US tech giant Apple Inc. made the uncommon decision of lowering its revenue guidance, citing weakening iPhone sales demand in China, whose economy has been pressured by uncertainty over the US-China trade relations.
Apple Chief Executive Tim Cook said they now expect sales for its fiscal first quarter ended December 29 to hit $84 billion instead of earlier forecasts of $89 billion and $93 billion, suggesting the company could be facing a holiday quarter slowdown for the first time since Cook was appointed as CEO in 2011.
Apple reported revenue of $88.3 billion in the same quarter last year.
The outlook cut marked the first time the California-based group had issued a warning on its sales outlook, ahead of reporting quarterly results since the iPhone was introduced in 2007.
The news sent shares of Apple down by 7.7 percent in after-hours trade, pushing its market value below $700 billion. The stock last stood 8.1 percent lower to $145.06 in extended trading.
The move was not much of a shock, as several analysts have foresaw the decline in iPhone sales since November when Apple announced that it would stop releasing unit sales data for iPhones and other hardware items.
Following that announcement, market spectators also called the peak for iPhones in a number of key markets after several component manufacturers forecast lower-than-expected sales.
Pressure Builds in Apple Business
The revenue decline for the just-ended quarter stresses how a slowdown in the world’s second-biggest economy has been more serious than many have speculated, unnerving companies and leaders in Beijing, as well as pushing some to readjust their plans in the market.
Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could strain its business.
Cook stated that while they anticipated some challenges in key emerging markets, they did not foresee the magnitude of the economic deceleration, particularly in Greater China.
The country’s smartphone industry has stumbled sharply this year, with the decline headed by Apple and South Korean rival Samsung Electronics Co. Ltd., while some domestic rivals showed better performance.
Apple is in a complicated position in China, a major market for its sales and where it largely produces the well-known products it sells across the globe, following the high-profile arrest in Canada of Meng Wanzhou, the chief financial officer of domestic rival Huawei Technologies Co. Ltd.
Since the arrest in December, occasional reports about Chinese buyers steering clear of Apple products have started to surface. Even before then, local competitors such as Huawei had been ahead of Apple in terms of market share.
Apple products have not been targeted by the Chinese government, according to Cook, but some consumers might have decided not to purchase an iPhone or their other devices because of the company being an American brand.
Cook said the much larger issue is the slowing of the Chinese economy, and then the trade tension that has further pressured it.
Apple’s decision, however, left some analysts questioning the impact of its own actions, like its pursuit of high selling prices for its products. The company has firmly stuck to its premium pricing strategy in the country despite the risk of a sluggish economy.
Analyst Kiranjeet Kaur stated that Apple sales in China have not been doing for a few quarters now, part if the reason is that their price points have gone too high – past the $1,000 mark – nearly three times as expensive as phones from other vendors that filling the mass market.
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