p Apple blames China as it cuts forecast | 2019-01-03

Apple blames China as it cuts forecast

BBC

3rd January, 2019 09:31:31 printer

Apple blames China as it cuts forecast

 

Apple has rattled investors with news that its sales have been slowing, blaming economic weakness in China.

 

In a surprise disclosure, the iPhone maker said it anticipated revenue of about $84bn (£67bn) for the three months to 29 December.

 

In November it forecast sales of at least $89bn - a prediction that had already disappointed investors.

 

Apple's share price sank more than 7% in after hours trade, extending its more than 28% slide since November.

 

The festive season is typically Apple's strongest quarter.

 

But revenue of $84bn would mark an almost 5% fall from the same period last year and represent the firm's first year-on-year quarterly decline since 2016.

 

In a letter to investors on Wednesday, chief executive Tim Cook said the firm's sales problems were primarily in its Greater China region, which includes Hong Kong and Taiwan and accounts for almost 20% of its revenue.

 

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China," he said.

 

However, he added that developed markets saw troubles as well, as fewer customers than expected chose to upgrade to Apple's newest phones.

 

'Mounting uncertainty'

 

Wednesday's cut to the sales forecast marked the first time Apple has revised its guidance to investors in more than 15 years.

 

It appeared to confirm doubts about the firm's prospects that have troubled investors in recent months, contributing to the broader market sell-off.

 

Production cuts by major suppliers had led to worries that the firm's newest phones were not gaining traction among buyers, in part due to high prices.

 

"The question for investors will be the extent to which Apple's aggressive pricing has exacerbated this situation and what this means for the company's longer-term pricing power within its iPhone franchise," said James Cordwell, an analyst at Atlantic Equities.

 

The firm had warned investors in November that a strengthening dollar and economic weakness in some overseas markets would be likely to hurt sales in the last three months of the year.

 

Analysts also highlighted that Apple was vulnerable to the effects of the US-China trade spat, in part due to risk that the tensions could cause Chinese buyers to sour towards US brands.

 

On Wednesday, Apple said trade tensions had hurt consumer confidence.

 

"As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed," Mr Cook wrote in the letter.

 

He added that Apple was taking steps to make it easier for customers to trade in their phones and said other parts of the firm's business, including services, remained strong.

 

"While it's disappointing to revise our guidance, our performance in many areas showed remarkable strength in spite of these challenges," he said.


Top