Apple Cuts Revenue Projections Due to Bad China Sales

Jermaine Castillo
January 11, 2019

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.

CEO Tim Cook told investors that come January 29, the phone-flinger won't hit the revenue figures it said it would reach, and would in fact see its first year-over-year decline since 2016. In an interview with CNBC, Cook said the reason behind the iPhone's decline in sales in China is the result of trade tensions between the US and the country which puts additional pressure on China's economy, leading to fewer customers interested in buying a new phone. Apple warns that disappointing iPhone sales will cause a significant drop in its revenue over the crucial holiday season compared to earlier projections. Apple has also recently signaled that its iPhone business may be struggling by launching special promotions for buying new iPhones-an extremely rare move by the company.

The price gap is one reason Huawei surpassed Apple in smartphone sales from April through September past year to seize the No. 2 spot behind industry leader Samsung, according to the research firm International Data Corp.

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"Our non-iPhone businesses have less exposure to emerging markets, and the vast majority of Services revenue is related to the size of the installed base, not current period sales", Cook noted.

China's not the only reason Apple is reducing its iPhone sales guidance, however.

Slumping financial markets seemed to hurt consumer confidence in China, he said, "with traffic to our retail stores and our channel partners in China declining as the quarter progressed".

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Both firms are checking in on whether Apple failed to inform investors regarding slowing iPhone demand, especially in China, which is the largest smartphone market in terms of volume. The company previously projected $89 billion-to-$93 billion in revenue.

Apple blamed China's slowing economy, which has been compounded by the impact of a growing trade war with the U.S. President Donald Trump, who has targeted China's trade policies as "unfair", has levied hundreds of billions of tariffs on Chinese imports.

Apple has fell victim to the Asian contagion, according to CEO Tim Cook as sales in China plummeted. That's the lowest price for Apple stock since July 2017 and its biggest single-day stock drop in six years.

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"And, while we saw challenges in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam", he said.

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