Apple shares tumble as firm blames sales slump on China slowdown


In a letter to shareholders on Wednesday, Apple CEO Tim Cook said iPhone demand was waning in China and would hurt revenue for the October-December quarter.

Apple's warning couldn't have come at a worse time for stock market investors given the wipeout in late-2018, when many global indexes posted their worst performances in a decade amid concerns about the global economy and the prospect of further US interest rate hikes.

The memo, aimed at pepping up staff after cutting its revenue outlook for the first time since 2002, reiterated Cook's note to investors that it missed its target due to lower than expected iPhone sales in China.

The statement from one of the world's largest companies will further rattle investors already anxious about the slowing Chinese economy. It also saw lower than expected upgrades in some developed markets.

Apple's decisions over the coming months around pricing, future hardware redesigns, timing of 5G smartphones, and driving its core services business will have implications for years to come as Cupertino now faces the biggest fear among bulls which is an installed base (we estimate roughly 750 million active iPhones worldwide) that could stall out and not grow over the coming years and in a nightmare scenario decline.

Apple originally forecast revenue of between $89 billion and $93 billion.

One thing Cook didn't mention in his letter is Apple's declining market share in China and the rise of domestic rivals like Huawei and Oppo.

On the other hand, Cook also stressed that Apple showed considerable strengths in other areas (particularly in its cash assets: the company is now sitting on about $130 billion). But, he noted that Apple "appears to have lost material share in China in Q4 despite its new product launch, and that Apple has struggled in China before, underscoring the fickleness and lower lock-in of Chinese consumers".

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The beginning of 2019 isn't proving to be as fruitful as Apple anticipated.

Tim Cook: "This moment gives us an opportunity to learn and to take action".

"This is not a catastrophe nor is it a sign that Apple is losing its grip on the smartphone market but merely a misjudgment by Apple with regard to how much money people will pay for an iPhone". But a situation that might be gloomy for investors will be good news for those who want to buy Apple products.

Although many analysts were anxious over Apple's iPhone issues, one remains unconcerned and upgraded Apple shares to "neutral" instead of "sell." as CNBC noted. More maneuvers like this from other companies could significantly impact the revenue Apple gleans from its app store.

Apple doesn't do small.

Consumers can trade in a Huawei's flagship phone Mate 9 PRO with 128 GB storage, for example, for a 720 yuan ($104) credit that they can use on iPhone XS and XR purchases.

Ahead of this week's G20 meeting, Trump talks up tariffs on Chinese-made iPhones and MacBooks. With iPhone's production lines in China, Apple has been caught in between the world's two largest economies.

The company blames a deceleration in demand in China, but investors imagine the worst.