Thursday, January 03, 2019 10:12:01 AM
Bloomberg
By Mark Gurman
January 3, 2019
https://www.bloomberg.com/news/articles/2019-01-02/apple-cut-first-quarter-sales-forecast-on-weak-iphone-sales?srnd=premium
Technology giant lowers revenue estimate to $84 billion
Cook says China economy, fewer upgrades led to rare revision
Apple Cuts Sales Outlook on Poor IPhone Demand From China
Bloomberg’s Mark Gurman discusses Apple lowering its sales outlook.
Apple Inc. plunged to its lowest price in a year-and-a-half after the company cut its revenue outlook for the first time in almost two decades, citing weaker demand in China.
Chief Executive Officer Tim Cook said sales will be about $84 billion in the quarter ended Dec. 29, down from earlier estimates of $89 billion to $93 billion. Apple posted sales of $88.3 billion in the fiscal first quarter a year earlier, so the new forecast would mean Apple is reporting a holiday quarter slowdown for the first time since Cook became CEO in 2011.
Apple shares fell as much as 9.6 percent, the biggest intraday drop in more than three years, as the market opened in New York Thursday. The revenue revision, which came late Wednesday, lead markets lower around the world and also triggered a slump for Asian suppliers and a wave of lower price targets from Wall Street.
The announcement, made in a letter from Cook to investors, comes after weeks of signals from inside Apple and its supply chain indicating the Cupertino, California-based company is struggling to sell the latest iPhones released in September. The flagship product earns Apple about two-thirds of its revenue, and allows the company to generate more money from attached products like Apple Watches, AirPods, and services like Apple Music.
Tim Cook’s Letter to Shareholders About Sales Slowdown: Full Text
Read Tim Cook’s Memo to Employees About iPhone Sales Slowdown
“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. 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.
“The fact that they missed that wasn’t the shock,” said Daniel Ives, an analyst at Wedbush Securities. “It was the degree and how confined it was to China. The fact that China basically fell off a cliff was a jaw dropper, and combined with the lack of metrics, it makes investors feel like they’re walking blindfolded in the dark.”
Suppliers in Europe and Asia slumped on the news. AMS AG, which produces optical sensors for mobile phones, fell 20.2 percent in Zurich, and Dialog Semiconductor Plc Inc., a producer of memory for Apple, dropped 4.8 percent in Seoul while Samsung Electronics Co., which makes chips and displays, fell 3 percent. IPhone assembler Hon Hai Precision Industry Co. lost 1.7 percent and rival Pegatron Corp. slipped 1.2 percent. Taiwan Semiconductor Manufacturing Co. fell 1.8 percent.
Several key Apple suppliers overseas had cut their revenue estimates during the past few months, suggesting something was amiss. In November, the company said it would stop reporting unit sales of iPhones, iPads and Macs beginning in fiscal 2019. That sparked concern Apple wanted to avoid disclosing weak growth numbers. Apple’s stock had fallen 32 percent from an October peak to its close of $157.92 Wednesday amid growing concerns about the iPhone.
In December, Bloomberg News reported the company was facing a “fire drill” to boost iPhone sales. That led Apple to aggressively market the iPhone XR on its website for $449, about $300 less than its official sticker price. The deal required customers to trade in an iPhone 7 Plus, a high-end handset from two years earlier.
At least four Wall Street firms, including BTIG and RBC, lowered their share price forecasts by more than 15 percent after Cook’s letter.
In his letter, Cook said the new iPhone models were released earlier than the flagship iPhone X last year, which created a difficult year-over-year comparison. The iPhone X launched in November 2017, while the iPhone XS and XS Max were released in September. Cook also noted supply constraints to new models of the Apple Watch, iPad Pro and AirPods.
“IPhone upgrades also were not as strong as we thought they would be,” he said, meaning the sales of new models to current customers replacing their old phones.
The CEO attributed much of the company’s “shortfall” in its outlook to struggles in China that he pinned on the economy and “rising trade tensions” with the U.S.
“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,” Cook said.
The timing of Apple’s announcement blaming its shortcomings partly on President Donald Trump’s trade war with China may increase pressure on American officials to ease the tensions quickly. Mid-level officials from the Trump administration are scheduled to travel to Beijing for talks early next week.
While iPhone revenue accounted for the forecast cut, Apple’s other product categories, including the iPad and services, grew a combined 19 percent year-over-year, he said. Services generated $10.8 billion in revenue for the quarter -- a 27 percent increase from a year earlier.
Apple’s decision to cut its sales outlook, “isn’t a huge shock at this point,” said Shannon Cross of Cross Research. “It will be interesting to see how Apple shares react if there’s a China trade agreement.”
<<<
Recent BRK.B News
- Intel Loses Pentagon Funding, Shell Plans 20% Business Team Reduction, and Latest News • IH Market News • 03/13/2024 11:02:03 AM
- Expedia Announces 1,500 Job Cuts; Hims & Hers Surges 19.8% Post Financial Results, and More News • IH Market News • 02/27/2024 11:15:07 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 02/26/2024 06:53:12 PM
- Form 10-K - Annual report [Section 13 and 15(d), not S-K Item 405] • Edgar (US Regulatory) • 02/26/2024 11:08:31 AM
- Broadcom in Talks to Sell Computing Unit, Alcoa Acquires Alumina for $2.2 Billion, and Latest News • IH Market News • 02/26/2024 10:55:58 AM
- Uniswap Skyrockets 55% with Incentive Proposal, Avalanche Confronts 4-Hour Shutdown, and More • IH Market News • 02/23/2024 06:26:18 PM
- Nvidia’s Earnings Skyrocket by 769%, BuzzFeed’s Pre-Market Shares Surge by 85%, and Other Highlights • IH Market News • 02/22/2024 11:08:52 AM
- Form SC 13G/A - Statement of acquisition of beneficial ownership by individuals: [Amend] • Edgar (US Regulatory) • 02/14/2024 09:46:01 PM
- Form SC 13G/A - Statement of acquisition of beneficial ownership by individuals: [Amend] • Edgar (US Regulatory) • 02/14/2024 09:40:04 PM
- Form SC 13G/A - Statement of acquisition of beneficial ownership by individuals: [Amend] • Edgar (US Regulatory) • 02/14/2024 09:39:50 PM
- Form 13F-HR - Quarterly report filed by institutional managers, Holdings • Edgar (US Regulatory) • 02/14/2024 09:02:18 PM
- Form SC 13G/A - Statement of acquisition of beneficial ownership by individuals: [Amend] • Edgar (US Regulatory) • 02/05/2024 10:27:17 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 01/12/2024 10:08:12 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 01/10/2024 09:16:32 PM
- Wall Street Highlights: Google Rejects Union Negotiations, Exxon Mobil Announces $2.5 Billion Accounting Write-Down in California • IH Market News • 01/05/2024 11:14:00 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/19/2023 12:41:33 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/14/2023 11:45:55 PM
- Apple Stocks Reach Record, Adobe Faces Stock Drops, Berkshire Hathaway Increases Stake in OXY, and More • IH Market News • 12/14/2023 10:59:57 AM
- Hasbro Job Cuts, Oracle’s Stock Decline, Google’s Epic Antitrust Loss, and More • IH Market News • 12/12/2023 10:50:47 AM
- Batteries Plus & Duracell Ignite Children's Holiday Spirit With Annual Toys For Tots Partnership • PR Newswire (US) • 12/05/2023 03:07:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 12/01/2023 02:11:02 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 11/29/2023 09:50:02 PM
- Amazon Unveils Innovative Services, Okta Discloses Data Breach, Textron Plans 2% Global Workforce Reduction, and More • IH Market News • 11/29/2023 11:18:11 AM
- Monday’s Wall Street Highlights: Walmart, Disney, Lloyds Banking, Mitsui Financial, HSBC, and more • IH Market News • 11/27/2023 11:29:25 AM
- Wednesday’s Wall Street Highlights: Nvidia, Broadcom, Berkshire Hathaway, Guess, Virgin Galactic, and more • IH Market News • 11/22/2023 11:49:26 AM
FEATURED Cannabix Technologies Launches New Compact Breath Logix Workplace Series and Prepares for Delivery to South Africa • May 7, 2024 8:51 AM
Moon Equity Holdings, Corp. Announces Acquisition of Wikolo, Inc. • MONI • May 7, 2024 9:48 AM
NanoViricides Reports that the Phase I NV-387 Clinical Trial is Completed Successfully and Data Lock is Expected Soon • NNVC • May 2, 2024 10:07 AM
ILUS Files Form 10-K and Provides Shareholder Update • ILUS • May 2, 2024 8:52 AM
Avant Technologies Names New CEO Following Acquisition of Healthcare Technology and Data Integration Firm • AVAI • May 2, 2024 8:00 AM
Bantec Engaged in a Letter of Intent to Acquire a Small New Jersey Based Manufacturing Company • BANT • May 1, 2024 10:00 AM