Apple’s investors are fussing over the recent problem in China.
Apple had previously warned investors that the product would not thrive in sales from the holiday quarter due to factors which Tim Cook explained in a letter. Some of these factors included a different timing on iPhone launches which would alter their “year-over-year compares”, foreign exchange, supply constraints, and economic weakness in developing markets. Cook explained further in the letter that these factors were responsible for the fewer iPhone upgrades than expected.
China currently makes up for 15% of revenue from Apple; however, the economy is on an all-time low, and growth in 2018 appeared to be the weakest since 1990. 2019 doesn’t look brighter either. Tim Cook explained in the letter, how the deceleration came as a shock to them, even though they expected economic challenges in emerging markets. He said in the letter:
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”
In what used to run into estimates between $89b and $93b in profits, Apple now expects about $84b in revenue, due to the shortfalls. The letter went public after the company’s shares went below 8%, wiping $55b off the company’s stock value.
As explicated in the letter, fewer people had over the quarter, upgraded their iPhones; a number lesser than anticipated. This could have been as a result of the dollar strength, which affected the price in emerging economies. A clear case is in the Nigeria’s Naira which continue weaken over the US dollar, making the devices outrageously expensive. Following an outcry from consumers that Apple was slowing down older phone, it decided to offer $29 battery replacement for each iPhone.
Apple has tried inventing means to curb an assumed disaster. In October, it resorted to stop disclosing to investors the number of iPhones sold in the market quarterly. Expectations are very high for the tech company, hence the pressure to wow the investors. However, Cook has noted that they cannot change the macroeconomic conditions, but they are working to undertake other initiatives to improve the current results.
Apple remains a leading company in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV.