Apple cut its sales forecasts for its key end of year period on Wednesday, citing the unforeseen “magnitude” of the economic slowdown in China

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Apple Inc. News

By Dominic Rushe|@dominicru

Apple stocks tumble after company cuts forecasts for key quarter. Trading in the company’s shares was temporarily halted as Tim Cook, Apple’s chief executive, issued a letter to shareholders explaining the reason for the change. When selling started again, Apple shares fell by 7.45%, wiping $55bn (£44bn) off its value.

“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. He cited falling sales of iPhones, Mac computers and iPads.

The statement is Apple’s first profit warning since 2002 and its first of the smartphone age. It is also one that will further rattle investors already worried about the slowing Chinese economy.


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The unusual move came on a day when it was reported that factory activity in China contracted for the first time in 19 months in December. China’s economy has been pinched by the ongoing trade war with the US, which is spilling over into other Asian economies. China is Apple’s third largest market after the US and Europe.

“China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years,” wrote Cook.

“We believe the economic environment in China has been further impacted by rising trade tensions with the United States. 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. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.”

Donald Trump and China’s president Xi Jingping agreed to a 90-day temporary ceasefire in their bitter trade war last month but as yet no long-term resolution appears close. Despite these challenges, Cook said: “We believe that our business in China has a bright future.”

However, the company’s woes in the country have been exacerbated by a court decision that could potentially ban iPhone sales there. Chip maker Qualcomm won a preliminary injunction in December that would ban sales of older models that it claims violated its patents. Apple is appealing against the decision.

Apple said it now expects sales revenue of around $84bn, down from an earlier estimate of between $89bn and $93bn. Analysts had been expecting revenues of around $91bn, according to market analyst FactSet.

Apple endured a bumpy 2018. In August it was the world’s biggest firm and became the first publicly traded company to be valued at $1tn. But it ended the year with its market value down close to 7% – its worst performance since the 2008 financial crisis. Apple is now the third largest public company behind Microsoft and Amazon.

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Apple remains hugely profitable and is sitting on $237bn in cash. In November the company announced record sales and profits but iPhone sales were flat, heightening investor fears that its glory days are coming to an end. Sales of iPhones have so far failed to pick up despite Apple launching more variations of the device and analysts have worried that the market has become saturated and cheaper rivals are taking market share.

The price of a new iPhone can now exceed $1,000 in the US and £999 in the UK. Last year, Apple temporarily cut the price of replacement batteries for older models and more customers chose that option instead of upgrading their phones.

The iPhone, which launched in June 2007, has been an extraordinary success for Apple. More than one billion were sold between 2007 and 2017. While sales of its other devices and services such as iTunes and Apple Pay are growing sharply, the iPhone is still its most important product, accounting for 59% of its revenue in its previous quarter.

Apple’s poor performance was echoed by its fellow Faang companies – Facebook, Apple, Amazon, Netflix and Google – which all performed poorly in 2018. Their collective stumble helped drag down US stock markets, which had been driven to new highs by their rise.

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Slowing iPhone sales have also compounded fears that Apple’s record-breaking run is coming to an end and China’s weakening economy worried investors that international markets would not pick up the slack.

Categories: Apple Inc, Business

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22 replies


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  9. Oil prices climbed around 3 percent on Wednesday as the extension of U.S.-China talks in Beijing raised hopes that the world’s two largest economies would resolve their trade standoff – Stock Market News Today
  10. China to set lower GDP growth target of 6.5 percent in 2019, as Beijing gears up to cope with higher U.S. tariffs and weakening domestic demand – Stock Market News Today
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  13. China’s exports unexpectedly fell the most in two years in December, raising risks to global economy – Stock Market News Today
  14. All Eyes on Corporate Guidance After Weak Economic Data. Economic reports in emerging and developed markets have been broadly below expectations – Stock Market News Today
  15. Procter & Gamble Co. reported strong quarterly sales, continuing a streak of robust gains and prompting the consumer-products giant to raise its outlook – Stock Market News Today
  16. Asian stocks rallied to a seven-week high, buoyed by gains in U.S. technology firms – Stock Market News Today
  17. Chief Executive Officer Mark Zuckerberg is planning to unify the underlying messaging infrastructure of its WhatsApp, Instagram and Facebook Messenger services – Stock Market News Today
  18. The last time many global stock indexes rose this quickly was in January 2018—when markets around the world rallied, only to tumble in February – Stock Market News Today
  19. Alibaba’s Revenue Jumps Despite China Slowdown, net income increased 37% in the just-ended quarter – Stock Market News Today
  20. U.S. Negotiators Are Preparing To Press China Next Week, Focus On Intellectual Property – Today’s Stock Market News
  21. Xiaomi And Apple Have Both Encountered A Slump In Shipments In China In The December Quarter – Today’s Stock Market News
  22. Chinese And U.S. Negotiators Are Seeking To Narrow The Still-Substantial Gap Between The Concessions China Is Willing To Offer And What The Trump Administration Will Accept – Today’s Stock Market News

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