Published: Mon, January 07, 2019
Markets | By Erika Turner

Apple cuts revenue guidance because of slow sales in China

Apple cuts revenue guidance because of slow sales in China

Apple has slashed its revenue forecasts by billions of dollars after iPhone sales fell well short of expectations, causing shares in the company to plunge.

Apple had previously estimated it would earn revenues of $89 to $93 billion in the most recent quarter.

Cook's unscheduled update had the effect of unsettling investors in other major tech firms, including Inc. and Microsoft Corp., which both saw their stock fall today, the first trading day of 2019. It also led to big drops overall in the US stock market, as well as other financial markets around the world. Reports claimed the company cut orders by as much as 50 percent, especially for the iPhone XR whose sales are the worst impacted this year.

Despite these challenges, Cook said, "we believe that our business in China has a bright future". Those factors include the staggered launch of the iPhone XS line compared to the more affordable iPhone XR and trade tension between the US and China. Counterpoint reported iPhone sales dropped by 17% year-over-year during the third quarter due to the weak initial performance of the new models.

"IPhone upgrades also were not as strong as we thought they would be", he said, meaning the sales of new models to current customers replacing their old phones.

Cook traced most of the revenue drop to China, where the economy has been slowing and Apple has faced tougher competition from home-team smartphone makers such as Huawei and Xiaomi.

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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But after decades of expansion, the Chinese economy is slowing down.

Apple did not immediately respond to a request for comment about this report.

"It's not going to be just Apple", CEA chairman Kevin Hassett said in an interview on CNN.

At the White House news conference, Trump was asked whether he was concerned about Apple's earlier this week.

Technology stocks led the declines with chipmakers and other phone part suppliers both in the U.S. and around the world in the red. Mid-level officials from the Trump administration are scheduled to travel to Beijing for talks early next week. "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. In the USA government bond market, a typical safe-haven, the yield on the benchmark 10- year, which moves inversely to the bond's price, sank to an 11-month low.

During the past year, the USA and China slapped new tariffs on hundreds of billions of dollars' worth of imports in a trade war that threatens to snarl multinational companies' supply lines and reduce demand for their products.

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