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Apple warns investors about disappointing iPhone sales

by Mark Tyson on 3 January 2019, 10:11

Tags: Apple (NASDAQ:AAPL)

Quick Link: HEXUS.net/qad23p

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Apple shares are nearly 8 per cent down in afterhours trading after the iDevice and computer maker's CEO published a letter about revenue expectations from the most recent quarter. It is now expecting to tally $84bn (£67bn) for the three months to 29 December. Though still an astronomical amount of cash, the firm had previously disappointed its investors with a prediction of revenue in the range from $89bn to $93bn for the quarter in question. In brief, the letter mostly blamed weak China sales for the shortfall, and noted weaker upgrade cycle sales in some other countries.

The above news will unsettle investors in a wide range of tech stocks, according to CNBC. It notes that Advanced Micro Devices, Nvidia, Skyworks and Qorvo all dropped in afterhours trading - as Apple sneezed, other caught the cold. Those watching the US/China trade friction and other signs from industry trends shouldn't be that surprised about Apple's downgraded revenue expectations. For example, CNBC says that a number of analysts had come out and cut their estimates and price target on Apple last quarter.

Apple's revised guidance for the period ending 29th Dec 2018, provided in Tim Cook's letter to investors, is as follows:

  • Revenue of approximately $84 billion
  • Gross margin of approximately 38 percent
  • Operating expenses of approximately $8.7 billion
  • Other income/(expense) of approximately $550 million
  • Tax rate of approximately 16.5 percent before discrete items

Furthermore, final results may (of course) differ from the above preliminary estimates.

In his letter Cook gave several excuses for worse than expected results. In the intro I mentioned weak China sales and weaker upgrade cycles and I will delve more into these and other reasons in bullet points below:

  • China: most of the revenue shortfall came due to China figures, says Cook. In H2 2018 China's economy slowed and Q3 showed the second lowest GDP growth in 25 years. This uncertainty weighed on markets and consumers, with a contraction in the smartphone market. Furthermore, trade tensions with the US have sharpened impacts on the Chinese economic environment.
  • iPhone launch timing: For greater competitive reasons Apple released the newest iPhone XS and iPhone XS Max a bit earlier in the year than the 2017 iPhone X, so a great deal of their sales were included in the previous quarter figures.
  • Dollar strength: as a US manufacturing company that exports a large proportion of its products a 'strong dollar' can make devices more expensive for worldwide customers.
  • So many new products: Tim Cook added that due the "unprecedented number of new products," Apple has recently released it faced various stumbling blocks such as supply constraints to a greater degree.
  • iPhone upgrade demand drop-off: interestingly Cook blamed the cut-price iPhone battery replacement program for a drop in upgrades. As summed up by The Verge "the easier it is to replace a battery, the less willing people are to buy a new iPhone".

Beyond the above reasons you might be able to add your own opinions. In a BBC report, one of its correspondents opined that the smartphone boom era is winding down, and many people now own "better, more reliable devices, with longer-lasting batteries," that aren't stirring-up feelings that they need to be replaced.



HEXUS Forums :: 21 Comments

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“the easier it is to replace a battery, the less willing people are to buy a new iPhone”.

Yeah - This attitude (and not just from Apple) really winds me up. Why should I have to junk a perfectly working phone/laptop/tablet etc just because the battery is worn. I have in the past ripped open a phone to replace a battery but then you can't find official replacements (and if you do its a quarter the price of a new phone!). Then when you rebuild the back of the phone doesn't want to go back just right or the glue needs replacing. Its so damn wasteful and I don't believe for a second its that hard to engineer replaceable batteries! Built in obsolesce by battery should be illegal full stop.
Well, their entire line up has a big cut out of the screen, its no surprise that their sales are not going to hit forecasts.

The notch may well be a personal thing of hatred for me, but also to a lot of people that I know who are deciding to stick with their iPhone 7 or 8 rather than “upgrade”, as they don't want to lose a big chunk out of their screens, and pay £1000 for the privilege. They are not necessarily jumping to a different vendor or buying a cheaper phone - just not replacing what they have. The iPhone 7 & 8 still perform perfectly well right now too so there just isn't a need to upgrade..
Spud1
Well, their entire line up has a big cut out of the screen, its no surprise that their sales are not going to hit forecasts.

The notch may well be a personal thing of hatred for me, but also to a lot of people that I know who are deciding to stick with their iPhone 7 or 8 rather than “upgrade”, as they don't want to lose a big chunk out of their screens, and pay £1000 for the privilege. They are not necessarily jumping to a different vendor or buying a cheaper phone - just not replacing what they have. The iPhone 7 & 8 still perform perfectly well right now too so there just isn't a need to upgrade..

This is a very good point. I personally love the iPhone X but the only reason I upgraded was partly because my iPhone 6 Plus was starting to have trouble with some of the latest apps and multi tasking and partly because there were so many good offers that after nearly 4 years with the same phone I gave in.

What I find so perplexing is that companies like Microsoft and Apple during their histories are frequently under valued despite the user base, technologies and profits/revenues they generate. Instead we have companies like Facebook and google and to some extent Amazon who do not have the same profit levels and own technologies yet are valued as much if not more.
I personally know about 20 people who have jumped ship to either S9's or other flagship phones from iphone. Sick of restrictions and lack of expandable memory is most of the reasons I get told.
Next up is having to constantly charge the phone…

Last few just don't want the expense of upgrading preferring to stick on sim only deals
walibe
Spud1
Well, their entire line up has a big cut out of the screen, its no surprise that their sales are not going to hit forecasts.

The notch may well be a personal thing of hatred for me, but also to a lot of people that I know who are deciding to stick with their iPhone 7 or 8 rather than “upgrade”, as they don't want to lose a big chunk out of their screens, and pay £1000 for the privilege. They are not necessarily jumping to a different vendor or buying a cheaper phone - just not replacing what they have. The iPhone 7 & 8 still perform perfectly well right now too so there just isn't a need to upgrade..

This is a very good point. I personally love the iPhone X but the only reason I upgraded was partly because my iPhone 6 Plus was starting to have trouble with some of the latest apps and multi tasking and partly because there were so many good offers that after nearly 4 years with the same phone I gave in.

What I find so perplexing is that companies like Microsoft and Apple during their histories are frequently under valued despite the user base, technologies and profits/revenues they generate. Instead we have companies like Facebook and google and to some extent Amazon who do not have the same profit levels and own technologies yet are valued as much if not more.

Not so reliant on fickle customers I guess