Apple cuts revenue forecast on weak China sales

2018 was the year that Apple arrogance backfired

2018 was the year that Apple arrogance backfired

Apple cut its revenue outlook for the latest quarter on Wednesday (Jan 2), citing steeper-than-expected "economic deceleration" in China and emerging markets.

China's "economy began to slow there for the second half, : Cook said during an interview with CNBC on Wednesday afternoon".

Cook placed the blame on "both macroeconomic and Apple-specific factors", and said that the iPhone maker failed to "foresee the magnitude of the economic deceleration" in emerging markets.

The holiday quarter's revenue of $84 billion would represent a sales decline of nearly 5 percent from a year ago.

Shares of the iPhone maker cratered almost 8 percent in extended trading Wednesday - knocking some $50 billion off the market cap after the company took the unusual step of cutting its revenue guidance.

Cook said Apple's revenue for the quarter including the crucial holiday shopping season will fall well below Apple's earlier projections and those of analysts, whose estimates sway the stock market.

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"In fact, most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad".

Still, Cook pointed out that sales of several Apple products are growing, including its wearables business - devices like the Apple Watch - while the company's burgeoning services business continues to expand. In the broader market, the S&P 500 futures fell 1.5 percent.

Cook said there were some bright spots for Apple in some parts of the world and that the company expects "all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands and (South) Korea". "The trade tensions between the United States and China put additional pressure on their economy". Apple tends to set its prices in USA dollars and charge a broadly equivalent amount in local currencies.

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook's comments on how the U.S. trade tensions with China were hurting the company's outlook "might be a dig at (U.S. President Donald) Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they've made over the previous year".

Cook said Apple's cash generation remains robust and added the company will end December with a net cash position of $130 billion. "This turned out to have a significantly greater impact than we had projected".

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