Apple Shares Tumble After CEO Tim Cook Issues Revenue Downgrade

Apple Shares Tumble After CEO Tim Cook Issues Revenue Downgrade

In a letter to investors Wednesday, Apple CEO Tim Cook said the company's fiscal Q1 2019 revenue would be lower than expected, a rare occurrence from one of the most valuable and profitable companies in the world.

The iPhone is Apple's biggest product, accounting for about 60 percent of its revenue in the July-September quarter, the latest reported.

President Donald Trump is chiming in on Apple's sales warning earlier this week, which led the company's stock to drop.

Apple is the latest company grappling with increasing Chinese consumer anxiety.

The stock has fallen about 30 per cent since Cook first said in a November earnings call that the company might experience lower sales over the Christmas period.

Apple has said that it expects weak iPhone sales in other emerging markets.

David Dollar is a China specialist at the Washington-based Brookings Institution. "Overall, consumption growth is slowing down in China". "He's going to build a campus and lots of other places". "People are anxious about losing jobs", she said.

For instance, Netflix has recently altered the way people can sign up to its video streaming service so that a cut of the company's sales don't have to trickle back to Apple via the app store. China makes up one-third of the industry's shipments worldwide.

Apple shares dropped nearly nine percent on Thursday, falling to their lowest amount since April 2017, the Wall Street Journal reported.

The iPhone maker has come up with what it hopes to be a solution to tepid sales in its second-largest market: get people to trade in their Android phones for credit to help them buy a newly-released iPhone.

Trump's comments marked his latest effort to press USA firms to bring back manufacturing amid a simmering trade war between Washington and Beijing. Chinese are waking up to the fact that their economy is vulnerable to the uncertainties of the global economy, he said.

But what happens when the Chinese growth juggernaut slows? "We believe the economic environment in China has been further impacted by rising trade tensions with the United States".

"Our analysis suggests that iPhone ASPs (now around $800) are almost 5x higher than the average non-Apple smartphone globally and that price elasticity is very real", Sacconaghi wrote.

Investors were also unsettled by a report Thursday that showed signs of weakness in USA manufacturing.

Apple Inc.'s falloff in demand for iPhones in China shows the company's flagship product is hurt by its high price and the rise of cheaper, more comparable rival devices in the world's biggest market. Some are priced as low as 500 yuan ($70).

That has eroded the iPhone's cachet and customers' willingness to pay premium prices. "I hope they correct course" on pricing, Zigmont said. The Nasdaq, which has a high concentration of tech stocks, retreated 202.43 points, or 3 percent, to 6,463.50.

Cook said other factors will also pull down Apple's revenue, including the timing of its iPhone launches previous year and a strong dollar that means lower revenues when converted to U.S. currency. To put it that number into perspective, Facebook is now worth $380 billion ($70 billion less than what Apple lost in the last quarter).

Samsung is expected to unveil a 5G phone in the first half of the year.

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