Apple warns of big hit to iPhone sales in China

Apple warns of big hit to iPhone sales in China

Bottom line: Fewer people are buying new iPhones than Apple and financial analysts would like.

The tech giant said revenue for its fiscal first quarter, which ended December 29, will be about $84 billion, falling short of an average analyst estimate of $91.5 billion. The company's revenue this quarter will be significantly lower than it had previously indicated, thanks largely to a slowdown in China sales.

The company slashed its revenue guidance for the first fiscal quarter of 2019, ended December 29, to $84 billion - sharply lower than analyst forecasts averaging $91 billion.

"We did not foresee the magnitude of the economic deceleration, particularly in Greater China", Cook wrote.

Apple on Wednesday lowered its first-quarter revenue outlook, following weaker than expected iPhone sales and a slowing economy in China. A survey a year ago found that more customers were buying the cheaper iPhone 8 rather than the pricier iPhone X, perhaps signaling that people weren't willing to pay up for the latest bells and whistles.

China's economy started slowing down in the second half of 2018, and its September-quarter GDP was the second lowest in 25 years, Mr Cook wrote.

Apple's poor performance was echoed by its fello Faang companies - Facebook, Apple, Amazon, Netflix and Google - which all performed poorly in 2018. Apple tends to set its prices in US dollars and charge a broadly equivalent amount in local currencies.

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Apple's stock plunged 7 percent to $146.40 in extended trading.

A Washington lobby group representing Apple, Google, Samsung and other global tech giants has called on the Trump administration to end the "mutually damaging trade war" with China after America's most recognised tech brand became the latest example of collateral damage amid ongoing Sino-US trade tensions.

In addition, the holiday quarter was big for Apple's wearables business. The company also sees the traffic to retail stores and partner sellers in China declining in the quarter. It won't be easy, but if that's the direction Apple chooses, it could mean a more compelling product portfolio in the coming years.

In his letter to investors, Cook makes much of the expanding base of Apple users, which grew by 100 million, and which has driven a 19% increase in Apple's service revenue. Since its peak in October Apple's stock had fallen 33% and analysts had started cutting estimates.

Recent production cuts by major suppliers have led to worries that the firm's newest phones were not gaining traction among buyers, in part due to high prices.

Onto the positive notes, Apple's wearables division grew almost 50 percent year-over-year. "Our profitability and cash flow generation are strong, and we expect to exit the quarter with approximately $130 billion in net cash". The other was as follows: "We believe the economic environment in China has been further impacted by rising trade tensions with the United States".

Others advised Cook to stop pointing the finger at China, and instead fix the flaws in Apple services and work on new products.

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