According to the news report by Bloomberg, Apple Inc. reduced its revenue outlook for the first quarter for 2019. This is the first time in decades that the technology giant has done so. The company cited weaker iPhone demand in China, which triggered a dip in share prices for its Asian suppliers and also led to Wall Street analysts lowering the share price target for the company.
The Chief Executive Officer of Apple, Tim Cook stated that revenue would drop to $84 billion for the quarter that closed on December 29. This number is down from the company’s previous guidance of $89 billion to $93 billion for that time period.
A year ago, for the first fiscal quarter, the company had posted sales to the tune of $88.3 billion. This means that the company is witnessing a holiday sales slowdown for the first time since Tim Cook took over the company as CEO in 2011.
With this news, Apple’s share prices dropped by as much as 8.5% during the day’s extended trading.
Cook made this announcement through a letter to the company’s investors and it came on the back of weeks of signals from both Apple and its suppliers that the company was struggling to sell its newest range of iPhones which were released in September 2017.
The iPhone is Apple’s flagship product and its sales account for about two-thirds of the company’s revenue. The phone also allows the technology giant to rake in more sales from accessorized products such as the Apple Watch, the AirPods as well as subscription services such as Apple Music.
In his letter to investors, Cook explained that while the company had anticipated a few challenges in its key emerging markets, Apple had not foreseen the magnitude of the economic slowdown in these markets, especially in Greater China, which is what accounted for most of the revenue shortfall.
However, he added, the iPhone upgrades in developed markets also did not do as well as the company had expected.
According to Wedbush Securities analyst Daniel Ives, the fact that Apple missed its target was not a shock. However, degree of the miss as well as the fact that most of the revenue shortfall came from China is what surprised everyone.
After the news about the company’s revenue guidance broke, suppliers in both Europe as well as Asia saw their stocks fall sharply. AMS AG, the German company that makes mobile phone optical sensors, saw its share price plunge by as much as 19.4% in Zurich.
Dialog Semiconductor Plc., another German supplier that manufactures power-management components for mobile phones, experienced an 8.5% fall in its share prices in Frankfurt.
In South Korea, SK Hynix Inc., which makes memory for Apple’s iPhones, saw its share prices fall by 4.8%. Samsung Electronics Co., Apple’s arch rival and also supplier for the iPhone’s displays and chips, saw its share prices fall by 3% due to this news.
The iPhone assembling companies in China, Hon Hai Precision Industry Co. and Pegatron Corp. saw their share prices fall by 1.7% and 1.2% respectively. Taiwan Semiconductor Manufacturing Co.’s shares also dropped by 1.8%.
Many of Apple’s suppliers had already indicated that things were not going well with the company – they had already reduced their revenue guidance last year. Added to this, Apple announced that it was not going to report the breakdown of the number of units of iPhones, iPad and Macs sold starting from this year.
All of this has caused a lot of concern for investors, and it has been reflected in Apple’s share prices, which have fallen more than 32% since its all-time high in October 2017.