Published: Sat, January 05, 2019
Finance | By Kristine Clayton

Dow Falls 500 Points after Tim Cook Slashes Apple Revenue Forecast

Dow Falls 500 Points after Tim Cook Slashes Apple Revenue Forecast

Apple's stock fell 9.96 percent after CEO Tim Cook said told investors Wednesday the company lowered its revenue guidance to $84 billion from the $89 billion to $93 billion it had previously projected.

Shares of the Cupertino, Calif. -based tech giant slid almost 10 percent on Thursday - wiping out more than $75 billion in market cap and knocking it back to No. 4 among the world's most valuable companies - after it warned of slower-than-expected iPhone sales.

Analysts see iPhone's high price point and lack of major updates as the major reasons for the Chinese market's lukewarm reaction to its new iPhone releases. 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, United States dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements. The new iPhone XS, XS Max, and XR began shipping in Q4 2018, leading to fewer sales to be counted in the first quarter of 2019.

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. "There's a hole in Apple's product portfolio - they do not have a low-cost smartphone to fully exploit emerging markets". "We knew this would create a hard compare for Q1'19", he writes.

Timing of the iPhone launches. "It symbolizes how deep China's economic problems are, and we can connect the dots right back to the trade war".

Apple isn't the only company facing difficulties in a slowing Chinese economy and escalating trade tensions. 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. With iPhone's production lines in China, Apple has been caught in between the world's two largest economies.

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook's comments on the impact of the U.S. trade tensions with China "might be a dig at (U.S. President Donald) Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they've made over the a year ago". "Our other products category was even stronger than the overall company number".

"It's not going to be just Apple", CEA chairman Kevin Hassett said in an interview on CNN. Mid-level officials from the Trump administration are scheduled to travel to Beijing for talks early next week.

Buried deep in the letter is Cook's admission that some of the devoted Apple fans who used to buy new devices every year are now "taking advantage of significantly reduced pricing for iPhone battery replacements".

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

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