Fri, Jan 04, 2019 - Page 1 News List

Apple cuts outlook on China, emerging market ‘challenges’


Apple Inc CEO Tim Cook speaks at the start of a special event at the Howard Gilman Opera House at the Brooklyn Academy of Music in New York City on Oct. 30 last year.

Photo: EPA-EFE

Tech giant Apple Inc on Wednesday cut its revenue outlook for the latest quarter, citing steeper-than-expected “economic deceleration” in China and emerging markets.

The rare revenue warning from Apple suggested weaker-than-anticipated sales of iPhones and other gadgetry, in part because of trade frictions between Washington and Beijing.

Apple shares slid about 7.6 percent in after-hours trade on the news.

The company slashed its revenue guidance for the first quarter of fiscal year 2019, which ended on Saturday last week, to US$84 billion — sharply lower than analyst forecasts averaging US$91 billion.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in greater China,” Apple CEO Tim 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,” he said.

Apple is the target of nationalist sentiment over the arrest of Huawei Technologies Co (華為) chief financial officer Meng Wanzhou (孟晚舟) in Canada at the behest of the US.

Meng was detained on Dec. 1 last year on a US extradition request linked to sanctions-breaking business dealings with Iran.

The Chinese government has condemned the arrest and demanded her release.

Some Chinese netizens and companies have also turned against Apple.

Several Chinese companies have offered employees subsidies for Huawei smartphone purchases, while others have even warned staff against buying Apple products.

“When the US went after the Huawei founder’s daughter, the Chinese government made Apple the target of the day, so sales should be way off,” independent technology analyst Rob Enderle told reporters. “This is more political than it is Apple execution.”

Nationalistic sentiment was likely intensified by Apple apparently ignoring a Chinese court-ordered ban on iPhone sales in a case involving US chipmaker Qualcomm Inc, Enderle said.

Qualcomm, which requested the ban, last month said that the Fuzhou Intermediate People’s Court ordered four Apple subsidiaries to stop selling older models of the iPhone, including the iPhone 7, 7 Plus, 8 and 8 Plus.

However, Apple stores contacted by reporters in Beijing, Shanghai and Fuzhou early last month said that they were still selling those older models — confirming a company statement that all remain available.

“It looks like Apple is flouting Chinese law, which helps promote a boycott,” Endlerle said.

Apple breaks down its revenue into a “greater China” that includes the People’s Republic of China, as well as Taiwan.

Other factors would also drag on Apple’s revenue, including the timing of its iPhone launches last year and a strong US dollar that means lower revenue when converted to US currency, Cook said.

Apple also cited supply “constraints” for some of its products, including its latest Apple Watch and iPad Pro.

The update suggested disappointing iPhone sales, the key driver of revenue and profit for the California-based tech giant.

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