Economy

Apple Cuts Revenue Projections Due to Bad China Sales

Apple Cuts Revenue Projections Due to Bad China Sales”

Over the years there's been a great deal of chatter around the subject of "planned obsolescence", and here we have Apple essentially confirming that this is indeed part of the business model. While this achievement was widely celebrated, it wasn't long before the bad news started piling in, leading to a substantial decline in Apple stock.

But the news raised questions on whether Apple - the first to reach a $1 trillion (roughly Rs. 70 lakh crores) valuation and until recently the world's most valuable company - is seeing a bump in the road or is starting to slide back from its leadership position. It jacked up its prices in India a year ago after the government raised smartphone tariffs from 15% to 20%.

But that's missing Apple's biggest problems, according to a new report from Nicolas Baratte and Cherry Ma, analysts at Hong Kong-based CLSA, who point directly to the iPhone's climbing average selling price (ASP) and increased competition from the likes of Huawei and others.

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

Still, Cook is confident in Apple's ability to narrow the enormous gap with its competitors, and overcome restrictions that prevent single-brand retailers opening stores in the country. Indeed, in fiscal 2018, the company derived $51.9 billion from the region - a whopping 20% of its total revenue.

Market movements including large swings from one day to the next signal that sentiment remains fragile, says Mike Archibald, associate portfolio manager, AGF Investments Inc.

But with the most expensive iPhone costing more than the average annual wage, Apple (AAPL) faces an uphill battle to take a much bigger share of India's market than its current 2%. As the U.S. -China trade war drags on, it's having an impact on these sales.

Existing initiatives haven't altered the smartphone market reality. First, as my colleague Evan Niu wrote about the smartphone market in December: "What little growth ... is left is being driven by low-priced handsets from Chinese vendors". The company posted revenue of $88.3 billion for the 2017 holiday quarter. "Apple was at a number that was incredible, and they're going to be fine". December 2018, Apple computing, only with a turnover of 84 billion United States dollars, it said in a letter to the Apple chief Tim Cook to the Investors.

The reason for that shortfall? "We knew that iPhone unit sales were weak, but just not how weak", he said.

Apple undoubtedly has some strong competitive advantages in the marketplace.

Apple surprised Wall Street on Wednesday afternoon after the market closed by issuing revised guidance for its fourth quarter in a letter from CEO Tim Cook to investors. It also led to big drops overall in the US stock market, as well as other financial markets around the world. If anything, things could get tougher for Apple. Bernstein Liebhard wrote in a recent press release: "Bernstein Liebhard LLP, a nationally acclaimed investor rights law firm, is investigating potential securities fraud claims on behalf of shareholders of Apple... resulting from allegations that Apple and/or its executives may have issued materially misleading business information to the investing public".

Carolina Milanesi of Creative Strategies said Apple is unique among smartphone makers because it has a wide array of apps and services that produce revenue.



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