Apple CEO Tim Cook said in a letter to shareholders on Wednesday that "lower than anticipated iPhone revenue" has led the company to slash its guidance for its fiscal first quarter of 2019, which ended December 29.
In issuing its late-Wednesday warning, Apple said when it first gave the guidance, it knew the different timing of its iPhone launches would make for "difficult" year-over-year comparisons, knew the strong USA dollar would create foreign-exchange headwinds, and knew it had "an unprecedented number of new products to ramp during the quarter and predicted that supply constraints would gate [its] sales of certain products during Q1". 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 USA and the country which puts additional pressure on China's economy, leading to fewer customers interested in buying a new phone. "We manage Apple for the long term, and Apple has always used periods of adversity to re-examine our approach, to take advantage of our culture of flexibility, adaptability, and creativity, and to emerge better as a result".
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"On this news, Apple's stock fell $11.97 per share, or over 7.5 percent, during aftermarket trading hours on January 2, 2019, damaging investors", said Bernstein Liebhard LLP, a law firm headquartered in NY. These included the strength of the U.S. dollar, in addition to "challenges" in emerging markets such as those in Asia. In November the California-based company said it would quit disclosing unit sales data for iPhones and other hardware items, leading many analysts to worry that a drop in iPhone sales was coming. The company also sees the traffic to retail stores and partner sellers in China declining in the quarter.
He noted that China's economy started to weaken in second-half 2018.
Of course, Apple doesn't have just bad news to share when it comes to the iPhone's performance this quarter.
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One of the key elements that Apple blamed for this sudden drop in revenue was the lack of interest in upgraded iPhone models and the Chinese economy. The company previously projected $89 billion-to-$93 billion in revenue.
While revenues overall will be down year-over-year, the company expects to set revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and Korea, as well as in some emerging markets. "The trade tensions between the United States and China put additional pressure on their economy". Cook chalked it up to multiple factors, including macroeconomic challenges, fewer carrier subsidies and reduced pricing for iPhone battery replacements.
Despite these challenges, Cook said, "we believe that our business in China has a bright future". Not only is there increased direct competition, but there are also now a huge number of highly capable alternatives to the iPhone available at a significantly lower price.
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Trump said Apple has gone up "hundreds of percent" since he's been president, but added that he wants the company to make its iPhone and other products in the US.