Apple shares drop after news of waning iPhone sales

Oscar PerryJan 05, 2019

CEO Tim Cook released a letter to investors yesterday that revised the company's guidance for its Q1 2019 performance. It now expects fiscal first-quarter revenue to be as much as $9 billion lower than previous projections.

The news, which comes as a spotlight grows on Beijing's attempts to revive stalling growth, sent Apple shares tumbling in after-hours trade, hammered Asian suppliers and triggered a broader selloff in global markets. The new iPhone XS, XS Max, and XR began shipping in Q4 2018, leading to fewer sales to be counted in the first quarter of 2019.

Twitter has met Apple's troubles with derision, with many pointing out that new models are massively overpriced while hardly being technological breakthroughs.

But the biggest problems came from lackluster sales in China and equally disappointing iPhone upgrades.

Cook blamed the lowered forecast on several different factors, including the timing of its latest generation iPhone launches, a strong United States dollar creating foreign exchange headwinds, supply constraints, and economic weakness in some emerging markets. [MKTS/GLOB] Developments in a patent dispute between Apple and Qualcomm in Germany also rattled investors.

Apple and smartphone competitors market shares in China.

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Apple's latest comments fueled worries that its relatively high-priced devices may be falling out of favor in China, where rivals such as Huawei Technologies Co Ltd [HWT.UL] offer cheaper options. The iOS developer community in China is among the most innovative, creative and vibrant in the world.

"It's two-third what's happening in China and one-third Apple's pricing", said Gene Munster, managing partner at Loup Ventures, noting the weighted average iPhone price had jumped 23 percent with the release of the new models.

Cook cited several other variable market-specific factors that may be playing into the iPhone sales slump we've been reporting on for weeks now. Greater China, a region that includes the mainland, Hong Kong and Taiwan, accounted for most of the revenue shortfall, but iPhone upgrades also weren't as strong as the company anticipated in some developed markets, Cook said.

Wall Street analysts scrambled to cut their price targets on Apple, with at least 27 lowering their estimates. After the company confirmed that it slowed down iPhones as their batteries aged, Apple apologized to customers and discounted out-of-warranty battery replacements from $79 to $29. Nevertheless, Wall Street countered that iPhones, both at home and overseas, have gotten too pricey for customers' tastes, and analysts don't see any quick fixes for the problem.

But most of those new Samsung smartphones, as well as those from Apple and other OEMs, will likely cost more than what many are willing to pay.

Apple has seen its share price plunge more than 30% over the course of the last 6 months, largely due to the company signalling in many ways that the oomph has gone out of its iPhone business.

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