Apple issues profit warning as iPhone/iPad sales fail to hit targets

Apple's board of directors named Tim Cook as the company's chief executive officer in 2011

Apple's board of directors named Tim Cook as the company's chief executive officer in 2011

Twitter has met Apple's troubles with derision, with many pointing out that new models are massively overpriced while hardly being technological breakthroughs.

Apple on Wednesday lowered its revenue forecast to $84 billion for its first quarter ended December 29, below analysts' estimate of $88.05 billion.

Apple's stock price dropped nearly 10 percent Thursday, closing the day at $142.19, the company's biggest single-day loss in six years. The revenue revision, which came late Wednesday, led markets lower around the world and also triggered a slump for Asian suppliers and a wave of lower price targets from Wall Street.

"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". Counterpoint reported iPhone sales dropped by 17% year-over-year during the third quarter due to the weak initial performance of the new models. US stocks have tumbled over the last three months as investors anxious that the economy might slow down dramatically because of a variety of challenges including the trade dispute and rising interest rates. The iPhone X launched in November 2017, while the iPhone XS and XS Max were released in September.

Cook said the new iPhone models were released earlier than the flagship iPhone X last year, which created a hard year-over-year comparison. China's economy has been pinched by the ongoing Sino-US trade war which is spilling over to other Asian economies. "We grew 16%, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there'".

Apple isn't the only company facing difficulties in a slowing Chinese economy and escalating trade tensions. The company also sees the traffic to retail stores and partner sellers in China declining in the quarter.

China's Commerce Ministry said talks will be held Monday and Tuesday in Beijing, and market watchers are hoping for signs the world's largest economic powers will make progress toward resolving their dispute. "Our other products category was even stronger than the overall company number".

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 previous year".

"It's not going to be just Apple", CEA chairman Kevin Hassett said in an interview on CNN.

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". To put it that number into perspective, Facebook is now worth $380 billion ($70 billion less than what Apple lost in the last quarter). On its website in China, Apple now advertises the iPhone XR for 4,399 yuan with the trade-in of an iPhone 7 Plus. Apple is appealing the decision.

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