Sales were also affected by the late launch of new products, problems with economies in emerging markets and the production of devices.
On January 2, 2019, Apple CEO Tim Cook published an open letter to investors, in which he announced a review of forecasts for the first fiscal quarter of 2019, which ended on December 29, 2018. Initially, Apple predicted revenues from $ 89 billion to $ 93 billion, but, according to Cook, the company expects revenue of about $ 84 billion, which is also lower than analysts who expected the figure of $ 91.5 billion.
Cook notes that other Apple divisions are growing year to year, but since the iPhone is its main business, if a sufficient number of new devices are not for sale, the company has problems.
The letter said that “in the second half of the year, China’s economy began to slow down, and GDP growth was the lowest in 25 years. In addition, the growing tension of trade relations with the United States affects the economic situation in China. Therefore, the decline in smart phone sales in China was particularly dramatic. ”
Although we expected some problems in key emerging markets, we did not foresee the scale of the recession, especially in Greater China. In fact, much of the decline in revenue compared to our forecasts and more than 100% of our revenue decline year-on-year occurred in Greater China because of the iPhone, iPad and Mac.
In other developing countries, sales of new iPhone models were also “not as strong as we thought,” said Tim Cook.
- Also, the drop in revenue was affected by the release dates of the iPhone XS, XS Max and iPhone XR – deliveries began early, in the fourth quarter of 2018, while the iPhone X began to be sold in the first quarter of 2018 – this created difficulties for comparing the sales dynamics year-on-year although “in line with expectations.”
- Cook’s letter says that lower subsidies for telecom operators, higher prices due to a stronger dollar, and cheap battery replacement were additional reasons for weak iPhone sales in the quarter.
- A strong dollar is another reason for lower forecasts. It affected currency exchange, and reduced Apple’s revenue growth by 200 basis points from last year.
- The fourth factor Apple calls “an unprecedented number of new products during one quarter” – supply restrictions “restrained sales of Watch Series 4, iPad Pro, AirPods and MacBook Air”.
If the forecast is confirmed, this will be the first decline in Apple’s revenue over the holiday period since 2000. Shares of the company after the publication of the letter and the resumption of trading fell by 7%. The final results of the fiscal quarter will be announced on January 29, 2019.