We are only 7 days into the new year and Apple has already revealed that sales of the company’s flagship iPhone are slowing.
How the mighty have rotten.
Apple’s stock price fell as much as 10% after the company lowered its earnings forecast last week due to sluggish international sales.
Since becoming the first American company to hit $1T in market value just months ago, Apple has lost 39% of its market cap — and now the Big Fruit’s historic losses are souring the whole economy.
How did it come to this?
Last year, Apple admitted it was throttling older iPhone models to compensate for degrading batteries that caused the phones to sometimes shut down. It offered to cut its $79 battery replacement fee down to $29 as a way of apologizing.
Unfortunately, the iPhone continues to be Apple’s top product and is the profit engine that drives the whole empire. In the short-term, if the iPhone fails to deliver sales, then – no matter the size of the margin – the impact will be seen on the bottom line. And in the long-term reduces the addressable size of the iOS ecosystem that Apple is relying on for future growth and profit.
Indeed, Apple faces several tough Chinese competitors like Huawei and Xiaomi that are now selling cheaper smartphones that are increasingly popular in China, as research firms like IDC have previously reported.
In China, a market that accounts for 20% of Apple’s sales, demand is unexpectedly small and is expected to decrease even further thanks to trade tensions.
Going forward, Apple has a lot to worry about.
The company has revised its first-quarter 2019 revenue guidance to $84 billion instead of the $89 billion and $93 billion it projected just a few months ago. Apple hadn’t lowered its quarterly forecast in 15 years.
International iPhone sales under-delivered, resulting in quarterly revenue that fell short of Apple’s predictions by more than $5B. Apple’s newfound pessimism is leaving investors in every sector of the economy with sour tastes in their mouths.