Economy

Apple Cuts Steerage for Newest Quarter; Shares Tumble

Apple Cuts Steerage for Newest Quarter; Shares Tumble

After Apple issued a profit warning, indicating that it believed first quarter revenue will be lower than previously expected, shares in the company dropped by as much as 9 percent in early trading, and the effects were felt by other companies as fear mounted that Apple's troubles could spread wider.

The company said Wednesday that it expected revenue of about $84 billion in the quarter that ended Saturday, down from a previous estimate of $89 billion to $93 billion.

Apple has shaken the business world by lowering its sales and revenue forecast for the next quarter. "Apple is an enormous revenue and profit generator, and will remain so for years to come".

Additionally, Apple is now expecting to report operating expenses of approximately $8.7 billion, a gross margin of approximately 38 percent, other income/(expense) of approximately $550 million and a tax rate of approximately 16.5 percent before discrete items.

More news: North Korean leader in China to meet with Xi

What happened: In a rare move, Apple has cut its quarterly sales forecast, blaming its poor performance on trade tensions between China and the United States, as well as economic deceleration in Greater China. Trump said that Apple is now building a new campus in U.S. because of "what we did with taxes and the incentives we created in the United States". Specifically, Cook said that poor iPhone sales in China was the main reason behind Apple's revised guidance. China accounts for around 15 per cent of Apple's revenues.

The company blamed an economic downturn in China as it revealed that sales declined at the end of 2018. He said China's smartphone market is feeling a particularly tight squeeze. In an interview with CNBC, Cook said the reason behind the iPhone's decline in sales in China is the result of trade tensions between the USA and the country which puts additional pressure on China's economy, leading to fewer customers interested in buying a new phone.

Cook also said in the letter that fewer carrier subsidies, price increases based on the strength of the USA dollar and cheaper battery replacements caused the weak iPhone upgrades for the quarter. This turned out to have a significantly greater impact than we had projected.

"This is not only great for the environment, it is great for the customer, as their existing phone acts as a subsidy for their new phone", Cook said. In fact, Cook said in a memo to employees (obtained by Bloomberg) that "iPhone activations in the U.S. and Canada set new Christmas Day records". In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow nearly 19% on-year. The company posted revenue of $88.3 billion for the 2017 holiday quarter. The truth remains that the iPhone has always been Apple's core business and if Apple can't sell enough of them, the whole company struggles. This also played out broadly in line with our expectations.


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