Dow Falls 500 Points after Tim Cook Slashes Apple Revenue Forecast

Apple sells less iPhones than predicted due to Chinese trade war and cheap replacement batteries

Apple sells less iPhones than predicted due to Chinese trade war and cheap replacement batteries

Apple's stock price dropped nearly 10 percent Thursday, closing the day at $142.19, the company's biggest single-day loss in six years.

This piles on to existing anxiety of a slowdown in global growth, Apple can be used as a proxy to China's growth.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China", Cook said in a letter to investors. In China, there were less than 100 million smartphone shipments in the first three months, and the second quarter saw a 5.9% year-over-year decline.

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

Cook told CNBC that Apple products have not been targeted by the Chinese government, though some consumers may have elected not to buy an iPhone or other Apple device because it is an American company.

While Cook said the main factor for the weakening iPhone demand is the trade war between the United States and China, many believe the high prices of the 2018 iPhones are actually what convinced many potential buyers to hold on to their purchases.

Apple shares skidded 7.7 percent in after-hours trade, dragging the company's market value below $700 billion.

Late Wednesday, Apple CEO Tim Cook published a letter to investors that said that a slowdown in sales in China would cause revenue to fall 4.8% year over year to $84 billion, well below what analysts had been forecasting. 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. Nowadays though, the iPhone is more expensive than ever and less people seem interested in upgrading, leading to Apple issuing its first "profit warning" since 2002. In the broader market, the S&P 500 futures fell 1.5 percent.

Beyond pricing, some consumers in China have fled to competitors like Huawei's phones for their combination of unique back covers and camera systems, and upstarts like OnePlus because of its speed.

Apple's move was not entirely a surprise.

However, the company's woes in China have been exacerbated by a court decision that could potentially ban iPhone sales in the country.

In November, Cook cited slowing growth in emerging markets such as Brazil, India and Russian Federation for lower-than-anticipated sales estimates for the company's fiscal first quarter. But he said then that he "would not put China in that category" of countries with troubled growth. [MKTS/GLOB] Developments in a patent dispute between Apple and Qualcomm in Germany also rattled investors. That growth came entirely from higher prices. "There are a heck of a lot of USA companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China".

But some investors were heartened by Apple's plans on using its cash pile. Cook says that Apple expected this.

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