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Apple slashes $5 billion from guidance on weak iPhone sales

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A woman uses an Apple iPhone at a shopping mall in Beijing on January 3, 2019. – Apple cut its revenue outlook for the latest quarter on January 3, citing steeper-than-expected “economic deceleration” in China and emerging markets. (Photo by Nicolas ASFOURI / AFP)

Apple braced for a significant year-on-year decline in revenue in the key December quarter, shaving upwards of $5 billion from its guidance estimate in the wake of weaker than expected iPhone sales, with China in particular suffering.

In a letter to investors, Apple CEO Tim Cook warned the company now anticipates $84 billion in revenue for its fiscal Q1 rather than the $89 billion to $93 billion originally forecast.

The revised figure represents a substantial decrease from the $88.3 billion in revenue Apple posted in the same quarter a year ago.

Cook said Greater China accounted for the “vast majority” of year-over-year iPhone revenue declines, noting economic and political factors weighed on both financial markets and consumers. As a result, traffic to Apple’s retail stores and channel partners dropped as the quarter progressed, he added.

The CEO did not discuss whether a sales ban on Apple’s older iPhone models in the country issued in early December had any impact on revenue. Neither did he break out unit sales to correspond to the revenue drop, though the omission was unsurprising given Apple’s recent decision to halt shipment reports.

Other markets

Cook also acknowledged the newest iPhone line also fell flat in markets outside China, with fewer than expected upgrades in an unspecified number of developed markets.

“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, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements,” he wrote.

He added sales of Apple’s Watch series 4, iPad Pro, AirPods and Macbook Air were also “constrained much or all of the quarter”, but said the company’s Services, Wearables and Mac units all posted record revenue for the period. Overall, revenue outside of iPhone grew nearly 19 per cent year on year, Cook said.

Mitigation

While he said Apple can’t control macroeconomic forces, Cook noted Apple is “undertaking and accelerating other initiatives” to boost its results. These include changes to make it easier to trade in a phone in Apple stores, finance device purchases over time and transfer data from an old device to the new one.

Cook added the company is confident its pipeline of future products will provide even more of a lift: “Apple innovates like no other company on earth, and we are not taking our foot off the gas.”


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