Apple announces decline in sales
Apple has rattled investors with news that its sales have been slowing, blaming economic weakness in China arising from the ongoing trade war.
This is the first time in 15 years Apple has to revise its own sales predictions for a holiday season.
Apple Inc. is one of the most successful multinational technology companies in the world. It was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in April 1976. It was incorporated as Apple Computer, Inc. in January 1977. It currently designs, develops, and sells consumer electronics, computer software, and online services.
Among the company’s most successful products are the iPhone smartphone, the iPad tablet computer, the Mac personal computer, the iPod portable media player, the Apple Watch smartwatch, the Apple TV digital media player, and the HomePod smart speaker. Apple's consumer software includes the macOS and iOS operating systems, the iTunes media player, the Safari web browser, and the iLife and iWork creativity and productivity suites. Its online services include the iTunes Store, the iOS App Store and Mac App Store, Apple Music, and iCloud.
The ongoing trade war between the US and China, which began in Early 2018, was projected to impact Apple’s daily operations. The current CEO of Apple is Tim Cook.
Apple Inc. cut its revenue outlook for the first time in almost two decades citing weaker demand in China, triggering a slump for Asian suppliers and a wave of lower price targets on Wall Street.
In a surprise disclosure, the iPhone maker said it anticipated revenue of about $84bn (£67bn) for the three months to 29 December. In November it forecast sales of at least $89bn - a prediction that had already disappointed investors. Apple's share price sank more than 7% in after-hours trade, extending its more than 28% slide since November. The festive season is typically Apple's strongest quarter. However, this revenue of $84bn would mark an almost 5% fall from the same period last year and represent the firm's first year-on-year quarterly decline since 2016.
Chief Executive Officer Tim Cook said sales will be about $84 billion in the quarter ended Dec. 29, down from earlier estimates of $89 billion to $93 billion. Apple posted sales of $88.3 billion in the fiscal first quarter a year earlier, so the new forecast would mean Apple is reporting a holiday quarter slowdown for the first time since Cook became CEO in 2011. The news sent its stock down as much as 8.5 percent in extended trading.
This announcement marks the first time Apple has revised its guidance to investors in more than 15 years. It appeared to confirm doubts about the firm's prospects that have troubled investors in recent months, contributing to the broader market sell-off. Production cuts by major suppliers had led to worries that the firm's newest phones were not gaining traction among buyers, in part due to high prices.
Several key Apple suppliers overseas had cut their revenue estimates during the past few months, suggesting something was amiss. In November, the company said it would stop reporting unit sales of iPhones, iPads and Macs beginning in fiscal 2019. That sparked concern Apple wanted to avoid disclosing weak growth numbers. Apple’s stock had fallen 32 percent from an October peak to its close of $157.92 Wednesday amid growing concerns about the iPhone.
The reported fall in revenue is not entirely under Apple’s control. The economic realities in China - where growth is slowing - mean a region which Apple relied on heavily for new customers is no longer providing that boost. Coupled with a US-China trade war, this might get worse.
There's little Mr. Cook can do about that, save lobbying hard, as he has already, for exemptions that help protect Apple's business. In addition, the iPhone’s novelty status which drove excellent sales volumes in the first few years of its launch has eroded. Apple faces stiff competition from cheaper, high-quality Chinese-made smartphones, which often have more practical features.
Our assessment is that the trade war has finally started impacting American and Chinese companies which are mutually dependent. We believe that Apple may look to relocate its manufacturing units from China if the dispute is not resolved. We also feel that Apple is likely to consider reshoring manufacturing operations to the US as a temporary alternative.