Published: Sat, January 05, 2019
Markets | By Otis Pena

Apple to Miss Sales Expectations, Dow takes a Hit

Apple to Miss Sales Expectations, Dow takes a Hit

Stocks are widening their losses on Wall Street after Apple warned of a steep slowdown in iPhone sales in China.

Some analysts point to Apple's dependence on iPhone sales to drive revenue and profits, even as it tries to diversify its product base and add services such as music and digital payments.

(Motherboard) Wednesday, Apple CEO Tim Cook wrote a letter to investors alerting them that the company would miss its revenue targets in part because Apple didn't sell as many iPhones as it expected.

The world got a glimpse on Wednesday when Apple, the second-largest public tech company, lowered quarterly sales estimates for the first time in more than 15 years. The flagship product earns Apple about two-thirds of its revenue, and allows the company to generate more money from attached products like Apple Watches, AirPods, and services like Apple Music.

"For a while now, there's been an adage in the markets that as long as Apple was doing fine, everyone else would be OK", said Neil Wilson, chief markets analyst at Markets.com.

Apple's latest comments fuelled worries that its relatively high-priced devices may be falling out of favour in China, where rivals such as Huawei Technologies Co Ltd [HWT.UL] offer cheaper options.

Additional major American brands - including Ford Motor Company and Tiffany - have also recently suffered sharp sales drops in China. Asian suppliers' stocks also fell, as did shares of Samsung.

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This represents the biggest stock market dive since 5 December when U.S. stocks suffered a dramatic decline; the Dow Jones fell 800 points back then due to renewed concerns over Washington's trade dispute with China and indications of a possible looming economic recession.

In a letter to investors, Apple CEO Tim Cook pointed to a slowing economy, particularly in China. "Apple is just outpricing itself-not only in the iPhone market, but also in the MacBook Pro market".

Under the new guidance, Apple says revenue will be around $84bn, well short of the $89-93bn range Apple had estimated and a sizeable drop from the $88.3bn revenue haul Apple reported in Q1 FY 2018.

On Thursday, Henry Zhu, a student from Shenzhen, was browsing a Xiaomi store at the upscale Parkview Green mall in Beijing as he considered the relative attractiveness of Apple's latest products. "We believe the economic environment in China has been further impacted by rising trade tensions with the United States".

He also cited other factors that contributed to the drop in iPhone revenues such as consumers adapting to a world with fewer carrier subsidies, price hikes resulting from a stronger USA dollar, and lower price for iPhone battery replacements. According to the Los Angeles Times, Apple's announcement "stoked investors' fears that China's economy, the world's second largest, is losing steam and that the U.S". The Nasdaq, which has a high concentration of tech stocks, retreated 202.43 points, or 3 per cent, to 6,463.50. Earlier today, Trump advisor Larry Kudlow - who serves as the Director of the National Economic Council - made an absolutely baseless statement claiming that China stole proprietary Apple technology.

Apple gave up 9.2 percent in early trading Thursday.

The yield on the 2-year Treasury note slid to 2.39 percent from 2.50 percent, and the yield on the 10-year note sank to 2.56 percent from 2.66 percent.

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