Coverage: Apple cuts forecast, citing weak China sales
Apple Inc. on Wednesday cut its sales forecast for its latest quarter, with Chief Executive Tim Cook blaming slowing iPhone sales in China, whose economy has been dragged down by uncertainty around U.S.-China trade relations.
Munsif Vengattil and Stephen Nellis of Reuters had the news:
The news sent Apple shares tumbling in after-hours trade and triggered a broader selloff in the stock market.
The revenue cut raises questions about whether Apple, the face of American business in many parts of the world, is being punished by Chinese officials or consumers in favor of local rivals such as Huawei Technology Cos Ltd, whose pricey smart phones compete with the iPhone and whose telecommunications equipment U.S. officials are considering banning.
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.“The much larger issue is the slowing of the (Chinese) economy, and then the trade tension that has further pressured it,” Cook said.
Mark Gurman of Bloomberg News reported that Apple’s services business grew 27 percent:
The timing of Apple’s announcement blaming its shortcomings partly on President Donald Trump’s trade war with China may increase pressure on American officials to ease the tensions quickly. Mid-level officials from the Trump administration are scheduled to travel to Beijing for talks early next week.
While iPhone revenue accounted for the forecast cut, Apple’s other product categories, including the iPad and services, grew a combined 19 percent year-over-year, he said. Services generated $10.8 billion in revenue for the quarter — a 27 percent increase from a year earlier.
Apple’s decision to cut its sales outlook, “isn’t a huge shock at this point,” said Shannon Cross of Cross Research. “It will be interesting to see how Apple shares react if there’s a China trade agreement.”
Michael Liedtke of the Associated Press reported that consumers in other markets aren’t buying as many iPhones:
Cook also acknowledged that consumers in other markets aren’t buying as many of the latest iPhones, released last fall, as Apple had anticipated — a factor that could stem from a starting price of $1,000 for Apple’s top-of-the-line iPhones.
Apple’s stock plunged 7 percent to $146.40 in Wednesday’s extended trading. The shares had already fallen 32 percent from their peak in early October when investors still had high hopes for the new iPhone models. Apple’s troubles may have ripple effects on other technology companies, given investors have been bailing on the industry in recent months. The tech-driven Nasdaq composite index now stands 18 percent down from its record closing high reached in August.
Now, Apple must try to find a way to win back Wall Street’s confidence and reverse a steep decline that has erased $350 billion in shareholder wealth in just three months.
“This is Apple’s darkest day during the Cook era,” Wedbush Securities analyst Daniel Ives said. “No one expected China to just fall off a cliff like this.”