Apple to Miss Sales Expectations, Dow takes a Hit

Roman Schwartz
January 4, 2019

Cook in November had cited slowing growth in emerging markets such as Brazil, India and Russian Federation when Apple gave first-quarter sales estimates that were lower than expected.

During the first three quarters of the year, Huawei sold 145.5 million phones, versus 140.4 for Apple.

Even if those trade tensions ease, it is hard to see Chinese phone buyers turning back to Apple in large numbers now the spell has been broken.

Cook also cited the trade war between the United States and China as another factor.

"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". "In fact, most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad", wrote Cook.

The memo, aimed at pepping up staff after cutting its revenue outlook for the first time since 2002, reiterated Cook's note to investors that it missed its target due to lower than expected iPhone sales in China.

Economic deceleration in China had caught Apple off guard and trade tensions between Washington and Beijing were starting to hurt consumer spending on smartphones in China, Apple Chief Executive Officer Tim Cook said on Wednesday.

Clearly, Apple is facing a dire situation-but not for the reasons many people assume.

"Apple's iPhones are facing a saturated premium smartphone market, with slowing growth rates and increased competition in China", Anshul Gupta, a research director at Gartner Inc., said last month when the firm released its latest smartphone sales tallies.

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The iPhone X, which debuted in 2017, was Apple's most expensive iPhone ever coming in at $999. iPhone prices continued to climb as the company debuted the XS and XS Max past year, with the former starting at $1,099.

PRECURSORS TO A WARNING Apple's move was not entirely a surprise. And after several component makers in November forecast weaker-than-expected sales, some market watchers called the peak for iPhones in several key markets.

In November, Cook cited slowing growth in emerging markets such as Brazil, India and Russian Federation for a lower-than-anticipated sales estimates for the company's fiscal first quarter. But he said then that he "would not put China in that category" of countries with troubled growth.

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

However, the company's woes in China have been exacerbated by a court decision that could potentially ban iPhone sales in the country.

In the latest fiscal year, ended September 29, unit sales of the iPhone were essentially flat from the prior year, while iPhone revenue expanded 18 percent to $166.7 billion.

However, the excuses Cook comes up with fails to mention any arrogance or stupidity on Apple's part.

Apple's warning sent the yen soaring, with the Japanese currency viewed as a haven investment in times of turmoil.

That spells trouble for companies that rely on China's enormous market to boost their global sales.

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