Markets

Apple drops revenue guidance after slowing sales in China

Apple drops revenue guidance after slowing sales in China

"While Apple anticipated some challenges in key emerging markets, it did not foresee the magnitude of the economic deceleration, particularly in Greater China", said Cook.

"While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be", Cook said.

With Chinese consumers less willing to part with their money, Apple's high prices may be leading shoppers to buy similar products made by Chinese phone companies like Huawei and Oppo. Some of the company's iPhones have passed the $1,000 mark while Chinese brands look to fill the mass market.

Apple's first instance of revised earnings guidance since 2002 has the potential to rattle the financial markets as it puts the spotlight on China's woes and the dependence of the largest US companies on strong growth in the world's second-largest economy.

Apple stopped disclosing unit sales reports for its phones in November, which Wall Street immediately took as the tech giant attempting to hide a downturn in sales. The move led analysts to believe a drop was coming.

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

In his letter to investors, Cook touted continued traction in Apple's "non-iPhone businesses", including wearable devices and supplementary services, like iCloud, Apple Pay and the App Store.

Apple suppliers' shares tumbled on the news.

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Stock trading was temporarily halted Wednesday while Apple lowered its guidance.

Apple isn't the only company that could be hurt by China's slowing economy.

Apple previously had estimated revenues of between US$89 billion and US$93 billion for the quarter.

The price gap is one reason Huawei surpassed Apple in smartphone sales from April through September previous year to seize the No. 2 spot behind industry leader Samsung, according to the research firm International Data Corp. "China has been very careful [about] not stirring up sentiments against competitors like Apple", Jain says.

Apple has become the target of nationalist sentiment over the arrest of Huawei's chief financial officer in Canada at the behest of the United States for alleged Iran sanctions violations.

This also comes at a time when Apple had already indicated that iPhone sales were weak in other worldwide markets, including India, Russia, Brazil and Turkey.

In the letter, Cook blamed a variety of factors for the revenue shortfall, but placed a significant amount of the responsibility on the recent economic slowdown in China. According to Cook, all of those factors (plus some others) resulted in fewer iPhone upgrades than expected.

European markets opened lower on Thursday.


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