GENERALLY, APPLE PROFIT WARNINGS are of the 'guys, there may be long queues at the bank because we've got too much money to pay in' variety. Not this time, however: Apple has issued its first profit warning since 2002, back when it's best-selling products were the iMac G4 and second-generation iPod.
In a public note to investors, CEO Tim Cook announced that the company was revising its estimates for the all-important end-of-year income, and stating the company was on course to make ‘just' $84bn in revenue, with a gross margin of around 38 per cent. The previous estimate had Apple on course to make $91bn.
At this difficult time, shareholders reacted in exactly the way Cook and Co should have expected: high-tailing it out of there. Apple shares dropped 7.45 per cent when sales were reopened, wiping $55bn off the company value. It never rains, eh?
So why was the quarter so much weaker than expected? In Cook's letter, he highlighted two main difficulties. The first was "economic deceleration, particularly in greater China." In all, Cook explained, "over 100 per cent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad."
There were bright points even there, mind, including "a new record for Services revenue," leaving the company optimistic over the "bright future" in China.
While Apple was keen to emphasise that this was the main shortfall, the company did also concede that the iPhone doesn't seem to be the guaranteed home run it once was.
"In some developed markets, iPhone upgrades also were not as strong as we thought they would be," Cook writes, going on to blame macroeconomic factors, fewer carrier subsidies, the strength of the US dollar and even the generosity of the company's cheap iPhone battery replacement programme breathing more life into older models.
Clearly, the awkward fact that you can literally buy three Xiaomi Pocophone F1s for the price of a single iPhone XS just isn't a factor. As the CEO, he'd definitely know if the product pricing was an issue, after all, and if he says flagship pricing raising 85 per cent in three years isn't a problem, then that's good enough for us. µ
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