Apple makes shock sales warning as US-China trade war hits

Galtero Lara
Enero 12, 2019

Apple had some news for investors to ring in 2019, only it wasn't good.

Apple CEO, Tim Cook, through a letter to shareholders has cited cheap battery replacements as one of the reasons behind the slowdown of iPhone sales.

Apple downgraded its sales projections, citing slowing Chinese growth, hitting technology shares in South Korea and Taiwan.

The warning, which came after trading in NY closed on Wednesday, looked likely to rattle already-volatile stock markets when they reopen on Thursday - with stock index futures pointing to Wall Street falls.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China", Cook wrote in the letter.

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook's comments on the impact of the US trade tensions with China "might be a dig at (US President Donald) Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they've made over the previous year".

Apple now expects revenue of $84 billion for the period.

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Wednesday's sales forecast was the first time that Apple had revised its guidance to investors for more than 15 years.

The iPhone has been Apple's chief moneymaker for years, accounting for almost 60% of Apple's total sales in the three months ending in September.

Apple ended Wednesday's session with a share price of $157.92, which was already a 30% decline from an all-time high of $227.63 on August 27. That wiped up to $55 billion off of the company's stock market value. "While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, U.S. dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements", Cook wrote in the letter.

In particular, he pointed to fewer carrier subsidies, a stronger USA dollar making devices more expensive overseas, and Apple's decision to offer $29 battery replacements for the iPhone. Multiple iPhone parts suppliers cut their sales outlooks in November.

Apple has been an absolute juggernaut in terms of sales, growth, revenue, and profit for shareholders. In October, Apple shocked investors by saying it planned to stop disclosing the number of iPhones sold each quarter.

As Apple for the longest time didn't manufacture the iPhone in India, it also couldn't reep tax benefits in India and it has been unable to open Apple stores in the country due to laws that pertain to sourcing local components.

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