Published: Sat, January 05, 2019
Business | By Eloise Houston

What Tim Cook left out about China in Apple's revenue guidance

What Tim Cook left out about China in Apple's revenue guidance

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.

"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. Blaming mostly macro headwinds, he failed to admit the launch of new iPhones haven't successfully lured consumers and acknowledge growing competition from domestic players. "In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad", Cook writes in the letter. The company also sees the traffic to retail stores and partner sellers in China declining in the quarter.

Many analysts and investors had anxious about a slowdown in iPhone sales since the company said in November it would stop disclosing unit sales data for its phones and other hardware products.

However, Apple continues to be optimistic about China. FedEx Corp., Starbucks Corp., Tiffany & Co. and Daimler AG are also finding it harder to sell their wares in the world's second-largest economy.

Consumers are more likely to curb spending on big-ticket items during economic downturns, and there are worries over "consumption downgrade" in China.

"The firm alleges that Cook's letter blaming business in China for the revenue shortfall is contrary to what he told investors during the company's fourth quarter conference call on November 1, where Cook is quoted as saying, "[Our] business in China was very strong last quarter. And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp.

Tim Cook is reportedly hosting an all-hands meeting with every Apple employee today about the revelations regarding stalling iPhone sales.

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 nearly two decades, citing weaker demand in China.

China has become a popular boogeyman-for the markets and now, for Apple.

Apple shares have plummeted after CEO Tim Cook revealed that the iPhone maker expects a drop of up to $9bn in revenue compared to its November report.

"Apple sales in China have not been doing well for a few quarters now, part of the reason is that their price points have gone too high - past the $1,000 mark", said Kiranjeet Kaur, an analyst at market research firm IDC. When the suspension on selling was lifted, Apple shares fell 7.45%.

In December, Bloomberg News reported the company was facing a "fire drill" to boost iPhone sales.

Krystal Hu covers technology and trade for Yahoo Finance.

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