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Apple Cuts Revenue Guidance Because of Slow Sales in China Apple Cuts Revenue Forecast Because of Slow Sales in China
(about 1 hour later)
SAN FRANCISCO — A significant sales slowdown in China has forced Apple to reduce revenue expectations for its most recent quarter. SAN FRANCISCO — A significant sales slowdown in China, partly fueled by trade tensions with the United States, has forced Apple to reduce revenue expectations for its most recent quarter.
The company said Wednesday that it expected revenue of about $84 billion in the quarter that ended Dec. 29, down from a previous estimate of $89 billion to $93 billion. The company said Wednesday that it expected revenue of about $84 billion in the quarter that ended Saturday, down from a previous estimate of $89 billion to $93 billion. That would be a nearly 5 percent decline from the same quarter a year ago.
Apple’s surprise announcement added to concerns about the ability of American tech giants to navigate an increasingly uncertain economy and a continuing trade war between the United States and China. China has become Apple’s third-largest market in recent years, driven mostly by iPhone sales. Apple’s surprise announcement added to concerns about the ability of American companies, particularly its technology giants, to navigate an increasingly uncertain economy and a continuing trade war between the United States and China.
Growth in iPhone sales has been slowing for years as the global smartphone market has become saturated. Late last year, investors became worried that trend was about to worsen when Apple said it would stop reporting how many iPhones it sold. “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” Apple’s chief executive, Timothy D. Cook, said in a letter to investors. “We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”
Apple’s shares fell in after-hours trading following the revenue warning. With more than 40 stores and hundreds of millions of iPhones sold in the country, Apple is arguably the most successful and highest-profile American company in China. It has become Apple’s third-largest market in recent years, mostly because of iPhone sales.
Apple shares dropped more than 7 percent in after-hours trading Wednesday evening.
Mr. Cook said the sales decline in China, Hong Kong and Taiwan would most likely exceed $4.3 billion, which would be roughly equal to the company’s overall drop in revenue.
“As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed,” he said.
Growth in iPhone sales has been slowing for years as the global smartphone market has become saturated. Late last year, investors became worried that the trend was about to worsen when Apple said it would stop reporting how many iPhones it had sold.
Apple’s announcement, which appeared to be the first time the company had revised its financial guidance since 2002, affirmed those worries. Mr. Cook said a slowdown in iPhone sales accounted for all of the revenue shortfall. The company’s other revenue sources, including iPad, Mac and software sales, together increased nearly 19 percent in the quarter.
While China and other emerging markets accounted for most of the sales drop, Mr. Cook said iPhone owners in developed markets were also holding on to their devices longer.
Apple has long tried to entice customers to buy new, more expensive iPhones every few years. But those efforts have been stymied. Wireless carriers have cut back on the subsidies they provide to customers, and more people are replacing their batteries instead of their entire device, Mr. Cook said.
That wound was in part self-inflicted. Apple cut the cost of a battery replacement to $29 from $79 in response to criticism of older batteries slowing down in its phones. The price of a new iPhone can often top $1,000.