of brokerages reduced their first-quarter production estimates for iPhones after several component makers in November forecast weaker-than-expected sales, leading some market watchers to call the peak for iPhones in several key markets.

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On Apple's earnings call in November, Cook cited slowing growth in emerging markets such as Brazil, India and Russian Federation for the lower-than-anticipated sales estimates for the company's fiscal first quarter. The rather tenuous grip on counterfactual optimism that has powered markets for the last few unconnected days could be pretty well undone by a concrete example of fallout from a global trade war and massive selling on the stock of a company with a market cap of $750 billion.

That all came before the damage to the Chinese economy from trade tensions with the United States became clear.

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business. He said the company was performing strongly outside of the communist nation. Automakers such as Ford Motor Co, Hyundai Motor Co and Nissan Motor Co all previously said they planned to cut production in the country.

In a letter to investors on Wednesday, chief executive Tim Cook said the firm's miss was due primarily to China. The Apple earnings miss suggests that the effects of the China slowdown could be reaching USA shores fairly quickly.

Changing market conditions are cited as a major reason why Apple's own estimates have not quite aligned with actual outcomes. Apple's troubles may have ripple effects on other technology companies, given investors have been bailing on the industry in recent months.

"When the United States went after the Huawei founder's daughter, the Chinese government made Apple the target of the day, so sales should be way off", Rob Enderle, an independent technology analyst, said.

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