Hit by a sharp economic deceleration in China and fewer upgrades to newer iPhone models, the world’s largest smartphone market, Apple Inc has lowered its quarterly revenue forecast for the first time in more than 15 years, The Wall Street Journal reported. China represents nearly 20 per cent of Apple’s sales.
Apple has now pegged its revenue for the quarter that ended 29 December at $84 billion, way short of estimates by analysts that it is likely to clock a revenue over $91 billion.
The announcement late on Wednesday (2 January) sent Apple shares plunging 7.6 per cent in extended trading after the announcement. The year 2018 has turned out to be Apple’s worst yearly performance since the financial crisis with the company losing more than $300 billion in market value after peaking above $1 trillion in early October.
Apple's Chief Executive Officer Tim Cook in a letter to investors on Wednesday (2 January) attributed the disappointing performance of the company to the economic slowdown in China, exacerbated further by mounting trade tensions with the US.
Cook in his letter pointed out that revenue outside iPhone business grew by almost 19 percent year-over-year, including all-time record revenue from Services, Wearables and Mac.
Cook said other factors will also pull down Apple’s revenue, including the timing of its iPhone launches last year and a strong dollar that means that sales when converted to US currency resulted in lower revenues. He also cited supply “constraints” for some products, including its latest Apple Watch and iPad Pro.
Despite concern over China, Cook said that he expected to set all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and Korea and in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam.
Analysing the dwindling fortunes of Apple in China, the WSJ report highlighted that the company's share of the Chinese smartphone market has been declining steadily, as it faces tough competition from homegrown tech giants such as China’s Huawei Technologies Co. that market increasingly sophisticated phones at a lower price tag.
In November, Apple announced that it will no longer be reporting unit sales of iPhones, iPads and Macs beginning 2019. Analysts believe that it was a calculated move on part of the company to avoid disclosing lacklustre growth numbers.
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