Apple iPhone sales look $9bn worse than expected, CEO blames China & cheap batteries
Apple shares plummeted after CEO Tim Cook revealed that the iPhone maker expects a drop of up to $9bn in revenue compared to its November report. More affordable battery replacements are to blame, among other things.
Apple stated that it now expects a revenue of approximately $84 billion in the first quarter of 2019, down from its previous estimate of $89bn to $93bn. Markets have reacted swiftly to the news, sending Apple shares into a 7.5-percent nosedive.
Explaining the causes behind the revision, Cook almost squarely blamed the expected drop in sales on the economic slowdown in mainland China, a key emerging market for Apple smartphones.
"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, noting that "most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China."Also on rt.com Trade war counter attack? China slams Apple with iPhone sale ban over ‘patent violations’
By far the greatest hit was dealt by iPhone sales, which, per Cook’s admission, are responsible “for all our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline”
In fact, non-iPhone product revenues actually contributed to 19-percent growth, except in China, where, according to Cook, a cooling-down economy hurt all kinds of Apple products (but still, the iPhone was the worst by far).
The ongoing US-China trade spat has also played its part in driving down Apple sales in the country, Cook stated, citing "the climate of mounting uncertainty" over the back-and-forth between Washington and Beijing.
If Apple racks up $84bn by the end of the first quarter, it will be a decrease of more than $4bn from the same period last year, when it pocketed $88.3bn.
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."
Following a massive scandal over its practice of deliberately slowing down older iPhones, Apple reduced the price for its battery replacements, charging $29 instead of $79 in 2018. The program was wrapped up by the end of the year.
Twitter has met Apple's troubles with derision, with many pointing out that new models are massively overpriced while hardly being technological breakthroughs.
Others advised Cook to stop pointing the finger at China, and instead fix the flaws in Apple services and work on new products.
So just due to China weakness. Got it. Went into an Apple store in MA 2x before Christmas, both times saw employees not helping customers. Few years ago, there would be 2-3 customers for every employee.— James D. (@JDiP09) January 2, 2019
There is this thing called competition Tim. Failed in India and China, not surprised one bit by this. Cook blaming the trade war so when it ends they get the biggest bump, but it will be short-lived bc their phones are losing appeal— Nicholas Ramos (@NickVRamos) January 2, 2019
One user argued that Cook's mentioning of the battery drama serves as proof that it was Apple's strategy from the beginning to fire up sales by damaging the performance and battery life of older models.
Not sure Cook should have listed this as a reason for slower than expected iPhone sales. Sure makes it sound like the old way of handling battery degradation was intended to drive people to buy new phones. pic.twitter.com/rd4pl7vqOy— John Gruber (@gruber) January 2, 2019
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